ExxonMobil may be plotting to increase its already enormous annual greenhouse gas emissions by 17% over the next five years, as much as the entire nation of Greece, according to an internal assessment of the company’s US$210-billion investment strategy obtained by Bloomberg Green.
The report landed just days after Exxon warned that its financial losses for the third quarter of the year may be higher than expected, and in the same week the colossal fossil was temporarily surpassed by Florida-based utility NextEra Energy as the biggest energy company in the United States.
“The emissions estimates predate the COVID-19 pandemic, which has slashed global demand for oil and thrown the company’s finances into distress, making it unclear if Exxon will complete its plans for growth,” Bloomberg reports. “The internal figures reflect only some of the measures Exxon would take to reduce emissions, the company said.”
Bloomberg reporter Kevin Crowley, one of the two writers behind this week’s exposé, had already reported in August that Exxon was “ripping up its debt-fuelled, US$30 billion-a-year plan to rebuild an aging worldwide portfolio after cash flow evaporated and threatened the company’s vaunted dividend.”
However, Crowley and colleague Akshat Rathi noted yesterday, “the largest U.S. oil producer has never made a commitment to lower oil and gas output or set a date by which it will become carbon neutral,” and “Exxon has also never publicly disclosed its forecasts for its own emissions.”
“The internal documents show for the first time that Exxon has carefully assessed the direct emissions it expects from the seven-year investment plan adopted in 2018 by Chief Executive Officer Darren Woods,” and “list Exxon’s direct emissions for 2017—122 million tonnes of CO2 equivalent—as well as a projected figure for 2025 of 143 million tonnes,” Crowley and Rathi write. “The additional 21 million tonnes is a net result of Exxon’s estimate for ramping up production, selling assets, and undertaking efforts to reduce pollution by deploying renewable energy and burying carbon dioxide.”
The troubled colossal fossil responded in a statement that the projections in the memo were “a preliminary, internal assessment of estimated cumulative emission growth through 2025 and did not include the [additional] mitigation and abatement measures that would have been evaluated in the planning process. Furthermore, the projections identified in the leaked documents have significantly changed, a fact that was not fully explained or prominently featured in the article.”
In the aftermath of the initial story, analysts pointed out that companies like Exxon “will publicly disclose forward-looking numbers on production forecasts, earnings potential, and capital expenditures,” Rathi and Crowley write in a follow-up post Tuesday. But they only publish their emissions data retrospectively.
“We would like to see Exxon make its emission projections public,” said John Hoeppner, head of U.S. stewardship and sustainable investment at Legal & General, a British multinational fund manager that Bloomberg identifies as one of Exxon’s top 20 shareholders. “Ambitious targets for absolute emissions are a key part of our assessment.”
“It’s fascinating to me that Exxon puts so much effort into tracking these [future] emissions internally, yet chooses not to disclose them,” said Andrew Logan, senior director of oil and gas at Ceres, a non-profit network of institutional investors with $29 trillion under management.
The critical analysis of its emissions plan was not the only problem Exxon faced this week. Last Thursday, Reuters reported the company “could slip into a bigger-than-expected loss in the third quarter as the U.S. oil major struggles to cope with the effects of a pandemic-driven downturn in the energy industry.” That was after Exxon itself said its upcoming earnings report could show anything from a profit of 7¢ per share to a loss of 68¢ and “listed a number of factors that could impact its earnings such as oil and gas prices, refining margins and sales volumes”.
The midpoint between those estimates, a loss of 30¢, “is much wider than analysts’ estimate for a loss of 7¢,” Reuters noted, citing analysts at Refinitiv IBES. And “if the oil major posts another loss, it would be the first time that Exxon has reported a third straight quarterly loss in at least 36 years. The company had in July vowed to make deep spending cuts to cope with sharply lower energy demand and prices.”
To add insult to injury, Exxon saw NextEra Energy, a utility with about 45,900 megawatts of installed capacity and sales of $17 billion in 2017, briefly push it out of top spot among U.S. energy companies, in what RenewEconomy publisher Giles Parkinson calls “yet another sign of the pace of the global energy transition—and the massive switch taking place in the investment community.” While not all of NextEra’s generation assets are renewable, the company describes itself on its website as “the world’s largest generator of renewable energy from the wind and the sun”.
“If you had invested in Florida-based utility NextEra Energy a decade ago, your total return through this week, including dividends, would have been 600%,” notes Forbes senior contributor Robert Rapier. “In contrast, if you had invested in ExxonMobil a decade ago, you would have seen the share value decline by half. Add in the dividends, and the total 10-year return of ExxonMobil is -25%.”
That “stark divergence in performance led to something that would have been unimaginable a decade ago,” Rapier adds. “This week, NextEra’s market capitalization surpassed ExxonMobil’s to become the largest U.S. energy company. By the end of the week, ExxonMobil’s value was back on top, but if the trends are any indication, that position will be temporary.”
Although the Forbes analysis attributes Exxon’s fall primarily to the economic impacts of the pandemic, analysts at Moody’s Investors Service were assigning the company a “negative” rating last November, before COVID-19 hit, and the Institute for Energy Economics and Financial Analysis has been questioning its all-in fossil strategy for years. Exxon earned a round of mockery in 2017 for its projection that oil, gas, and coal would supply 77% of global energy demand in 2040, against only 4% for renewables, and was unceremoniously dumped from the Dow Jones Industrial Average last month.