Criticized in the past for not spending enough to find and recover new oil and natural gas reserves, ExxonMobil Corp. is boosting its capital spending by about 20% to $25 billion this year and said it plans to pend at least that much every year until 2012.
Part of the jump in spending follows industrywide cost increases, CEO Rex Tillerson told financial analysts in New York last week. However, he also pointed to the start-up of 19 major new oil and gas projects by 2010, which would add about 725,000 boe/d at their peak. Twelve major projects are slated to ramp up this year.
“The key is seeing opportunities before others do,” said Mark Albers, senior vice president. Albers, who spoke with analysts about ExxonMobil’s upstream projects, said the plethora of new developments across the globe should enable the company to add to its reserves base for at least five to 10 years. “We expect a very busy year” in 2008, with even bigger ramp-ups over the coming four years.
Investment decisions, Tillerson added, “continue to be shaped by our long-term view of trends in the industry and the global economy.”
What it sees at the moment are rising costs, said the CEO. The Irving, TX-based major’s cost to produce oil and gas jumped by 18% in 2007 following a 13% increase in 2006. ExxonMobil last year spent $7.14/boe on worldwide finding and development costs, which was up from $6.04 a year earlier.
With the padding of its capital budget, ExxonMobil plans to launch a bevy of projects, mostly overseas — but there are key additions planned in North America.
The deepwater Gulf of Mexico Thunder Horse platform is scheduled to finally begin operations this year. Between 2009 and 2010, ExxonMobil is scheduled to begin operating its Piceance Tight Gas Phase I in Colorado. Longer term, North American start-ups include future phases of the Piceance tight gas project, some oil and oilsands projects in Canada and Alaska onshore and offshore and two possibles: the Alaska gas/Point Thomson endeavor and the Mackenzie Gas Project.
Across the globe, ExxonMobil remains “well positioned” to increase its oil and gas volumes over at least the next five to 10 years, said Albers.
“We’ve got a very deep inventory of projects to work on,” he told analysts.
Liquefied natural gas (LNG) projects are a big part of the mix in North America. With its hands in LNG developments around the world, ExxonMobil plans to begin “multiple projects over the next three years across the full value chain of the LNG business, including production, transportation and distribution,” Albers said. Using proprietary technology, the company is scheduled to commission four of the world’s largest liquefaction facilities and new LNG ships that would be able to carry 80% more natural gas than conventional ships.
Proprietary LNG technology advances are contributing to the development of an international natural gas market in Tillerson’s view..
“We will almost double our production of LNG over the next three years, providing greater supplies of this clean-burning energy source for power generation and for industrial and domestic use,” Tillerson said.
Golden Pass LNG LLC, a terminal to be located near Sabine Pass on the Gulf Coast of Texas, is expected to begin operations in 2009 (see NGI, Nov. 21, 2003). The company in December also unveiled plans for a $1 billion-plus floating LNG receiving terminal that would be located off the coast of New Jersey and Long Island (see NGI, Dec. 17, 2007).
ExxonMobil has secured a lot of its future U.S. LNG supplies through key partnerships with Qatar. However, Tillerson told analysts that the U.S. market in general may have trouble competing with Asian and European markets.
“In the near term, that’s going to be the situation,” Tillerson said. “The U.S., from a pricing standpoint, will have difficulty competing for LNG.”
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