Speaking at an analyst conference Tuesday in Houston, Exxon Mobil Corp. Chairman Lee R. Raymond remained pessimistic about the development of a natural gas pipeline through Alaska. Backing the results of a preliminary study by Exxon Mobil, Phillips Petroleum Co. and BP Plc, the three largest lease holders along the North Slope, he said the future of an Alaskan pipeline still remains a long shot, due to the nature of natural gas volatility along with the overall cost of the enormous project.

Regarding any Alaska pipeline (see Daily GPI, Feb. 20), Raymond said the two major obstacles that stand in the way are “the cost of the line” and “the price of the gas.” As to whether any proposed Alaska project would reach fruition, the executive said “it’s going to be tough. I think all of the estimates of cost to get [the pipe] to the upper Midwest are…running in the high teens in billions of dollars…which is a rather sizeable investment for a pipeline.

“Even if you’ve got that nailed down, I think there is a concern on the part of the producers as to whether or not we can see the sustainable gas price in the Lower 48 that would have to be in the mid to high $3.” Raymond added that he did not think there is anyone who would be a “big bettor” on sustainable prices in that range. The question becomes, “What is the timing where you would have a level of confidence to put up $25 billion to build that type of project,” Raymond asked rhetorically. “I don’t think it is right around the corner,” he said.

Touching on the company’s merger with Mobil Corp, Raymond revealed that the company now expects to exceed $8 billion in savings from merger synergies, a sizeable increase from the company’s original $2.8 billion estimate in 1998 (see Daily GPI, Dec. 2, 1998), and an increase over the company’s most recent $7 billion estimate. Of the more than $8 billion in savings, he said $1 billion will be realized in 2003.

Making good on what analysts predicted would be a ‘stay the course’ message, Raymond told the financial community that the diversified global energy giant will continue to focus on its base earnings business, while making its earnings results easy to understand to the financial community. Without pointing fingers, Raymond said, “There are no long-term incentives to manipulate [financial] results.”

On the production track, Raymond said liquids and natural gas in North America will continue to provide significant contributions, “with growth in Gulf of Mexico deepwater and expansion in Canada more than offsetting natural fuel decline in the Lower 48.” Globally, “We are on track for near term capacity growth of 3% on average” through 2007, he said.

Calling the company’s upstream opportunities “exceptional,” Raymond said Exxon Mobil has 90 major projects representing investments of $55 million. Almost 20% of those are currently being implemented, just under 30% are in design with the remainder being planned. Earnings for the downstream sector increased “significantly” to a record $4.2 billion.

In other company news, Raymond filed with the Securities and Exchange Commission (SEC) in late February to sell 63,316 shares of Exxon Mobil’s common stock valued at approximately $2.6 million.. According to the SEC filing, Raymond was divesting the shares he acquired after exercising options granted in 1992.

“It is not unusual [for executives] to either exercise and sell those options occasionally,” said Exxon Mobil spokesman Tom Cirigliano. “Typically the options are only good for only 10 years anyway, so it may have been a situation where he had to sell them or he would lose them.” Cirigliano said Raymond did sell the shares in question.

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