The Transition from Domestic to International Oil Operations

Abstract

Abstract The general strategies that Continental Oil Co. has pursued in developing its exploration, production, refining, pursued in developing its exploration, production, refining, and marketing positions overseas in the face of strong, deeply-entrenched competition are discussed. Attention is given to the contributions that the so-called "newcomers" can make to the oil economies of the producing and consuming countries in which they operate. A commentary on the political, economic, and competitive outlook for oil operations in the Eastern Hemisphere is also given. Introduction Continental Oil Co. is only one of many American companies that have made the transition from domestic to international oil operations during recent years. When the history books for the third quarter of the 20th century are written, they will mark an era for American business-an era in which we became for the first time a nation of international industrialists, merchants, traders, and financiers. In the oil industry alone, some 200 or more companies have gone outside the U. S. during the past 10 or 15 years. Continental's experience has not necessarily been representative of the entire group, or any substantial segment thereof, and I certainly would not want to present it as such. My purpose is to discuss solely our own experience and our own viewpoints. I shall try to answer four questions:Why are we trying to develop a strong position overseas?What policies are we following? position overseas?What policies are we following?What has been the impact of the newcomers like us on the oil business abroad?What do we see ahead? Why Are We Going Abroad? Let us begin with the fundamental question. Why are we embarked on a program of expansion overseas? We made the decision to go abroad in about the middle 1950's. Some of the reasons that prompted us to do so have long since disappeared, and others have arisen to take their place. Today, I believe we would summarize as follows place. Today, I believe we would summarize as follows our reasons for expanding abroad. Need for Crude Oil Reserves Abroad First, we believe it is essential from a long-run strategic standpoint for us to have a significant stake in crude oil reserves overseas. The facts are clear and very simple. Almost 90 percent of the Free World crude oil reserves lie outside the U.S. and Canada. Since 1958, crude oil reserves in the U.S. and Canada have increased by only 9 billion bbl as compared with a gain of 120 billion bbl abroad (Fig. 1). As a basic corporate policy, we want to develop and maintain a strong position in the energy markets of the Free World for the long-term future. We must, therefore, go where the oil is and participate aggressively in oil exploration and production activities abroad. Growing Crude Oil Imports to the U. S. Second, we believe that some day the U. S. will need to import larger quantities of foreign crude oil to meet domestic market requirements on an economical basis. The costs of finding and developing domestic crude oil reserves have been rising steadily for many years. (Dramatic evidence that these cost increases are likely to continue may he found in the recent California, Louisiana, and Texas offshore sales.) These rising costs, in turn, generate rising pressures for more imports of lower-cost foreign oil. Almost every month we see some new scheme concocted for further weakening the U. S. import barriers. A recent example is the Occidental proposal for a 300,000 B/D refinery in Maine to run on Libyan and Venezuelan crude oils. Ultimately, of course, the day will come when American industries will need more foreign oil to satisfy their growing energy requirements on terms that will enable them to compete with foreign manufacturers. When that day arrives, Continental wants to have large, low-cost reserves abroad to supplement its domestic supplies. JPT P. 1339