ConocoPhillips’ first earnings report after spinning off its refinery business underlines the resurgence of oil drilling in rich nations. While reporting a reduced profit of $2.3-billion (U.S.) for the second quarter on Wednesday, the U.S. energy company made much of rising production in the United States and other developed economies. The trend reflects a renewed focus on resources in the rich world as opposed to emerging markets.
Navigating the politics of turbulent developing nations has always been a headache for major oil firms. Chevron has had to fight environmental claims in Ecuador and Brazil. Exxon Mobil was famously caught up in Indonesia’s civil strife, just one of many dodgy situations over the years. Shell and others have to grapple with government weakness and unpredictability in West Africa. And Conoco has been haggling with Venezuela since 2007 over compensation for nationalized oil assets.
Yet against the trend of several decades, recent promising oil and gas fields have been in friendlier locations.
Pride of place in Conoco’s quarterly report went to growth in output from the oil-rich rocks of Texas and North Dakota, and big hopes for the future include deep sea wells in the Gulf of Mexico and newer shale finds in the central United States.
This reflects the fact that American production of crude is expected to rise faster than in any other nation outside the Organization of the Petroleum Exporting Countries in the coming two years, according to PFC Energy.
Canada, which Conoco also highlighted, comes a close second in production growth. Australian production of natural gas also merited a mention. Meanwhile, in recent years Conoco, a $67-billion company, has retreated from Russia, lost assets in Venezuela and is now exploring an exit from Nigeria.
Global energy firms have to go wherever the oil is. But for as long as Conoco and bigger rivals Chevron and Exxon can boost production in rich, stable countries – while, of course, avoiding disasters like BP’s in the Gulf two years ago – they’ll suffer less volatility and fewer distractions. That reduces the risks for Big Oil, and for investors.
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