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On Sunday, SIGMA ended the record-breaking meeting with a content-filled General Session and politically driven Closing Luncheon. In the morning, SIGMA conducted its association business in between captivating speakers that included The Washington Post’s Jeff Birnbaum, ConocoPhillips’ Clayton Reasor, Suncor Energy’s Mike Ashar, and BP’s Clay Soares.
Washington Post writer Jeff Birnbaum addressed marketers first with a somewhat bleak outlook on the Middle East and its impact on oil prices. He explained the political landscape that set up America for a shell-shocked economy—the 2000 controversial elections decided by a Supreme Court intervention followed by the 9-11 terrorist attacks and the fall of Enron, which took down the corporate image.
“In my view, this period was historically momentous,” Birnbaum said. “Planning becomes more difficult. The stock market crashed and we went to war twice. That’s when the Congress decided to step in, with measures like the Sarbains Oxley Act, because that’s what Washington does best: react.”
That’s when Birnbaum proposed that the myth of governance takes control; he said elections are about who’s in charge but really no one is in charge. During those trying times, America’s leaders had to decide what issue to start with; how to set the nation’s priorities; and which problems to address first. “Really all the politicians were concerned about was getting re-elected,” he said. “It’s what politicians worry most about and it’s always their first priority.”
He implied that the conventional wisdom to winning any election falls with the people and their financial state. “If you (the people) feel rich, you vote for the party in power; if you feel poor, you vote a new party in—it’s the economy, stupid,” Birnbaum stated. “But in 2002 and 2004, the issue was security and how to make people feel safe—security, stupid, is what’s most important. People think about their safety before they think about how much money is in their pocket.”
Birnbaum also touched on the importance of U.S. governmental policy on issues of supply and demand, including drilling on the Outer Continental Shelf and refinery construction. He predicts drilling offshore, refinery expansions and any exploration for oil will come to an end and that OPEC’s production cut will lead to rising prices because of higher demand. “The 2006 elections will add to the shell shock factor,” he said. “The Democrats will try to pass some legislation but Bush will dust off his veto power. The hope for drilling in the ANWR will NOT happen, and I would discount the hope to drill offshore, too.”
He said budget bills will become the major focus but that the biggest implication will be in the Middle East. “Bush fell down on the job of security—the voters decided this week he did not fill his duties as Commander in Chief,” Birnbaum said. “Iran’s nuclear arm development and a volatile oil market will lead to price spikes. Bush’s less effective methods in dealing with the Middle East will lead to supply issues that will also disrupt the market.” He ended his uplifting speech with a word (or phrase) of warning: follow the money.
“Two industries gave heavily to the Republicans in the last two years,” Birnbaum warned. “They include the pharmaceutical industry and the oil/gas industry. You’d better watch your backs!” Next, ConocoPhillips President of U.S. Marketing Clay Reasor discussed how market analysts value companies within the industry and how that drives his business and industry trends in general. He explained ConocoPhillips’ refinery capacity and alluded to future growth. “The market doesn’t like surprises,” Reasor said. “So we give access to our management to build customer loyalty and credibility.” The ConocoPhillips refineries, through various joint ventures, went from 225 in 1985 to 148 today but the fuel supplier does plan on expanding its U.S. facilities in the near future.
“We have 12 refineries and will contribute money towards a Canadian pipeline,” Reasor said. “We’ll need to upgrade capacities to accommodate the amount of bpd we’d like to reach and heavy oil will play a key role in our operation growth.” A favorite among SIGMA marketers, Suncor Energy (U.S.A.) Inc. Executive Vice President Mike Ashar talked about Suncor’s downstream business, including refining and pipeline operations in Colorado and Wyoming. “To give you a little perspective,” Ashar said, “Suncor is a little bigger than Valero.”
He explained the company’s focus on developing one of the world’s largest petroleum resource basins—Canada’s Athabasca oil sands. “Canadian Oil Sands are second in oil reserves only to Saudi Arabia,” Ashar added, “with a projected capacity of 5 million bpd.” He went on to say that Suncor went from 16,000 bpd in the early 90s to 300,000 bpd now and a projected 500,000 bpd by the end of this decade. He added that it costs about $12/barrel currently to extract oil from the sands, thus offering a viable alternative to oil in the Middle East.
BP’s Director of Business Development & BioFuels Clay Soares took participants on a biofuels journey to wrap up the session, where everyone explored alternative fuels—including butanol, ethanol and other biofuels—as a viable option. “There is tremendous growth expected in biofuels,” Soares said, “but it will require investments to install the proper infrastructure.” He stressed BP’s commitment to biofuels by announcing its newest bio division and told members about the partnership BP instituted among DuPont and a major biotechnology university—as yet to be chosen—to lead the market in this new technology. “BP is firmly committed to participate in the biofuels market,” Soares said. “It’s exciting to be part of the industry.” Soares warned, however, that biofuels will not replace traditional petroleum. “It will complement them instead,” he said, “as a blending agent.”
SIGMA also elected a new slate for Board of Directors by a membership vote at the Annual General Session Business Meeting in Chicago, Ill. on November 12, 2006. Members include: SIGMA President Paul Reid, President of Reid Petroleum Corp. in Lockport, New York; SIGMA First Vice President Carl Boyett, CEO of Boyett Petroleum in Modesto, California; SIGMA Second Vice President Frank P. Greinke, CEO of SC Fuels in Orange, California; and SIGMA Secretary-Treasurer Jack Pester, Chairman of Pester Marketing Co. in Houston, Texas.
The membership also instated four new Board of Director members to serve three-year terms including: Bryan Beaver, Chairman & CEO of CarterEnergy Corporation in Overland Park, Kansas; Steve W. Johnson, President of Vancouver Oil Co. Inc. in Vancouver, Washington; Charley Jones, President of Stinker Stations in Boise, Idaho; and James B. Westgate, Co-President of WESCO, Inc. in Muskegon, Michigan.
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