ConcocoPhillips: Fueling Creativity

Nov. 7, 2007
New energy sources could meet tomorrow's needs today.

Generations ago, natural resources were thought to be a series of virtually bottomless pits. Today, most of us know a little better and conservation reigns supreme. But as fuel sources continue to be depleted, millions of people will still need to get to work every day. The question is how.

For companies like ConocoPhillips, one of IndustryWeek's 50 Best Manufacturers for 2007, many of the answers lie in exploring the remaining, untapped fuel resources around the world -- and even a few in our own backyards.

As part of its ongoing search for answers, ConocoPhillips recently announced a collaborative effort with Peabody Energy to determine whether a small, uncultivated part of Kentucky could be a possible site for a major, commercial-scale coal-to-gas facility. The joint venture is conducting a feasibility study for a state-of-the-art "mine-mouth" gasification project, using ConocoPhillips' proprietary E-GAS technology.

"We are pleased to work with Peabody Energy to pursue the development of new energy supplies from Kentucky coal," said Willie Chiang, senior vice president, commercial, ConocoPhillips, in a statement. "Meeting tomorrow's demand for energy requires innovative ways to use existing resources that meet our needs today."

According to Rick Bowen, Peabody's president of generation and btu conversion, the ability to turn coal into synthetic gas represents an exciting new market opportunity. In fact, the research could result in future production representing as much as 1.5 trillion cubic feet of natural gas over the life of the project. The study will review optimum project designs and specific sites, and is expected to continue into 2008.

ConocoPhillips released the news on the Kentucky site just a month after announcing another joint pursuit, this time partnering up with Archer Daniels Midland Co. in an attempt to take an important step in creating the next generation of biofuels.

The collaboration will research how to develop renewable transportation fuels from biomass, with the intent to eventually commercialize two components of a next-generation biofuel production process. This would involve converting biomass (which is derived from crops, wood or switchgrass) into biocrude, a non-fossil substance that can be processed into fuel. If all goes well, the refined biocrude can then be turned into transportation fuel.

At A Glance

Houston, Texas
Primary Industry: Petroleum & Coal Products
Number of Employees: 38,400
2006 In Review
Revenue: $188.5 billion
Profit Margin: 8.44%
Sales Turnover: 1.12
Inventory Turnover: 29.13
Revenue Growth: 2.46%
Return On Assets: 14.53%
Return On Equity: 29.49%

"ConocoPhillips believes that the development of next-generation biofuels is a critical step in the diversification of our nation's energy sources," Jim Mulva, chairman and CEO of ConocoPhillips, said in a statement. "We are hopeful that this collaboration will provide innovative technology toward the large-scale production of biofuels that can be moved efficiently and affordably through existing infrastructure."

Hopes are that the two ventures will help offset a 5% drop in profits reported in ConocoPhillips third-quarter earning release, in which the company anticipated a decrease in daily production of approximately 180,000 barrel-of-oil equivalent (BOE) from the previous quarter. The drop is said to be the result of a combination of factors, most notably the expropriation of Venezuelan oil projects, unplanned downtime in the United Kingdom and planned downtime in the Timor Sea and Alaska.

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