ExxonMobil bets on a future imbalance of supply and demand caused by underinvestment in oil and gas energy development. Therefore, ExxonMobil is positioning itself to take on the role of providing for the future hydrocarbon demand in contrast to European counterparts who clearly state their goals in pivoting towards low-carbon cleaner energy.
As of now, the company is focused on the short to medium-term outlook with no indication of shifting away from oil and gas. However, ExxonMobil could potentially outperform other peers if the company is able to optimise its assets, preparing to capture a bigger market share once oil demand recovers closer to pre-pandemic levels by 2022 as forecast by the IEA. ExxonMobil could also sustain and profit marginally at a lower price environment, considering its aggressive measure to reduce operating costs by approximately 20% from 2019.
Due to the Covid-19 pandemic, ExxonMobil reduced 2021 capital guidance by 30% compared to 2020 down to approximately $16m-$19m. However, the company retains its priority to invest in a high-value project in Guyana and Brazil while pacing the development of Permian Basin and liquefied natural gas (LNG) in Mozambique. ExxonMobil had significant growth in Permian production through 2020 but decided to slow down the development and maintain 10 – 15 rig count by the end of 2020 and throughout 2021 in order to retain the long-term value of Permian Basin.
In the downstream and chemical segment, ExxonMobil believes in a significant upside as the current profit margin is at the bottom of the cycle. ExxonMobil remains focused on expanding the downstream, high-grading portfolio by divesting old refineries to focus on long-term strategic asset mainly to expand Permian crude processing capabilities. The company plans for an expansion of Beaumont refinery by 250,000 barrels per day, which will efficiently increase Permian crude processing capability. In order to maximise the value of the full value chain, ExxonMobil is expanding its US petrochemical capacity mainly in ethylene derivative capacity to position itself to take advantage of low-cost ethane feedstock and ensure a competitive ethylene cash cost. In the Asia market, ExxonMobil recognises a grow in petrochemical demand and plans to venture into China to capture some market share, also focusing on ethylene derivatives.
To deal with the increase in emissions that comes with the increase in production capacity, ExxonMobil expresses its commitment to environmental, social and governance (ESG) criteria by signing agreements with multiple partners. The majority of ExxonMobil’s initiatives are focused on biofuels and carbon capture and storage (CCS), reflected by their recent partnership with Global Clean Energy Holdings and Global Thermostats respectively. However, ExxonMobil’s initiative to combat climate change has not been significant compared to the scale of the production.
With respect to investing or diversifying into renewable energy, Chevron is taking a different approach compared to European oil giants. Companies such as Total, BP, and Shell are looking to replace their upstream portfolio with alternative cleaner energy. Chevron’s priority remains in the upstream segment while committing to reduce the carbon intensity in its production. The company signed a partnership with Algonquin to power the company’s operations globally with 500MW of clean energy, which fulfils the company’s commitment to ESG goals.