ConocoPhillips CEO sees weakness in U.S. economy

HOUSTON Feb 12 (Reuters) - ConocoPhillips (COP.N) Chief Executive James Mulva said on Tuesday the U.S. economy was showing signs of weakness and beginning to affect the oil industry.

"We're starting to see that demand is not as strong as it was. The economy has softened," he said, speaking to reporters before giving a wide-ranging speech on climate change at the CERAweek energy conference.

Mulva also said the oil company hoped to wrap-up talks with Venezuela's state-run oil company PDVSA this year over compensation for its oil operations seized there in 2007.

"We continue our discussions with PDVSA and the Venezuelan authorities," Mulva said. "I believe that we are making progress. It will take time. I would like to see and hope that we can come to some sort of solution to this in 2008."

Exxon Mobil Corp (XOM.N), the largest U.S. company, has won temporary court rulings to freeze up to $12 billion of Venezuela's global assets in the fight over payment for its own project that was nationalized last year.

Conoco's Mulva said the company had no plans to follow the same path as Exxon Mobil.

"We're going to do this in a very deliberate way the objective is to reach an amicable solution so as not to follow the (arbitration) process through for a number of years," he said.

CALL FOR ENGAGEMENT

In his speech to the conference, Mulva called for the oil industry to become more engaged in the debate over climate change policy.

He said that, without a coherent climate change policy, anti-development sentiment that keeps the industry from drilling in many areas of the United States could strengthen, as companies are forced to rely on unconventional resources such as heavy oil or oil shale.

"These are higher on the carbon-intensity curve, which adds to climate concerns and strengthens the anti-development movement," Mulva said. "This movement will only grow as we are forced to rely on more unconventional oil to meet consumer demand. The consequence could be even further restrictions on access -- and the spiral downward would accelerate."

ConocoPhillips backed mandatory cuts to greenhouse emissions last year, joining the U.S. Climate Action Partnership, which has asked for legislation to cut U.S. greenhouse gas levels by 10 percent to 30 percent within 15 years.

On Tuesday, Mulva also said he believes the U.S. government should enact climate change policies that would tie into programs abroad.

Countries that signed the Kyoto Protocol have already pledged to cut greenhouse gas emissions and trade carbon dioxide offsets, or credits, under the agreement's cap-and- trade system.

But costs for carbon under that program are already higher than the levels suggested in many U.S. climate change proposals.

High carbon costs would not necessarily be a negative for ConocoPhillips, which has a higher proportion of natural gas assets than its U.S. oil major peers.

Mulva also said the U.S. should lift tariffs on imported Brazilian ethanol. (Editing by Andre Grenon)