00:00 Mark Lashier
There’s uh a lot of discussion around Iran, a lot of discussion around AI. and both very timely and important, uh, uh of interest to us. So glad to be here. just a broad range of CEOs, a lot of different perspectives, all looking at the same kinds of issues.
00:26 Speaker B
They all have to be asking you like, Mark, what’s going on with oil? Is that the question you’re getting?
00:32 Mark Lashier
Uh, getting a lot of that. Yes, absolutely. Uh and it’s it’s one of the most uh tumultuous times in certainly in my lifetime and I think uh perhaps in the history of oil and gas to have the kind of disruption that we’re seeing with the straight of Hormuz closed down.
00:54 Speaker B
How, you know, we talk about it a lot in the media. We say the straight of Hormuz is closed down. We see a ship going through. We don’t see a ship going through it. Like how, like how severe is a closure like this?
01:09 Mark Lashier
Well, when you step back and look at the math, uh, about 20% of the world’s crude oil, uh similar numbers around LNG, things like fertilizer, uh massive fertilizer production can’t transit the straights of hormuz to get out to the world market. So it’s it’s incredibly disruptive. The world has become very integrated and very efficient. So every barrel of oil that comes out, everything gets put to use and when you pull 20% out of that stack,
01:45 Mark Lashier
uh it causes great disruption and I don’t think we’ve seen the full impact of that disruption yet. It’s still, uh the world has been working down inventories, but all of that production has been stuck inside the Straight of Hormuz. Now, you get about 7 million barrels a day, I think, Saudi can move via pipeline, maybe another couple million, uh one or two million out through UAE. So the net impact is that’s 12 million barrels a day roughly that’s not getting produced and into the markets and that’s that’s a big disruption.
01:59 Speaker B
What does that full impact look like and when does that happen?
02:05 Mark Lashier
I think that I was just reading this morning an article that said that the you know, really the the last shipment of crude oil that was on the outside of the straight of Hormuz was delivered and and tapped into. So that that’s a sign that those inventories are going to start getting very tight out there. You see uh reports of Asian refineries cutting back production, uh to conserve their inventory. Uh you see a lot of buying in the US of North American crudes
02:45 Mark Lashier
for Asia and a lot of crudes out of the Atlantic basin being acquired by Asians where they’re feeling that the quickest impact of that. So you’re seeing the the movements shift around the planet, uh the supply chain shift to accommodate that and the and it’s it’s going to be a tough market with, you know, 12% of the volumes uh not in play.
03:00 Speaker B
There’s also this this is thinking in the market that uh once the straight opens up again, things will be great, back to normal. But how, how, like what is the the damage this six weeks have what have they what does it done to the oil market longer term?
03:14 Mark Lashier
Yeah, I think first of all, I hope peace breaks out today. I hope that the ceasefire lasts. We have a lot of friends in the Middle East, a lot of partners in the Middle East, and we just, we would love to see things get back to normal for them as quickly as possible. But the fact is, you’re gonna have to replenish those inventories that have been uh drained around the globe. You’re going to have to figure out what refineries, what uh LNG facilities and what crude oil production will do once once the hostility cease and the straight is open up. So
03:54 Speaker B
That’s what I want to ask about. How how difficult is it to rebuild what has been destroyed?
03:57 Mark Lashier
It it will be difficult. It’ll be timely. You’ll have to redesign things, build things to to repair. Some of it will come back quickly, some of it will take longer. So, but I think it’s you think of it in terms of a tail effect that all that production is not going to come back online instantaneously. It’s going to be a slow gradual process going forward.
04:18 Speaker B
I wrote a story a couple of weeks ago and it was tied to a Goldman Sachs report saying that some countries may run out of oil. And at the time I’m like, all right, well, all right, Goldman wrote it, I’ll keep it moving, I’ll get the story out there. We’re not going to run out of oil. Is that what we’re looking at here? Some countries are just going to run out of oil?
04:36 Mark Lashier
I don’t know that they will completely run out of oil, but the the price will be bid up until something shifts to where it’s needed most. And that’s the way the free markets will work. Uh fortunately, the US, North America, we’ve got plenty of full crude oil, uh Permian basin, Canadian crudes, we have more crude oil than we can consume. So we’re a net exporter of crude, we’re a net exporter of refined products. So we’re making sure everything runs well,
05:00 Mark Lashier
uh is efficient in this environment so we can continue to provide the energy that the world needs as well as we can.
05:07 Speaker B
You mentioned AI at the top of the interview and some executives I have talked to here in the AI front are like, we need more power, we need more energy. What type of demands is AI putting on companies like yours, looking out over the next few years?
05:22 Mark Lashier
Yeah, the the big demand for AI data centers is going to be for electric power and I think the biggest source of electric power is going to be gas-based generation, burning burning natural gas to generate electric power. We do have uh we do have some supplies of gas that that we control and of course we’re always interested in finding the best way to monetize that gas to avoid building more pipelines. As you see data centers built out in uh places like West Texas, for instance, you can avoid
06:00 Mark Lashier
the pipeline infrastructure to feed that natural gas directly to the power generation that provides the power for those data centers. So that’s that’s the impact that the electrical demand and the natural gas demand. There’s plenty of natural gas in North America to supply the needs. I think the the big hurdle to get over is that how is electrical power then provided? Is it off the grid? Is it on the grid? All of those things will be sort are being sorted out as we speak.
06:21 Speaker B
Has this administration made it easier to get done what you need to get done in the US market to get permits to to drill or wherever you’re exploring?
06:31 Mark Lashier
They are absolutely doing everything they can to uh to smooth the regulatory processes. There’s a lot of permitting reform discussion going on in Congress. We believe that something could get done this year to make sure that whether it’s a a pipeline for gasoline, for refined products, for natural gas or electric transmission, you name it, that there’s a more streamlined process to get these things permitted. And then once they’re permitted, you’re not subject to ongoing legal processes
07:02 Mark Lashier
that could shut down that project. They want to be able to get the assets in the ground that deliver the energy that people need, whether it’s electrons or hydrocarbons or whatever it may be that you need to to run your business that you’ve got a clean and clear and efficient way to get there from a permitting perspective.
07:18 Speaker B
Of course, uh, Phillips 66, um, in a transformation of its own that you’re leading. Like where are you at on your transformation journey?
07:29 Mark Lashier
Yeah, we’ve been on a a journey for the last four years focusing on becoming uh more efficient, more agile, to creating that culture that recognizes that we have to get out of bed every day and figure out the best way to do what we do. Our mission is to provide energy and improve lives and to do that, we have to have the best people, the best assets, the best access to hydrocarbons. We’re in the business ultimately of gathering and processing hydrocarbons from
08:04 Mark Lashier
from crude oil fields, natural gas, natural gas liquids and converting those molecules into things you use every day. And the world depends on us to do it very efficiently, very effectively, safe, reliable, consistent operations and we have to deliver strong returns for our shareholders in the process. So if cost is a big element.
08:21 Speaker B
Are you uh are you happy with the portfolio as it sits today?
08:24 Mark Lashier
I’m I’m happy with the portfolio, but I always want to improve. We are on a continuous transformation. I don’t think you can ever lay down, lay down your sword on transformation. We are always leaning in, looking at ways to get better. There’s always some new technology out there. There’s always a new opportunity and markets are changing. So we have to be thoughtful. We have to be agile in what we do. We’re using, we’re leaning in on AI around machine learning, getting the most out of these massive assets that we have
09:00 Mark Lashier
and it’s a 247 365 day a year job and we’re always thinking about how can we be more consistent in our performance and consistently improving that performance each and every day.
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