WHEN: Today, Friday, June 18th
WHERE: CNBC's "Closing Bell with Maria Bartiromo"
Following is the unofficial transcript of a CNBC interview with James Mulva, ConocoPhillips CEO, today on CNBC's "Closing Bell with Maria Bartiromo."
All references must be sourced to CNBC.
Mr. JAMES MULVA: Good being with you.
BARTIROMO: Tell me about the opportunities in oil and gas today in terms of demand and supply. Let's begin the conversation broadly speaking. Where are we in terms of the opportunities for your company as it relates to the demand out there today?
Mr. MULVA: Opportunities for our company, I think, are primarily the development of natural gas. We're a big producer of natural gas, and so we're developing L&G projects in different parts of the world, the Middle East, Asia, other places. We're also developing conventional gas in North America. And we also, obviously, are looking to--for oil to replace the production that we produce each year. So most of our investments are concentrated in North America, Europe, Russia, Caspian and all of Asia, in particularly China and Australia.
BARTIROMO: There seems to be a much more abundant supply of natural gas than, I don't know, oil, particularly in the United States. Why do you think it is that we don't exploit that more?
Mr. MULVA: Well, it's a good question and, obviously, I think the agenda is the development of all sources of energy and a lot of emphasis on renewables in new forms of clean energy. We're certainly not against that, but we're going to need all forms of energy--renewables, solar, wind. We're also going to need fossil fuels--coal, oil, natural gas. The thing that's so good about natural gas, as compared to five or 10 years ago, is new technology. We're able to not only find but we have the ability to develop more of our natural resources in North America, particular and the lower 48 states than we though three and five years ago. What's good about natural gas is it's really the cleanest of the available fossil fuels. So it's clean, so it's a clean fuel. We have abundance of it. So we develop it. Indigenous resources in the United States promotes investment, promotes jobs. Another thing that's very good about natural gas is if you compare it to a coal-fired power generation, it uses--it's emissions are half of what coal would be. So it's not only indigenous resource to us, it's clean, but it also goes a long way towards helping our clean air and greenhouse gas emissions.
BARTIROMO: You know, a lot of people talk about other renewables like you mentioned, whether it's solar or wind, but those things can't run a car, can't run an airplane. Natural gas can, right?
Mr. MULVA: That's true. And another thing that natural gas is good for is it is a source of power generation. So if we move towards electric vehicles, things like that, they ultimately what develops electricity, generates electricity. So we think natural gas is a good form of power generation. And another thing, the wind. The wind doesn't necessarily blow 24 hours a day, so you need a backup source, and we think natural gas, for the reason we just talked to, is a great backup source behind things like wind.
BARTIROMO: A lot of people are talking about shale here in Russia. How abundant is shale? What are your thoughts on shale right now? Because some people in Russia are worried that there's so much shale out there, and it could actually impact Gazprom, it could impact business here.
Mr. MULVA: Well, it could. One--we think that one of the greatest resources of shale gas is certainly North America, and that's where it's been developed into technology. We think other applications can be in places like India, and we're working--not India, sorry, China. But we are looking and working to how can we develop shale gas opportunities in China, but also in Russia. Also working into Eastern Europe. The thing, though, is that it probably is not as abundant source, shale gas, in Eastern Europe. Not so sure about Russia or China. It's going to take us a longer period of time, and not just one or two years from now. We're probably looking at five to 10 years to determine, you know, just how commercial and how much available shale gas is in these areas. The other thing that's different in the United States, when we look at shale gas, not only do we have abundance amounts of shale gas, but we have the infrastructure that we can immediately tie it into pipelines and put it in the marketplace. But that's not necessarily true in Eastern Europe or in Russia.
BARTIROMO: Let me--let me ask you about the Gulf of Mexico and I know that the company's a minor player in that region. Is that right? Only operating one platform in the Gulf?
Mr. MULVA: That's right. And 1 percent of our production worldwide comes from the Gulf of Mexico. Now, in the Gulf of Mexico, in the deepwater Gulf of Mexico, we have a real interest and have been for a number of years to expand our presence in the Gulf of Mexico. So we've been active in the recent resales.
BARTIROMO: Do you think there's anything, I mean--and I know there's so many people who have weighed in on this--but do you think there are any solutions that we have not tried in terms of containing the spill by BP?
Mr. MULVA: Well, I think we--BP, along with the help of the industry, all of the companies, including ourselves, have made available our people, resources, our facilities, our experience, everything. We--it's not just BP, but it's an industry situation to do everything that we can. It's a tragic incident, an environmental disaster. I think we will find that, as a result ultimately through the investigation, we will find that this incident, this tragic incident, is certainly--could have been preventable. The important thing is that we learn from what has taken place. I think there's two things that we've found--that we'll find is that it was preventable, so we've got to do everything we can to make sure it doesn't ever occur again. The second thing, though, that we have found is the response to the spill and the environmental disaster is inadequate. So which I think it's very important for our industry and working with governmental authorities and everyone, we have to really ramp up new technology, our ability that should a situation develop like this in the future that we have new technology and more capability to adapt and control, really, such as this on the seabed so as to minimize the very best we can any oil on the water and to the extent that we can do that, certainly minimize the impact with respect to oil ultimately getting to the beach.
