'Your World': ConocoPhillips CEO on Disaster in Gulf

This is a rush transcript from "Your World With Neil Cavuto," July 22, 2010. This copy may not be in its final form and may be updated.

NEIL CAVUTO, ANCHOR: Anger over the White House’s drilling ban is growing. Jobs are leaving. Oil companies are scrambling.

Today, one of the oil giants is talking. And ConocoPhillips CEO, James Mulva, today is talking to us — and only us — on whether that ban will hike gas prices, on whether the BP disaster was preventable, and on the billion-dollar plan to deal with the next disaster.

I sat down with Mulva a short time ago.


CAVUTO: The Four Horseman thing, was BP invited?

JAMES MULVA, CHAIRMAN AND CEO, CONOCOPHILLIPS: Well, we — BP will, we believe, ultimately join our group, but we thought it was important to not to divert attention that BP is directing towards the Macondo incident.

So, the four companies have been working on this for about six weeks. And we have talked with BP. We want to learn from the findings of the Macondo incident that BP has experienced.

But we expect that when the Macondo incident is completed that BP will join our group.

CAVUTO: So, then BP would then presumably kick in for the cost of getting something like this up and running?

MULVA: Well, we haven’t really discussed that.

The four companies felt that it was important to get this going. Our people over the last six weeks, our engineers and project people, have looked at what — the estimated cost. And we believe it will be around a billion dollars.

CAVUTO: So, you each are going to pony up $250 million?

MULVA: Each of us for $250 million. We know it’s an initial estimate, but we want a robust containment system that we would put in place. And we will be building this over the next 12 to 18 months.

CAVUTO: This moratorium is all about making sure we don’t have another incident. What do you think of that?

MULVA: Well, it’s understandable, given the incident, why there would be a moratorium.

When we look at the incident, I think we will find, after the investigation is complete, that — that the incident was preventable. The other thing we found is that the...


CAVUTO: Well, what was preventable, that BP botched it maybe?

MULVA: Well, I wouldn’t say that, but, I mean, that it was preventable. A number of decisions were made, judgments were made that we will find in hindsight...

CAVUTO: Where they botched it — they botched it.

MULVA: ...was preventable.

But the other situation that we have seen from the incident is that the response capability was inadequate. So, there are three things that we will be working on, as the industry and all — and also with the regulatory authorities, one, to improve drilling standards, raise those standards. Second is a containment system that we just announced amongst the four companies. And the other is a response capability of handling oil should it get to the water.

CAVUTO: But is the Washington response, Jim, overdone? In other words, to put a moratorium on it in the name of safety, when a number of judges — at least one crucial one — have said this was a bit draconian? I’m vastly oversimplifying it.

But the administration can keep coming out with executive orders to keep running the clock. So, I’m wondering if the intent here is actually to stop drilling or at least stall it to the point that you guys sort of are dying on the Gulf vine in the meantime.

MULVA: Well, hopefully, the intent is not to stall or delay what the industry can do. And that is development of indigenous resources, a great deal of investment and jobs.

CAVUTO: You had mentioned not too long ago in an interview — and I hope I’m quoting you correctly, Jim — Gulf — "The Gulf spill will have only a modest impact on our company’s crude supplies."

Do you still stand by that, because it seems relatively staggering? Because that whole area seems frozen for the time being. But update me.

MULVA: In the short term, the production continues from existing fields. So, it won’t have an immediate large impact on production.

But, as a result of not continuing exploration, over time, it will amount to a more substantial amount of production — impact on production coming from the Gulf of Mexico. And we have seen over time that slight impacts of production and supply, because supply-and-demand situation in a period of time, can — is still pretty tight. It can be tight. Just a few hundred thousands barrels a day can have quite an impact on supply and demand and on price. So, in the short-term, I don’t think it has a great deal of impact, but, longer term, it will.

And the other thing that is important is not just the amount of production. But this is United States indigenous resources, oil and gas that we have that we should develop because it’s for our energy security, but it also leads to investment and to jobs.

