Reporter Q&A

Rex Tillerson took about a dozen questions from reporters this morning, covering everything from the Sakhalin project in Russia to a recent U.N. report on global warming.
Tillerson confirmed that Phase I of the massive Sakhalin project is up to its peak oil output of 250,000 barrels per day. Natural gas output from the project was good, he said, but the company continued to keep its options open as to future customers. India and Japan, for example, have expressed interest in buying future output.
Another question concerned what could be seen as a contradiction: ExxonMobil’s encouragement of alternative energy and conservation efforts and how that could cut into the company’s future profits.
Tillerson said, in essence, world demand for energy is growing so fast that the oil and gas business ExxonMobil is in will continue to be in high demand for decades.
“We do not feel in any way threatened by renewable energy,” Tillerson said.
The impact of energy trading on prices has been a frequent question in the past two years (the University of Houston held a conference on the issue of speculative trading recently). Tillerson said he thought about $10 to $15 of the price of a barrel of oil reflected the “risk premium” that trading brought, meaning the underlying price of a barrel of oil would be closer to $40 (based on recent trading activity). It should be noted that’s not the same thing as saying trading artificially boosts the oil price.
Tillerson also noted the company uses a variety of oil price levels to judge the wisdom of its investments.
“We have to make sure our investments make sense across a range of business cycles,” Tillerson said.
In times like these, of high oil and gas prices, the company should “do extraordinarily well,” he said. Eventually lower commodity prices will return, he said, and so will days of tighter profits.

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