ConocoPhillips: Modest Impact On Its Supplies From Gulf Spill

ConocoPhillps (COP) only expects to see a 'relatively modest' impact over the next year on its crude supplies because of the massive oil spill's impact on Gulf of Mexico production, a company executive said Tuesday.

Late last month, the Obama administration put a moratorium on deepwater drilling rigs and put in place a six-month ban on further exploration activities.

As a result, about 100,000 to 150,000 barrels a day of production is expected to be lost in the Gulf due to lower drilling activity, Clayton Reasor, Conoco's vice president of corporate and investor relations, said during a panel discussion at an energy conference hosted by RBC Capital Markets. About one-third of that production is natural gas and the rest is oil, he said.

"The impact on us would be relatively modest," Reasor added.

Conoco has three refineries along the Gulf coast, of which two run heavy, sour crude oil and one light, sweet crude.

Much of the lost production "can be replaced by Nigeria or West African crude" and the markets can expect to see an expansion of heavy, light crude differentials, Reasor said

Conoco expects prices for the benchmark West Texas Intermediate oil to average between $70 and $80 a barrel over the next two-to-three years and then between $80 and $100 a barrel post- 2010, Reasor said. However, "we don't expect refining margins to be materially different," he added.

Refining executives from Valero Energy Corp. (VLO), Holly Corp. (HOC) and Delek US Holdings (DK) said during the same panel discussion that they didn not expect to see a significant impact from the Gulf spill either.

Valero Chief Executive Bill Klesse noted that the company processed 77 different types of crude last year, of which a third was heavy, a third was medium sour and the rest came from other blends. He said Valero is seeking to take advantage of attractive WTI prices.

-By Naureen S. Malik, Dow Jones Newswires; 212-416-4210; Naureen.malik@dowjones.com

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