Discovery Newsletter: Perspective, Brad Razook and Jeff Ramsey

October 1, 2017

As recently as 2007, newspaper headlines insisted that the world was quickly running out of oil.

The so-called “peak oil” theory had people all over the planet fearing the prospect of $10 per gallon gasoline and contemplating a future without oil. The hydrogen car was considered a pretty safe bet.

But, as it turns out, North America and much of the world is awash with oil and natural gas thanks to technological advances made by the drilling industry. By one estimate, the U.S. now has more proven oil reserves than any other nation on earth, including Saudi Arabia.

This realization, coupled with market-driven innovations throughout the value chain, has unleashed an energy renaissance in North America — creating jobs and making energy more affordable.

Keep in mind that this all happened in a span of 10 years without a government plan.

Thanks to private sector innovation, products derived from oil continue to play a fundamental role in our modern society. They represent much of the energy used for manufacturing the things that we want and need in our lives — essential products such as cement, glass, steel, asphalt, plastics, fertilizer and pharmaceuticals.

Oil-based products make up the majority of our transportation fuels and the substrate for our roads and highways. The agricultural industry depends on petroleum-derived fuels to cultivate and dry grain, and then transport it worldwide.

FHR’S ROLE

Flint Hills Resources has helped people make their lives better by making reliable energy available and driving innovation.

But that’s not all. In the last 15 years, FHR has enhanced its petrochemical business with major acquisitions and capital projects, established connectivity between new terminals and pipelines to facilitate the delivery of feedstock and finished products for strategic markets, and invested heavily in value creation projects at both Corpus Christi and Pine Bend, making those refineries even more competitive. We’ve also expanded into biofuels.

Because of these investments, Flint Hills continues to be competitive in a very competitive industry. As a leader, the company is also constantly evaluating its point of view about the future.

LOOKING AHEAD

As we all know, the energy landscape today is rife with divergent points of view. Many believe oil and gas will remain the foundation of our economy for many years to come, while others are convinced that history museums everywhere need to quickly clear space for combustion engine, industrial heater and boiler exhibits.

While we believe the products FHR makes today will remain in demand for the foreseeable future, we also believe the energy and transportation industries in which we compete are ripe for disruption, change and transformation.

That’s why we need to fundamentally change our mindset.

We have to pivot from focusing on opportunities that are based on assumptions looking out 15-20 years to opportunities that are more immediate. We need to adapt quickly to an increasingly competitive and unpredictable marketplace.

In response to this, Flint Hills Resources has already shifted its primary focus from rapid growth and expansion to pinpointed growth and optimization of its existing assets, with a heavy emphasis on digital innovation.

We believe we can create a tremendous amount of value by improving our existing capabilities and applying new technologies that transform how we do our work. If we can do that, we are confident we will be able to compete well in any market environment and shape our own future.

ROCK THE BOAT

In addition to optimizing its base business, FHR continues to explore new platforms for growth, including disruptive technologies. We’re already partnering with technology companies such as Molex, Infor and i360, as well as other Koch companies, to accelerate our pace of innovation and drive transformation.

We’re convinced Flint Hills Resources will be just as important to Koch Industries’ future as it has been to its past. We are not going to sit back and just wait for the future to happen. That’s not a strategy.

We intend to drive transformation by encouraging experimentation and exploring new business platforms that complement — or even diverge from — our current business.

As the famed computer scientist Alan Kay once said, “the best way to predict the future is to invent it.”