Exxon boss tells peers, Saudis their oil supply crunch bet is wrong
By Ron Bousso and Karolin Schaps
LONDON (Reuters) - Exxon Mobil's (XOM.N: Quote) boss Rex Tillerson told Saudi Arabia's energy minister on Wednesday that fears of a new global oil supply crunch were exaggerated as the U.S. oil industry was adapting to the low price shock and was set to resume growth.
The remarks by Tillerson, who is due to retire before March next year, about the resilience of the U.S. oil industry come as the Saudis have effectively abandoned their strategy to drive higher cost producers out of the market by ramping up cheap supplies from their own fields.
More than two years of downturn that saw oil prices halve to around $50 a barrel today after a boom in U.S. shale oil production have led to a sharp decline in investment.
But Tillerson, who heads the world's largest listed oil and gas company, said that shale oil producers' resilience in cutting costs to make some wells profitable at as low as $40 a barrel means that North America has effectively become a swing producer that will be able to respond rapidly to any global supply shortage.
"I don't quite share the same view that others have that we are somehow on the edge of a precipice. I think because we have confirmed viability of very large resource base in North America ... that serves as enormous spare capacity in the system," Tillerson told the Oil & Money conference.
"It doesn't take mega-project dollars and it can be brought on line much more quickly than a 3-4 year project."
"Never bet against the creativity and tenacity of our industry," he said.
His stance contrasted with that of Saudi Arabia's Energy Minister Khalid al-Falih, who minutes earlier warned the same event that the sector faces challenges due to the drop in investment. Continued...