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Tariq Siddiqui's picture
COO Upstream EP Advisors LLC

Oil & Energy | Business Development | Capital Projects | Offshore Wind - Proven leader in offshore development and operations, with 25+ years’ expertise in managing business through cycles of...

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  • Jun 14, 2021 10:33 am GMT
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The recent overhaul of Exxon Mobil Corp.’s board of directors could shift billions of dollars in spending and strategy over several years, but any changes likely will take time, analysts and investors say.

KEY INSIGHTS

  1. Investors rejected XOM view of a slow transition to lower-carbon fuels - want spending to be revisited.
  2. The practice led XOM to miss industry shifts and play catch-up at the expense of its balance sheet.
  3. Investors want a “fundamental rethink on strategy; the big measure” being its $16 billion-$19 billion annual project spending.
  4. XOM did not pay attention early enough to public frustration over global warming & ESG. Investors,
  5. Energy analysts do not see Exxon slashing its biggest ventures—offshore oil in Guyana and Brazil, or LNG in Asia and the U.S.
  6. LNG projects that supplant oil production also can help Exxon Mobil reduce emissionsIn the U.S.
  7. XOM has sharply cut drilling and reduced its shale output goals to 700,000 bbl/d from 1 million.

BOTTOMLINE

“This is a call to reassess fundamentals of supply and demand for energy in the long term, and to question whether Exxon’s current thinking around renewables gaining market share is too modest,”

 

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Matt Chester's picture
Matt Chester on Jun 14, 2021

but any changes likely will take time, analysts and investors say.

The speed and scale of these changes will be illuminating as to how earnest and genuine the attempted shift towards cleaner energy is, or if it's more of a PR smoke screen that's been seen from oil companies in the past

Tariq Siddiqui's picture
Tariq Siddiqui on Jun 14, 2021

Matt you hit the nail right on the head! If the oil companies want to remain relevant, they can no longer drag their feet. I will soon share a benchmark, that indicated ExxonMobil was lagging behind in resilience matrix indicative of low carbon energy transition. The investors are serious; if companies are not serious with ESG credible actions and messaging the investment capital will dry up soon. 

Bob Meinetz's picture
Bob Meinetz on Jun 16, 2021

Tariq, oil companies have only stayed relevant by dragging their feet - in fact, they've become experts at it. By erecting a few turbines here, a few solar farms, they've successfully exploited public perception to continue business-as-usual for as long as possible.

"The investors are serious; if companies are not serious with ESG credible actions and messaging the investment capital will dry up soon."

No Tariq. Investors are serious about one thing and one thing alone: making money. No investor will sacrifice profits on behalf of the environment - or anything else. If dragging their feet, if erecting a false front to protecting to the environment is more profitable for oil companies than actually doing it, that is the path corporate policy will follow. Always been that way, and will be to the end of time.

Tariq Siddiqui's picture
Tariq Siddiqui on Jun 18, 2021

A 19 trillion dollars fund group in NY has decided that they will not include oil & gas in their portfolios, another 17 trillion global funds group, has decided they will only invest in those oil & gas companies that have a credible ESG and transition plans.  The poor performance of Oil & gas compared to S&P in last four years, threat of stranded assets (oil & gas) has alarmed the investors. 

First, there is  a significant gap between, what oil companies should have done and what they have actually done. However, within the peer group, there is spectrum of performance. There are benchmarks (Wood Mackenzie), that shows, companies that have done relatively well (example RDS & BHP etc) and one that have really lagged behind, (example XOM). 

Second, I fully agree, oil & gas companies, have spent less than 1.0 % of their annual CAPEX spend on meaningful transition technologies ( Offshore wind, CCUS, Hydrogen, Bio-fuels). What they have targeted is a low hanging fruit; onshore wind, EV/Batteries, charging stations, power grid infrastructure etc. 

Thirdly, investors, regulators and society at large is not only interested in oil & gas company reduce their carbon footprint, or bring their spare cash, but there looking forward to their expertise, in supply chain, in offshore projects and manage R&D and technology deployment.

Lastly, oil companies are like battle cruisers, its not that easy to change their direction. Although, oil companies had more than 10-15 years when his apparent iceberg of transition was approaching. The European oil companies that had small reserve base and government regulatory support managed to change the direction quickly; example Danish Oil & gas Company (DONG) that has completely morphed into Orsted. Companies in these countries not only had legislative binding for energy transition but also a regulatory follow through at industry and company level to make meaningful transition plans. Something which is missing in US.

 

Bob Meinetz's picture
Bob Meinetz on Jun 18, 2021

Tariq, I spent 5 minutes at Orsted's website looking for any description of their power mix - and found nothing but hype. And more hype. Graphics, promises, goals for 21XX. Big, big plans for the future. "Net zero" carbon emissions, colorful charts, and more hype.
 

If you've ever wondered why they never talk about their past environmental accomplishments, the reason is simple: it's because they don't have any.

 

Finally, some environmentalists are starting to catch on:

Planet of the Humans

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