ExxonMobil Corp. CEO Rex Tillerson told shareholders last week "no single energy source exists today" to move the world significantly beyond using natural gas, oil and coal for decades. To 2030 "and beyond," he said, only fossil fuels will solve the growing demand for energy.
Tillerson made his comments at the Irving, TX-based company's annual meeting. ExxonMobil is committed to investing in renewables such as biofuel, wind and solar, but operating more efficiently will be as important as developing new technologies, he told the audience.
"For now and the foreseeable future, an integrated set of solutions is required -- ranging from producing hydrocarbons more effectively, to using them more efficiently, to improving existing alternatives and developing policies that encourage long-term planning and investments," Tillerson said.
ExxonMobil scientists are working on the cause and effects of climate change, which Tillerson called "a serious risk-management issue." He outlined the challenge of meeting growing energy demand while reducing greenhouse gas emissions.
"ExxonMobil is strong, resilient and well positioned for the future, with plans to invest between $125 billion and $150 billion in new energy projects over the next five years alone," said Tillerson. “Our commitment to developing advanced technology, our industry-leading operational and project-management capabilities and exceptional employees continue to position the company as the world leader in the petroleum industry and a partner of choice for resource owners around the world.”
Between 2008 and 2015, to offset normal field declines and depletion, ExxonMobil expects to add around 1.5 million boe/d of new capacity through new projects -- equivalent to almost 40% of current production. In all, more than 100 projects are under development to support development of more than 24 billion boe.
In its Corporate Citizenship Report for 2008, which was released late last month, ExxonMobil said it was on track to meet its target for improving energy efficiency by 10% between 2002 and 2012. A significant part of the emission cutbacks, estimated at around 2 million metric tons, came from a sharp reduction in natural gas flaring from its Nigerian operations. Most of the rest of the reductions came from efficiency measures.
"Today is the supreme test of any business model," Tillerson told the audience. "But we are well suited to handle the conditions of the last year...The recent months have certainly been challenging...and there are some difficulties going forward in the broader market. But our planning horizon is for the long view, and our view of demand is for the long term...We believe the world needs integrated energy solutions."
Shareholder activists protested ExxonMobil's climate change policies and executive compensation plans, but they failed to pass any of the 11 items on the annual meeting agenda.
A proposal to allow shareholders to call special board meetings captured almost 41% of the "yes" votes. A resolution by descendants of John D. Rockefeller requesting a climate change report drew only a 10% positive response. Around four billion shares were voted at the meeting, and around 131,000 of the company's shareholders were represented by proxy or in person.
Shareholders were allowed to speak at the meeting, and many took the opportunity to criticize the company's climate change policies, which have lagged those of some of its peers. Chevron Corp. has agreed to track and report on the carbon content of its products, which was praised by some of the shareholders at the ExxonMobil meeting.
Patricia Daly, who was representing the institutional investor Sisters of St. Dominic of Caldwell, NJ, told Tillerson that Chevron was making a good faith effort and was preparing for a future in which carbon would be more stringently regulated. Of ExxonMobil, she said, "I'm not confident yet that we're ready."
Shareholder Michael Crosby said recent models by the Massachusetts Institute of Technology indicate global warming may be occurring more rapidly than previously projected. "ExxonMobil should put a warning on gas pumps about the risks associated with continued use of fossil fuels," he told the audience.
Several speakers voiced their disapproval of Tillerson's compensation package, which in 2008 was worth $23.9 million. Shareholder resolutions called for splitting the duties of the chairman and CEO and for reining in executive compensation.
If Tillerson retires at age 65, he could leave the company with a package estimated at $670 million, including stock options, noted stockholder Mari Mather of NorthStar Asset Management Inc.
Tillerson chuckled at Mather's remarks, but he refused to engage in any debate with the speakers. Instead, the CEO told the audience that ExxonMobil's board opposed all of the 11 shareholder proposals.
Also last week Chevron Corp. shareholders overwhelmingly rejected a proposal to compel the oil major to issue an environmental protection report on its worldwide operations.
The proposal garnered only 7% support from company shareholders, and other proposals by shareholders were rejected as well, mirroring the results from ExxonMobil's annual meeting. The results were tallied as part of Chevron's annual shareholder meeting, which was held in San Ramon, CA.
CEO Dave O'Reilly told the audience that the company's record performance last year enabled the company to reward its investors, fund a "robust" capital program and be in a position to capitalize when energy demand recovers.
"Chevron's been in business for 130 years through 13 major recessions," said O'Reilly. "It's no accident we're still in business today. We look past the downturns to keep our focus on long-term growth. Eventually, world economies will grow. Experts say that by 2030 energy demand will increase as much as 30-40%. When the world starts growing, it will need all the energy it can get. Chevron will be there to supply it."
John Watson, vice chairman of the board, told investors that Lloyds Register, an independent auditor, confirmed that Chevron's environmental management systems meet all international standards. Chevron has met its greenhouse gas emission goals every year since 2004, and is ranked No. 1 among U.S.-based oil and gas companies and No. 2 worldwide in the 2008 Carbon Disclosure Leadership Index. The index lists companies taking best-in-class actions to measure and report carbon emissions.
Chevron's $22.8 billion capital and exploratory expenditure program for 2009 is expected to fund large, multi-year projects with about 75% earmarked for worldwide crude oil and natural gas exploration and production projects.
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