Tag Archives: ExxonMobil

Trump challenges Rex Tillerson to IQ test

US President Donald Trump has challenged his Secretary of State, Rex Tillerson, to an IQ test, in the latest sign of discord between the two.

He made the remark in a magazine interview when asked about reports that Mr Tillerson had called him a moron.

“I think it’s fake news,” Mr Trump told Forbes, “but if he did that, I guess we’ll have to compare IQ tests. And I can tell you who is going to win.”

Continue reading Trump challenges Rex Tillerson to IQ test

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ExxonMobil and OMV Petrom Explore New Prospect Offshore Romania

BUCHAREST–ExxonMobil and OMV Petrom (SNP.RO) Monday said they are drilling an exploration well on a new prospect about 155 kilometers offshore in the Romanian sector of the Black Sea, news agency Mediafax reported.

ExxonMobil Exploration and Production Romania Ltd., the Romanian unit of the U.S. oil giant, and OMV Petrom, the largest oil and gas company in Romania, have started drilling the Pelican South-1 exploration well on a new prospect in the Neptun Block, the companies said in a statement.

The well will test a new geological structure on the Neptun Block. Earlier in October, the Ocean Endeavour rig completed drilling of the Domino-2 well and data from the well are being evaluated, the statement said.

In February 2012, ExxonMobil and Petrom announced the discovery of a natural gas field estimated at 42-84 billion cubic meters following the drilling of a first well in the block.

ExxonMobil Exploration and Production Romania and OMV Petrom each hold 50% of the deepwater sector of the Neptun Block.

Energy sanctions aim to hurt Russia more than the west

The Rosneft logo is seen on the side of tanks at the company’s booster pump station 3 on the Ust-Balyksky oil deposit

As the US looks for levers to exert influence over Russia, energy is an obvious choice. Oil and gas generate more than 50 per cent of Russian federal government revenues, and Rosneft and Gazprom, the country’s two largest energy companies, are both state controlled.

The problem is that energy binds Russia to the rest of the world in a codependent relationship. Consumers – especially in Europe – need Russian oil and gas as much as Russia needs the revenue they bring in.

The energy sanctions being proposed by the US are intended to circumvent that obstacle.

The plan is to block exports of oil and gas technology only for new projects run by state-controlled companies, with the objective of casting the long-term future of Russia’s energy industry into doubt, while safeguarding its short-term contribution to global fuel supplies.

“This situation calls for a scalpel, not a meat axe,” says Robin West of the Center for Strategic and International Studies. “We need targeted asymmetric sanctions that hurt them more than they hurt us.”

By allowing continued exports of oil and gas equipment and services to Russia’s existing oil and gasfields, the proposed sanctions should make very little difference to the country’s energy exports.

Russia’s exports of crude oil and refined products, totalling about 7m barrels a day, supply 8 per cent of global consumption, while gas exports of about 16bn cubic feet a day meet 30 per cent of Europe’s demand.

However, blocking exports of equipment and services for new projects could have a “very meaningful impact on Moscow”, according to Jason Bordoff of Columbia University’s Center on Global Energy Policy.

Depriving Rosneft and Gazprom of the most modern technology would be a significant setback for their ambitions in the areas that are the future of the Russian industry, including shale oil, liquefied natural gas and the Arctic.

Vladimir Putin, Russia’s president, moved in the 2000s to tighten the state’s grip on the energy industry and curb the influence of western companies, but more recently has been encouraging deals to bring in the technology and expertise in areas such as drilling and hydraulic fracturing that will be needed to develop the country’s more challenging resources.

ExxonMobil of the US in 2011 signed a wide-ranging strategic co-operation agreement with Rosneft, which has since been expanded to include joint exploration of the Arctic Kara, Chukchi and Laptev seas, pilot projects in the Bazhenov and Achimov shales of western Siberia, and a possible new liquefied natural gas plant in the far east of Russia.

Royal Dutch Shell has a similar arrangement with Gazprom, also expanded last year to include exploration in the Arctic and shale development in western Siberia.

Without the help of these and other western companies, such projects would progress much more slowly, if at all, and would face higher costs.

The sanctions would not send Russia’s oil and gas production into an immediate slump, but over time the natural decline of existing fields would depress the country’s output.

The US government’s Energy Information Administration has estimated that the more stringent sanctions imposed on Iran cut its oil production capacity by about 10 per cent to 3.4m barrels a day during 2009-13.

The uncertainty over Russia’s long-term prospects in oil and gas would probably also depress the share prices of Rosneft and Gazprom.

Exempting private sector companies would also help their local rivals such as Novatek, the Russian independent gas group, which may be able to go ahead with Yamal LNG, its project with Total of France and CNPC of China, although Gennady Timchenko, the tycoon who owns 23 per cent of Novatek, is under sanction by the US.

