WASHINGTON Oct 17, 2006 (Dow Jones Newswires)
ConocoPhillips (COP) CEO Jim Mulva said Monday he was going to talk to Gazprom leadership within the next few weeks to see how his company might be able to still participate in the Russian giant's massive 3.6 trillion cubic meter Shtokman natural gas project, even though Gazprom has said no foreign companies will have any equity ownership in the project.
Speaking at a press conference at the American Petroleum Institute's annual meeting, Mulva also said his company wasn't looking to make any more acquisitions for the time being.
Last week, OAO Gazprom (GSPBEX.RS) rejected all five bids from the shortlisted candidates, including ConocoPhillips, Chevron Corp. (CVX), Total SA (TOT), Statoil ASA (STO) and Norsk Hydro ASA (NHY). Each were seeking minority stakes in the project.
All five companies had pushed hard to join the project, discovered in the early 1980s, and Gazprom had earlier said it would accept two or three of them as minority partners. The Russian company had repeatedly pushed back the deadline for choosing partners, citing the complexity of the five bids. Chief Executive Alexi Miller declared that none of the five companies' proposals were acceptable, however.
The reserves at Shtokman are enough to supply all U.S. gas needs for more than give years at current rates of consumption, according to a 2006 report from BP PLC (BP), and much of the proposed gas was to be shipped to the U.S. Statoil, for example, had counted on its newly authorized expansion at its 10 billion cubic meter a year Cove Point LNG terminal in Maryland to win a spot in the final partnership.
Instead of giving foreign partners equity in the project, however, Miller said Gazprom would attract "authoritative international companies" to work as subcontractors in helping to develop the field.
"We respect their decision," Mulva said, "Unfortunately I have not had the ability to talk with Gazprom leadership, but I intend to do so within the several weeks to see to what extent the industry or our company could be of help (such as) in technology."
Mulva also said his company wasn't looking to make any new acquisitions given that asset prices were currently too high, and any growth would be organic, expanding production from existing assets.
Last week, the company announced that it would, in a joint venture with Encana Corp (ECA), spend around $10.7 billion over the next decade to boost Canadian oil production and deepen its access to the U.S. market.
The companies aim to increase the output of crude oil from two of EnCana's projects in Alberta's oil sands, a region where the oil is heavy and difficult to refine, and expand the capacity of two of ConocoPhillips' U.S. refineries to process the crude.
"In terms of acquisitions, I think at this point in time, things could be rather expensive," the CEO said. "We have a great deal on our plate in terms of our investments."
He said investments to develop existing oil and gas resources, infrastructure and expansion of existing refinery capacity would total $18 billion this year, and around $15 billion a year in the years ahead.
"We have a lot of opportunities, organically, within the company, without having to look out or resort to acquisitions," Mulva said.
ConocoPhillips would be expanding capacity at its refineries on the East, West and Gulf U.S. coasts, he said, but the bulk of expenditure would be for its Wood River and Border refineries to be able to handle more heavy crude.
Mulva also said his company would not book any of the oil sand reserves from the Encana deal until the end of 2007. Then, based on Encana's figures, "You could expect us to book something in the neighborhood of 300 million to 400 million barrels."
Copyright (c) 2006 Dow Jones & Company, Inc.
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