H. Laurance Fuller, 53, became chairman and chief executive officer of Amoco Corp., Chicago`s largest company based on market value, a year ago in February at the end of the Persian Gulf war. Oil prices already were dropping in response to the successful assault against Iraq.
Fuller, who spent eight years as company president before assuming the top post, has spent much time in the last year traveling to Egypt, the former Soviet Union and other spots where Amoco has increased its efforts at exploration for oil and gas. He spends ”as little time in the office as possible.”
In an interview with Tribune energy writer John N. Maclean, Fuller talks about Amoco`s international business, the future of the giant Whiting refinery in Indiana, the effects of recent environmental legislation and Amoco`s strong commitment to natural gas, currently selling at historically low prices.
Q-What was the most significant development for the oil industry in the last 12 months?.
A-In the short range, our industry has had tough times. The price of oil and gas has come down. The chemical business is not what it was a couple of years ago. We have not fared well in Washington in terms of environmental regulation.
There are short-range actions that have to be taken to bring things back into some kind of equilibrium. By that I mean cost-cutting and restructuring. We`re closing our refinery in Casper, Wyo., and we`ve put the Salt Lake refinery up for sale. Those are symptoms of concern about expenditures for environmental matters that make it difficult to keep smaller facilities open. Q-How does the longer term look?
A-It`s a very positive time. There are the changes in the Eastern Bloc, there`s the potential of the North American free trade agreement and what I think is the very substantial potential for economic revival in Latin America, and the further progress in China. I have never seen a time in our industry when there was more opportunity and a more open playing field to make strategic moves.
Q-What do you think is the biggest change at Amoco since you took over a year ago? An increasing commitment abroad?
A-I think our direction toward international occurred over a longer period of time than that. But certainly the pace has increased.
In the exploration and production sector, it`s a matter of opportunity. There`s no philosophical desire for us to spend less money in the United States. It`s a matter of geologic opportunity.
And our government has made it difficult for us to go some places, particularly offshore and in Alaska, where we would like to go and that would provide domestic opportunity.
In chemicals, again we`ve been overseas for quite a period of time. But if you look at the projected relative growth rates of the economies and their requirements for petrochemicals, that big growth is going to take place outside the United States. There`ll be growth here-we`re building a new polypropylene plant in Texas-so it`s not a matter of moving entirely away from the United States.
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But when you look at the projected growth rates here versus the Far East, the Eastern Bloc, Latin America, you go where the growth is.
Q-What`s the status of the half-dozen deals you have under way in the former Soviet Union? Everybody seems to be close to a deal, but nobody has one.
A-There are some deals, but most of what we`re looking at are large, complex deals that require technology and major commitments of capital on both sides. So it just takes a while to put these things together.
There is room for caution over what`s occurred in the last year or so in the breakup of the Soviet Union. But I remain very optimistic that the people in the former Soviet Union understand they need help from Western oil companies. The issue is one of timing.
We are as far along as anybody. But these things have to have some pace. If Amoco did all six deals, which we`re not very likely to do, you`re talking about a very major capital commitment on our part. So we`ll be moving with all deliberate speed.
So one looks to partnerships where others can add value and also for apportionment of risk, and that risk is partly political and sometimes technical.
Q-What kind of potential do you see in the Soviet Union?
A-By the year 2000, it`s easy to think of Amoco producing over 100,000 barrels a day of oil and perhaps some gas equivalent to that. It is very hard to find that sort of opportunity around the world.
Q-You`re getting back into Latin America. Do you have fears of expropriation or other reversals?
A-You have to assess the overall risk-reward situation. We`ve had the experience in politically stable countries of being taxed to a point we weren`t making any money. That`s as much a risk as expropriation.
The change, at least in certain of the Latin American countries, has a momentum to it that is not going to change, particularly if the U.S., Canada and Mexico come together on a free-trade agreement. Mexico particularly is a very major opportunity.
Q-President Carlos Salinas de Gortari hasn`t opened the oil industry, though he has opened everything else. Do you see any real opportunity to change that?
A-Actually there are some changes. They are gradual, but indicate a direction. I expect to see petrochemicals change gradually so there are investment possibilities. There are possibilities today, and we are looking at them.
