ExxonMobil’s massive Kearl Lake mine north of Fort McMurray may be the latest tar sands/oil sands to be devalued as one of the world’s most determined colossal fossils considers designating up to one-fifth of its global oil and gas reserves as stranded assets, part of a company-wide scramble to respond to crashing oil prices and weak markets for its product.
On Monday, Bloomberg News reported that Exxon was “ripping up its debt-fueled, US$30 billion-a-year plan to rebuild an aging worldwide portfolio after cash flow evaporated and threatened the company’s vaunted dividend.” Then in a regulatory filing Wednesday, the company admitted that “certain quantities of crude oil, bitumen. and natural gas will not qualify as proved reserves at year-end 2020” if oil prices stay low through the end of the year—as many analysts expect.
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And just as French colossal fossil Total singled out two investments—its tar sands/oil sands operations at Fort Hills and Surmont—when it declared C$9.3 billion in stranded assets last week, Exxon’s statement Wednesday focused in on one particular project. “The company’s massive Kearl oil sands mine in Alberta was the only specific asset singled as a potential victim of any year-end revision,” Bloomberg writes. “Imperial Oil Ltd., which is about 70% owned by Exxon and run as a subsidiary, said in a separate filing that an undetermined portion of Kearl’s reserves may be imperiled.”
As for the bigger picture, “a 20% hit would impact the equivalent of almost 4.5 billion barrels of crude, or enough to supply every refinery on the U.S. Gulf Coast for 18 months,” the news agency adds. And “Exxon isn’t waiting until the traditional end-of-year period to reassess reserves. After slashing its drilling budget by $10 billion to cope with the virus-driven market collapse, the company on Wednesday said it removed about one billion barrels from its books,” mostly in shale fields.
Those moves are part of a bigger and, some analysts would say, long-overdue change in Exxon’s investment strategy. “The shift by the Western world’s premier oil explorer represents an about-face after more than two years of doing pretty much the opposite of its biggest rivals, who have been shrinking and looking to a future beyond fossil fuels,” Bloomberg wrote Monday. “As recently as March, the Texas giant had pinned its future to huge capital spending on oil and natural gas at a time when peers were exploring ways to decarbonize.”
At the time, “Exxon Chief Executive Officer Darren Woods’ plan was to lean on the company’s impeccable balance sheet to drill for gushers and still cover almost $15 billion in annual dividends,” the news agency added. But now, the company is cutting its capital spending, exploring management job cuts, and announced that “work on Exxon’s five marquee developments—deepwater oil in Guyana and Brazil, Permian Basin shale, gas exports from Mozambique and Papua New Guinea—will all be curtailed or delayed.”
Senior Vice President Neil Chapman told analysts the moves were just an adjustment, not a strategic shift. “I don’t think it’s a fundamental change,” he said. “I think it’s a response to the short-term environment.”
Sustaining the company’s annual dividend to shareholders is “something we take really, really seriously,” Chapman added. “Exxon is keenly sensitive to the fate of its dividend because 70% of the company’s shareholders are retail investors,” Bloomberg explains. But “the commitment comes at a significant cost,” and “without so much money being spent on new projects, questions remain over how Exxon can mitigate its long-term production declines and how resilient its assets will be in an energy transition toward low-carbon fuels.”
Successfully addressing climate change means less fossil fuel production and consumption, there is no alternative to that outcome, unless we don’t successfully address climate change. I am fascinated to watch the oil majors maneuvering in this regard and they are of course not about to be the first to acknowledge their very uncertain futures are actually linked to the emergence of a low carbon world. I feel for the fossil fuel workers who will ultimately be abandoned by this once immensely profitable sector that has had every opportunity to diversify in the face of clear science on climate change.
” I feel for the fossil fuel workers who will ultimately be abandoned by this once immensely profitable sector that has had every opportunity to diversify in the face of clear science on climate change.”
Yes, this once immensely profitable sector has had every opportunity to diversify in the face of clear science on climate change – and yet this sector has squandered every opportunity that has come their way to set a different course in their short-sighted clinging to practices that are now endangering our planet and the billions of people who are destined to suffer because of their shortsightedness. Shame on the corporate elites who are responsible for this, and also shame on them for dragging their fossil fuel workers down with them, when they could have helped create a more promising future for those workers.
“Sustaining the company’s annual dividend to shareholders is ‘something we take really, really seriously,’ Chapman added.”
This is the problem with modern shareholder-driven capitalism. The company is cutting capex, cancelling projects, abandoning equipment, and telling their employees to “tighten their belts,” all so they can keep giving money to shareholders even while profits are nonexistent. This is completely ass-backwards. A company’s first priority should be its employees – its most valuable resource – and dividends should be the very last place money goes.
Wealthy fat cat shareholders are leeches who provide no value to the companies they hold a stake in, only take, take, take.
What this really means is that large oil in America is not confident that they can make a profit.
It has nothing to do with the environment.
Nothing to do with concern of its employees.
It is all corporate greed.
While the Arab nations and Russia continue to control the worlds economies with cheaply produced and some would say corrupt and hostile means Exxon mobile who has refineries in the gulf coast of Texas that rely on heavy oil to manufacture many oil based products will in the future return to the oil sands in mass.
Why you ask?
Because no matter how much we divest ourselves from fossil fuels there are so many things like computers, cell phones, medical masks, clothing, packaging for toilet paper, medical gowns, syringes, IV bags and list goes on that rely on this product either fully or partially.
A, reasonable person would look at both sides of this story and try to find ways to mitigate and minimize the impact of both.
Exxon is all about profit and greed and less about us and the earth.
Darren Woods, why not revise Exxon’s future fossil fuel plans and instead invest in exploration in climate- friendly alternative energy sources, and restrain your workers in these new endeavors. Produce just enough fossil fuel for plastics operations, and research for less toxic forms of plastics. Most stock holders will survive. Tighten belts, lose a little weight. Lighten their loads.
Deborah, here’s some of our recent coverage on plastics:
http://theenergymix.com/2019/05/16/blockbuster-report-shows-plastics-producing-850-million-tonnes-of-emissions-this-year/
http://theenergymix.com/2019/06/09/fossils-see-circular-economy-backlash-against-plastics-cutting-demand-for-oil-and-gas/
http://theenergymix.com/2020/01/30/fracking-industry-driving-massive-boom-in-plastic-production/
http://theenergymix.com/2018/01/04/fossils-fund-186-billion-investment-binge-on-future-plastic-pollution/
I’m afraid the “just enough” the fossils are interested in is just enough plastic production to sustain their operations as liquid fuel demand gradually disappears.
Green Energy is not possible without fossil fuels at the moment. That’s just a fact.
Plastics, batteries, wind turbines, etc… They all require that initial seed