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Golden Pass LNG May Advance If It Passes Muster with Competition, Says ExxonMobil CEO

ExxonMobil Corp. is nearing a decision to advance with Qatar’s state-owned producer their long-held Golden Pass liquefied natural gas (LNG) project on the Texas coast, eyeing ways to optimize it in a broad pipeline of upstream, downstream and chemical investments across the U.S. onshore.

During a quarterly conference call Friday morning, CEO Darren Woods laid out a bevy of global project opportunities that include Golden Pass, which he said go “way out to the future. The intention is to bring them along or put them aside, regardless of the price environment.

While some operators have expressed caution on spending this year because of volatile oil prices, the supermajor, as usual, is running in its own lane, with plans to increase capital expenditures year/year by $4 billion to $30 billion.

Adjusting up and down with the commodity cycles is inefficient, Woods said. It’s better to look to the long term to build the organization more efficiently.

“We’ve got a very strong portfolio of investments,” he said, supported by a spectrum of exploration and production, midstream and chemicals projects across the value chain.

ExxonMobil is the biggest leaseholder in the Permian Basin, which it holds in parallel with pipeline and petrochemical infrastructure that extends from South Texas into Louisiana.

The estimated $10 billion Golden Pass LNG project in Sabine Pass, TX, would fit into the portfolio, Woods said. Originally designed before the unconventional drilling revolution as an import facility, Golden Pass has since been reconfigured to export up to 15.6 million metric tons/year.

The facility is not yet sanctioned, but Reuters reported Friday that ExxonMobil and Golden Pass partner Qatar Petroleum (QP) may move the project into the development pipeline within days.

Analysts on the conference call pressed Woods to provide more details about its potential, which parallels the ExxonMobil-led Rovema LNG SpA export facility underway in Mozambique.

Woods did not confirm the status of Golden Pass, but he noted that it could be concurrently developed with Rovema.

“With strong growth in the LNG market, there’s lots of demand that supply will chase,” he said. However,  “we want to make sure those developments occur in a cost efficient way.” The company has an “advantage” built into its Texas supply chain but management “is less worried about what others are doing…” regarding LNG developments. “We would want to bring it on in a cost efficient manner.”

Abundant onshore gas, supplemented by associated gas from oil, “is an important element in the LNG projects we’re advancing,” the CEO said. “We are looking at this opportunity not on the basis of what we have in the portfolio but of what industry has in its portfolio.”

Unless ExxonMobil sees an advantage over the rest of industry, “we won’t pursue it. It has to compete on an industry-wide basis. We don’t make decisions on what we have but on what we can compete on...That applies to everything, not just LNG.”

Still, ExxonMobil values its history with QP, the largest LNG exporter in the world. Woods touted ExxonMobil’s “long-term presence and partnership” with QP, and said together the companies have achieved “a lot of success...We certainly want to extend that…”

QP in December said it was exploring investments of up to $20 billion in the United States, in both onshore and offshore projects. It plans to exit the Organization of the Petroleum Exporting Countries, i.e. OPEC, to concentrate on building its already substantial gas business, and in particular, LNG. Combined oil and natural gas, which it supplies via pipeline and via exports, currently is around 4.8 million boe/d, Energy Minister Saad Sherida al-Kaabi said at the time.

ExxonMobil delivered fourth quarter results that topped expectations, lifted by its increasing global LNG sales, as well as output from the Permian, which increased 93% year/year and 12% sequentially.

Net income totaled $6 billion ($1.41/share) in 4Q2018, versus year-ago profits of $8.4 billion ($1.97). The final quarter of 2017 included a tax benefit. Upstream earnings swung to a profit of $549 million in 4Q2018 from a year-ago loss of $60 million.

For 2018, earnings topped $20.8 billion ($4.88/share) from $19.7 billion ($4.63) in 2017. Cash flow from operations in 2018 was $40 billion, including sales asset proceeds of $4 billion.

Total oil, natural gas and other hydrocarbon output increased slightly, hitting 4 million boe in 4Q2018. On gains from the Permian, global liquids production increased 4% to 2,348 b/d, while gas production fell to 9.97 Bcf/d from 10.44 Bcf/d.

In the United States, net liquids production increased year/year to 583,000 b/d from 525,000 b/d, while gas output declined to 2.58 Bcf/d from 2.75 Bcf/d. Average realized domestic oil prices improved slightly year/year to $54.50/bbl from $54.12, while gas prices increased to $8.18/Mcf from $5.77.

Up-Streamlining To Double Cash Flow, Earnings By 2025

The Irving, TX-based supermajor is streamlining its upstream organization and centralizing project delivery with a goal of doubling operating cash flow and earnings by 2025. The reorganization, to take effect April 1, was announced Thursday.

“We’re simplifying and integrating our upstream organization to better capitalize on the industry leading portfolio we’ve assembled through acquisitions and exploration success in the...Permian Basin, Guyana, Mozambique, Papua New Guinea and Brazil,” said Senior Vice President Neil Chapman. “Our focus is on increasing overall value by strengthening our upstream business and further integrating it with the downstream and chemical segments to take advantage of our unique capabilities across the value chain.”

A clear example, he said, is what the supermajor is doing in the Permian, which provides upstream, midstream and downstream opportunities. Three upstream companies have been formed: ExxonMobil Upstream Oil & Gas Co., ExxonMobil Upstream Business Development Co. and ExxonMobil Upstream Integrated Solutions Co.

The oil and gas unit, to be run by Liam Mallon, would focus on end-to-end value chain management in five distinct global businesses: unconventional, liquefied natural gas, deepwater, heavy oil and conventional. Mallon now is president of ExxonMobil Development Co.

The business development unit, overseen by Steve Greenlee, would oversee strategy development, exploration, acquisitions and divestments, as well as “actively” manage the upstream portfolio. Greenlee is president now of ExxonMobil Exploration Co.

The integrated solutions unit, run by Linda DuCharme, would provide technical and specialized commercial skills, such as drilling, research/technology, gas and power market optimization, and global resource deployment. DuCharme now is president of ExxonMobil Global Services Co.

Project-delivery capability would be enhanced through a single organization, ExxonMobil Global Projects Co., to centralize major capital project planning and execution expertise that supports upstream, downstream and chemical. Neil Duffin, now president of ExxonMobil Production Co., would oversee the unit.

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