ExxonMobil Corp. expects to ramp up more than 20 new global oil and natural gas projects in the next three years that at their peak will add 1 MMboe/d to the producer’s base volumes. Scheduled U.S. start-ups between 2008 and 2009 are the Piceance Tight Gas Phase 1 project in the Rocky Mountains, the deepwater Thunder Horse platform in the Gulf of Mexico and the Golden Pass LNG [liquefied natural gas] import terminal near Sabine Pass, TX.
CEO Rex Tillerson told analysts in a three-hour session at the New York Stock Exchange that ExxonMobil will spend about $20 billion a year through 2010 on a multitude of global energy projects, spending at roughly the same rate it spent in 2006. However, the projects that have been in the construction and design phase are soon to be completed. Only seven oil and gas projects ramped up worldwide in 2006, but this year, ExxonMobil will double its start-ups, with 14 new additions to its portfolio. Between 2008 and 2009, 32 projects will launch, and in 2010 and beyond, 63 oil and gas projects now on the drawing board are expected to be integrated into the business.
“Market and geopolitical forces continue to shape the environment in which we operate,” Tillerson said. “Our view of what it takes to be successful in this industry has not changed. It requires consistency, integrity, discipline, reliability and ingenuity.” The Irving, TX-based producer appears to have what it takes. Tillerson noted that ExxonMobil’s return on investment led the industry in 2006 with return on capital employed of 32%, which was 50% higher than its competitors.
There are only three projects coming on line between now and 2009 in the United States, but two are gas-directed. Targeted for completion in 2009, the Golden Pass LNG terminal project near Sabine Pass, TX, is being built with partners Qatar Petroleum and ConocoPhillips (see Daily GPI, Dec. 27, 2006; July 1, 2005). The Thunder Horse deepwater platform, in partnership with BP plc, is due to ramp up by the end of 2008, three years later than initially scheduled (see Daily GPI, Sept. 19, 2006).
The third project, ExxonMobil’s Piceance Tight Gas Phase I expansion, has flown mostly under the radar, and the company still hasn’t detailed how much money it plans to spend in the basin. But it appears to be readying for success. Last year, ExxonMobil filed plans with the Bureau of Land Management (BLM) to drill more than 1,000 wells in the next 30 years on 29,680 acres of leased and state land in Rio Blanco County, CO. The BLM is expected to make a ruling on the expansion this spring. The company has produced gas from the mid-Piceance Basin near Meeker, CO, since the 1950s, and it has an interest in more than 300,000 acres there. In 2005, its Piceance Creek Unit was producing 45 MMcf/d from 52 wells.
In anticipation of the expansion, ExxonMobil has entered into a 30-year agreement with Enterprise Gas Processing LLC to provide midstream services for the Piceance gas. Enterprise expects to invest $185 million to construct new plant and pipeline facilities to treat and deliver the gas; construction is expected to be completed in late 2008.
By 2010 and beyond, several North American projects are listed as add-ons to ExxonMobil’s upstream portfolio: additional expansion in the Piceance, Prudhoe Bay western region development, the Alaska gas pipeline, the Mackenzie Gas Project, Kearl oilsands development in Alberta and the Hebron field of Canada’s East Coast.
ExxonMobil still wants to be part of the long-proposed Alaska gasline project, Tillerson said. The company partnered in a consortium with the North Slope’s other leading producers, ConocoPhillips and BP plc, to push through a gasline plan, but it ultimately was rejected by state authorities last year.
“At this point, a pipeline to the Lower 48 still seems to be the most sensible and robust option to pursue,” Tillerson told analysts. He’s not quite as enthusiastic, though, about Alaska Gov. Sarah Palin’s new legislation to restart pipeline negotiations, which was unveiled last Friday (see Daily GPI, March 5).
“Alaska does not have a good record of fiscal stability…That’s going to be the most difficult challenge for this administration [Palin’s] to deal with,” Tillerson said. The pipeline ultimately will cost more than $25 billion, he said. “You can’t undertake something on this size and not have durability.”
Financial analysts appeared to like what they heard about ExxonMobil’s plans for the next few years.
Deutsche Bank analysts said ExxonMobil’s “industrial story is as relatively powerful as ever. Over the past year, large projects were delivered on time, on budget, humiliating bungling competitors.”
Citigroup’s Doug Leggate said ExxonMobil has a lower commodity risk than the rest of the energy sector, and its management team is “seen as number one in the sector…” ExxonMobil “has replaced reserves consistently over the past two decades with a current five-year average of 137% (excluding acquisitions and disposals), and retains substantial resource potential from new developments under way.” The company’s “consistent performance, long-term planning horizon, portfolio depth and sheer balance sheet strength remain a potent cocktail that in our view is understated in the current valuation.”
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