CAVUTO: Well, not now, right? I mean, now China’s coming in, in a big way, and a number of other foreign players are coming in, in a big way. The number of our big players, maybe for fear of Washington or that it’s become hazardous legally, P.R.-wise, they’re going abroad.

What’s going on here?

MULVA: In terms of what’s going abroad?

CAVUTO: Gulf-related activities and drilling?

MULVA: That’s right.

With a moratorium, if it continues for an undue period of time, we will see basic facilities and drilling ships leave the Gulf of Mexico and to other places. And the concern is, if it doesn’t come back quickly, we lose our capability...

CAVUTO: Is that your fear?

MULVA: We lose our capability to be drilling and to producing ultimately...


CAVUTO: Well, it’s already happening.

MULVA: It has happened to some extent. The concern is that, as it prolongs over some period of time, several months, why, it has — will have quite an impact.

CAVUTO: What do you think of President Obama, the job he’s doing?

MULVA: Oh, I really don’t know the president. All of us as Americans, we want...

CAVUTO: You have never met with him?

MULVA: Oh, I have met several times.

CAVUTO: What’s your impression?

MULVA: The president is a very nice individual, very smart.


CAVUTO: Does he know your industry?

MULVA: I think he knows our industry to some extent, yes.

CAVUTO: To some extent?


CAVUTO: How does he treat you?

MULVA: Well, I think we would have to say we, as an industry, haven’t done as good a job getting our point across with respect to the oil and gas and it’s contribution to our economy and to energy security and our energy policy of our country.

CAVUTO: I have talked to many fellow CEOs, chairman, powerful business titans, like yourself, sir, who have said, to a man or woman, I’m not sure this guy likes us. I’m not so sure he likes business guys, whether it’s the financial regulatory overhaul that he signed into law yesterday that they say is going to be very disruptive, or health care reform that they say is going to be very costly, or tax increases coming that they say are going to be very draining.

What do you say?

MULVA: Our concern is we have not maybe, as a business, gotten our point across with respect to the administration and Congress.

But we look at the strength of our economy, our standard of living, and it really comes from the business aspect and manufacturing, promoting investment. And to really get our economy going again, we need to promote investment. And when we make investment, we start generating jobs.

CAVUTO: But we’re not doing that.

MULVA: And we haven’t — we’re not doing that at this point in time. So, we need to really...

CAVUTO: Well, that’s usually a prescription for double-dip right there.

MULVA: It possibly could. But...


CAVUTO: Do you think that’s going to happen?

MULVA: I don’t think it’s going to happen. I certainly hope that it doesn’t — is not going to take place.

But I think it is important to look and listen to the business agenda. And the business agenda is, give us the incentive with respect to be making investment. We make investments and we’re going to be adding jobs. And that’s going to be helpful to moving...


CAVUTO: But, Jim, they’re not doing that. And I don’t mean to put you in a corner here, but there was a big powwow that the Chamber of Commerce had across the street from the White House, where no one from the White House was invited. The White House then had a job symposium same day, didn’t invite anyone from the Chamber.

So, these business guys are not talking to each other. Ivan Seidenberg, who heads the Business Roundtable, got pretty nasty with the White House on a bad tone it is setting toward business. And then the White House tried to make nice with him, and the Business Roundtable will say, things aren’t so bad. Let’s see what we can find, some common ground.

I have covered presidents and Congresses and business-political relationships for many a decade, and I — I honestly can’t remember a period there’s been this kind of chill. Am I missing something?

MULVA: No, I don’t think you are.

I think that the relationships aren’t as good as they have been in past years. It’s obvious we need to communicate and talk with each other much better and understand the situation.

Again, I go back to my point. I think the real key to this economy is not additional regulation and control. What it really comes down to is, we need the incentives to business to get back to making investments. We make the investments encouraging and we become competitive, more competitive again, and the world market...


CAVUTO: Jim, valid points all, but we’re not doing that. And you and your colleagues — not you specifically — are building up this pile of cash you’re sitting on. We’re told corporate America almost $2 trillion of the cash you’re sitting on, not putting it to work.