BARTIROMO: And the new technologies are there?
Mr. MULVA: Well, I think the--certainly, we believe that the technologies can be developed, and they need to be developed because, as I just indicated, I think the response is inadequate and the American public is--will look to the industry to make sure that we improve our response capability. We need to do that as an industry, but I think, from a governmental point of view and regulation, the American public are going to demand--world public--the world public will demand better response capability.
BARTIROMO: Yeah. I mean, I was actually astounded how much product there was down there, and I think that we should recognize that in terms of being too far-reaching on this moratorium or sort of stopping any exploration, but...
Mr. MULVA: I mean, we can understand a situation, a moratorium, a time off for some period of time. But on the other hand, we really believe that we can drill these wells very safely with good environmental performance. And the development of these resources is so important to our--the security of our energy for the United States, and it's also employment and jobs. In the Gulf Coast, states and residents are certainly adversely impacted by this tragic situation. On the other hand, we want to make sure that we don't--want to do things certainly in the right way, but we want to get people back to work.
BARTIROMO: Tell me the plans for the company. I see that your restructuring plan over the next 12 to 18 months is in place. Where are you in that in terms of selling off $10 billion in assets, divesting the stake in Luke Oil? What can you tell us as far as where the growth comes from at ConocoPhillips and where you are in the restructuring?
Mr. MULVA: OK. On our restructuring plan, we said we'd sell $10 billion in assets over a two-year period of time, 2010, 2011, and will complete sale of our 9 percent interest in the Syncrude mining operation in Canada. We're selling at the sign-up of that for $4.65 billion. We'll conclude that in the next month or two. But, of the $10 billion program, we will probably complete about 7 billion of the 10 billion in 2010 and then $3 billion of sale will be done in 2011. We will apply a substantial amount of those proceeds toward debt reduction, so we have a very strong balance sheet in that regard. We've sold a small amount so far at this point of our 20 percent ownership stake in Luke Oil. So that all continues. So everything that we said we were going to do, we're right on track or a little bit ahead of what we said we would do over this two-year period of time. The other thing that's very important in what we're doing with the company is we have nearly 40 to $45 billion of--40 to 45 billion barrels, oil equivalent, of resources. And what we need to do is convert those resources to proven reserves. And we do that in a way, efficient way over the next 10 years, then we will more than replace our production each year. So that's how we're ultimately going to be working towards growing the scope and size of our resource experience, our reserves, and our production of our company.
BARTIROMO: Are you finding government, not necessarily hostile--more hostile, but tougher in terms of accessing the resources? Higher taxes, bigger fees around the world? Where are we in that story?
Mr. MULVA: Well, the fiscal taxation and fiscal take of the countries around the world were essentially put in place or adjusted when oil prices were--went up as high as $147 a barrel going back to 2008 time period. And we really haven't seen anywhere that it's been adjusted downward. And so the cost of replacing our current production continues to go up even though there's not been a great deal of inflation, but costs continue to go up. So access is an issue for publicly-traded international oil companies like ourselves. So it's not just that the fiscal situations haven't changed, but the other--there's a great deal of competition, IOCs, international oil companies, as well as national oil companies. So the access is really a very competitive situation, and it's difficult, and it's very challenging for companies like ourselves. Now, we think we have an advantage because the hard to resource base that we already have, that we can invest and convert the proven reserves. But access is an issue, and I think fiscal take needs to be looked at and adjusted given the cost situation and to promote investment, to see to it that there's acceptable return for the investments we make on our new projects.
BARTIROMO: I realize this is not your business, but what's your take on nuclear?
Mr. MULVA: I'm sorry.
Mr. MULVA: Nuclear, oh, we need nuclear. We need, as I said earlier, we need all sorts of energy to be developed. It's fossil fuels, it's renewables, it's solar, it's wind, it's nuclear. And the other thing that we really need to do as a society is conservation. Good thing about conservation is we use less energy, and that's good and efficient for the economy and production--productive capacity of a country, but also goes a long way towards addressing the environmental issues of climate change. You--more conservation, you use less energy, it has an immediate impact on greenhouse gas emissions.
BARTIROMO: Jim, would you like to add anything else that I may have missed?
Mr. MULVA: No, I think you've covered a great deal here.
BARTIROMO: Thanks so much for joining us.
Mr. MULVA: Good.
BARTIROMO: Great. Thank you, Jim.
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