I don`t know what will be in the North American Free Trade Agreement, but my expectation would be that petrochemicals would gradually be more possible. Q-What kind of possibilities?
A-The next phase would be refining and perhaps marketing, because they clearly need investment there.
If they`re going to make `environmental` gasoline-get lead out of gasoline and so forth-they`re going to need some technology and investment to do that. And my expectation is that over time it will be possible for Western companies to engage in that.
The last thing to free up in terms of equity investment will be oil and gas in the ground. That`s a matter for Salinas to judge politically, and not for me. But I believe it will happen, and we`ll be prepared to participate when it does.
Q-You`ve closed one refinery and put another on the block because of environmental costs. Is the big Whiting, Ind., refinery threatened in the same way?
A-We are committed on a long-term basis to the Whiting refinery. It`s in the middle of our major market. I assure you it`s not a matter of historical feeling on our part; it`s a belief that that refinery is a very large, currently efficient, potentially very much more efficient refinery.
We are now engaging in some considerable investment to bring it up to environmental standards and continue to make it more efficient.
Q-Do you anticipate layoffs at Whiting to make up for that investment?
A-I don`t think there`s a direct relationship between staffing levels and the kind of environmental investment we have to make.
One of the major environmental units we need to put in is related to the desulfurization of diesel fuel, and I expect, at least in the short term, that will add to rather than subtract from our personnel out there.
We`re not looking at big manpower reductions as a way of increasing efficiency.
Q-Is desulfurization the `right thing` to do?
A-It will contribute to helping solve air-quality problems, but it requires engine manufacturers to do some things, too. No one argues that all the billions of dollars we invest don`t have some effect.
The question is whether there is a reasonable relationship between the size of the investment and the improvement in the environment. One real concern I have is not that there aren`t some changes that need to be made in our operations and some investments made; rather, I`m very much concerned that Congress and sometimes regulators do not take into account good science in making the decisions they make.
I think a fair amount of the $2 billion to $4 billion we talk about in terms of overall investment (by Amoco to meet environmental requirements) is not based on good science and has a very marginal impact on our neighbors near the refinery or our employees in the refinery or our customers.
Q-Do you intend to appeal the recent $200 million court award for the Amoco Cadiz oil spill off France in 1978?
A-I don`t think we`ve decided whether to appeal, but I would frankly hope to get that litigation behind us as soon as we can. We have always viewed that as a major tragedy and something we`re terribly sorry took place.
Q-While your earnings were down in 1991, your market share increased.
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A-Market research shows we have a superb product quality reputation, and our marketers do a great job of locating facilities. I think we`ve done a good job in working with our dealers and distributors and getting across to them that the name of the game is service to the customer.
Q-You`re the biggest private holder of natural gas in the Northern Hemisphere. Is that an overcommitment to a product that doesn`t ever seem to take off in terms of price?
A-It was in 1991. But there`s no question the forces at work in the North American marketplace are going to make that an outstanding investment for us. Use should increase when decisions are made for the next power-generation increment and down the road perhaps for transportation fuels. But current use is very much tied to two major factors over which we have little control: How cold or how warm is the winter-we`re in our third warm winter-and the economy. I think natural gas demand is going to grow. It will be a good investment, but there`s no question about the fact the timing has been disappointing for us.
Q-You`ve got oil men in the White House and in the State Department.
A-Well, they`re from Texas, anyway.
Q-Do you regard them as an oil administration?
A-No. It is helpful to have some people who have an historical understanding of the oil business, but I don`t detect any bias at all in favor of the oil industry. It is very hard to cite any major legislative or regulatory initiative that has had a positive impact on the industry over the last several years.
The oil industry in the United States is in the weakest position it has been since the Great Depression, in terms of exploration and production side of the business.
Q-If you`re in that bad a shape, why haven`t you had to go through the wringer the way the auto and steel industries have?
A-I was talking about the oil industry generally in the U.S. If we today were solely dependent on investment in the U.S., then I think you would have seen a much larger negative impact.
What we`ve seen is a major redeployment of people from domestic concerns to international concerns. We have looked elsewhere where the business environment is better.