And I had the head of Heinz telling me not too long ago, H.J. Heinz, we don’t know how things are going to shake out regulation-wise. We don’t know how things are going to shake out tax-wise. I’m paraphrasing him. But he said, why would I spend? Mort Zuckerman, a big Democratic, Boston Properties, owns a lot of media properties as well.

Who would commit a lot of capital in this environment?


MULVA: Well, and there’s uncertainty with respect to the rules, regulations associated with your industry, changes in taxation, all of those things, fiscal take. Those certainly have an impact. And...


CAVUTO: Well, you were battening down the hatches last fall, before anyone. And this was before the BP explosion, before all of this huge new overhauls that we saw going on in health and everything else. You must have seen something.

MULVA: Well, it was a little different for our company. With respect to looking back at the late summer, fall of last year for our company, we saw the economy wasn’t as strong as we would have thought. The issue for our company and our industry was access for international oil companies, access to new areas where we can drill and produce more oil and gas.

The result of that, our emphasis was on — we just didn’t see the opportunities were at great as they have been in the past.


CAVUTO: Well, now you have got hundreds of other CEOs who are waking up to what you saw then.

MULVA: Well, I’m not so sure about that. But we look at our company and we say, we have a great deal of resources. Let’s concentrate on our existing portfolio.


CAVUTO: But you weren’t making a political statement back then; you were not saying, oh, my God, get out of Dodge; this is ridiculous?

MULVA: No. We were looking at the economy, the opportunities, access issues. And for us, the emphasis was on how we were going to improve the return on our portfolio.

So, it was all a return-on-the-portfolio approach than it was to looking at the access issue. We didn’t see as many opportunities as we have seen in the past.

CAVUTO: OK. You have been very patient.

A couple of BP questions, if you don’t mind. Would you ever buy BP?



MULVA: We’re — we’re — our interest in our company is completely directed towards how can we get the most out of our portfolio of assets.


CAVUTO: Yes, but their portfolio has been kicked in half in value. The stock is half what it was.

MULVA: Well, to commercialize the resources that we have in our — so, we’re very...


CAVUTO: Zero interest in BP?

MULVA: Our interest is — certainly, we work with BP in other parts of the world. To the extent that this would lead to some other opportunities that we could work with them in the Gulf of Mexico or somewhere else, obviously, we know them well, and it may lead to some opportunities in that regard.

But, in terms of the merges and acquisitions, no, I don’t believe so.

CAVUTO: Tony Hayward, what do you think of him?

MULVA: I know Tony Hayward quite well. It’s an unfortunate situation that certainly he has gone through. So...

CAVUTO: He’s been portrayed in the media as a buffoon. Is he?

MULVA: Oh, I think he’s a professional, capable individual.

CAVUTO: Not an idiot?

MULVA: Not at all.


Joe Biden, the vice president, recently went down to the Gulf and charged the visit $75,000 on BP. What do you think of that?

MULVA: Well, that’s for — something I think really for BP and others to opine on. I’m just not that close to the situation.

CAVUTO: It’s pretty gutsy, though, ain’t it?

MULVA: Well, I just won’t comment on that.

CAVUTO: The vice president of the United States is charging a visit to the Gulf on BP.

MULVA: I think it’s appropriate for the vice president to go down to the Gulf. With respect to how that’s handled and the cost of that, I don’t think it’s appropriate for me to comment on.

CAVUTO: Do you think the Gulf comes back soon?

MULVA: Hopefully it will. We believe, as an industry, that we can explore and we can produce and we can do this in a safe, environmental, proper way.

It’s important for our country. It’s important for the Gulf states, important for employment. So, that’s why we announced this containment system. Let’s get the industry back to work as quickly as we can.


CAVUTO: By the way, you can get more of this chat with the ConocoPhillips CEO on FOX Business Network at 6:00 p.m.

We are going to get into whether he feels Washington is using this spill to clamp down on oil companies and continue an anti-business bashing wave, if you will.

That’s coming up on FOX Business, which, if you do not get...

STUDIO: Demand it!


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