The sanctions will be more effective if applied multilaterally. Shell is based outside the US, as are many of the main technology providers. Schlumberger, the oil services group with a large Russian operation, has its legal domicile in the Netherlands Antilles. SeaDrill, which is providing the rig scheduled to drill wells for Exxon in the Kara Sea, is registered in Bermuda.

The US is seeking support from European countries for its plan, but that may not be necessary. Mark Dubowitz of the Foundation for Defense of Democracies points out that when the administration began tightening restrictions on Iran in 2010, “secondary sanctions” were effective in persuading non-US companies to stop doing business there.

The tricky question will be what to do if the Ukraine crisis drags on. As time passes and the effect on Russia’s output grows, the strains on world energy markets will become more noticeable, potentially driving up prices for oil and gas.

Mr Bordoff warns: “In a global economy, each of these actions may also come at a cost to the countries imposing the sanctions that needs to be considered.”

With western oil companies tripping over themselves to assure Putin, it’s no wonder he’s so confident

What, me worry? Reuters/Alexei Druzhinin/RIA Novosti/Kremlin

Europe is warning Russian president Vladimir Putin of reputational harm if he shuts off the natural gas flow to the West, but judging by the behavior of western oil chiefs, he is secure if he dismisses the admonishment as so much noise.

Energy—and not the deployment of incognito, ragtag or straight-out government troops—is the central actor in the drama playing out between Russia, Ukraine and the West.

If the West wants to ensure that Putin’s land grab stops at Crimea, it will impose sanctions that impair or halt the activity of foreign oil and gas companies in Russia and ignore his threats to suspend Ukraine’s gas supply. But as long as it is business as usual in Russian energy, look for the Putin crisis to continue.

Russia relies on oil and gas exports to support 52% of the state budget. It is no overstatement to say that oil and gas are the lifeblood both of the Russian economy and Putin’s rule. The current revenue, and the promise that it will continue in relative perpetuity, frees him up to remain how he prefers—unpredictable.

So it is that, with production on a natural decline, Putin has brought in western behemoths ExxonMobil, Shell, Statoil and others to break open the Arctic and the enormous Bazhenov shale field. It is their job to ensure the long-term continuance of Russia’s daily flow (pdf) of some 21.8 million barrels of oil and gas equivalent.

The signs are that they intend to. In a visit with Putin yesterday, Shell CEO Ben van Beurden pledged to continue the company’s work to expand Russia’s flow of liquefied natural gas (LNG) and break open the Bazhenov.

A few days earlier, Norway’s Statoil said it, too, would continue to explore and drill wells. France’s Total said its work with private Lukoil will go on. “For us, it’s business as usual,” BP CEO Bob Dudley said about his company, which owns a 19.6% share of Russia’s giant Rosneft.

ExxonMobil CEO Rex Tillerson seemed to sum up the mood when he said he perceives no new geopolitical risk in Russia, apart from more sanctions, with which the company is already accustomed from prior experiences.

In fact, global energy actors seem to be tripping over themselves to make Putin feel secure. After Russia annexed Crimea last month, the European Union put a hold on South Stream, a cherished Putin natural gas pipeline intended to bypass Ukraine. But now there are reports of a split among the Europeans on the subject, with Bulgaria especially coming to South Stream’s defense. Meanwhile, Turkey says that if Europe won’t go along, Putin can reroute his line to the south.

Some disruption has been caused by Japanese banks, which have begun a retreat (paywall) from Russia out of fear of new sanctions, the Financial Times reports. And US and European banks appear to be exercising caution short of actually halting any activity. But it is oil and gas that count, and—with good reason—Putin appears to feel fully confident on that front.

Exxon forecasts natural gas to be world’s second most-used fuel

Natural gas will overtake coal as a global energy source in the middle of the next decade, in part because of the environmental benefits it offers, according to ExxonMobil, the world’s largest oil and gas company.

In its annual forecasts of the energy outlook for the next three decades, published on Thursday morning, Exxon says that around 2025 gas will become the world’s second most-used fuel on an energy-equivalent basis, behind oil.

By 2040, it expects natural gas consumption to rise 65 per cent, but coal use to be no higher than it is today, rising and then falling again during the next two decades.

The forecasts sketch out the battleground for a contest between gas and coal to be the dominant fuel for power generation.

Exxon is significantly more negative about the outlook for global coal use than other forecasters. The International Energy Agency, the think-tank backed by rich countries’ governments, expects coal use to continue to rise to 2035, and to stay ahead of natural gas throughout that period.

Bill Colton, Exxon’s vice-president for strategic planning, said there had been revolutions in both the supply of and demand for gas.

New reserves had been unlocked by technical advances enabling extraction from previously inaccessible rocks, and concern about pollution, including greenhouse gas emissions, was encouraging the use of cleaner alternatives to coal.

Mr Colton said that while nuclear power and renewable energy would also grow, both faced constraints, including public acceptance and the intermittency of wind and solar power. “That opens this huge opportunity for natural gas,” he said.

Exxon and other oil and gas companies have often resisted efforts to fight the threat of climate change, but now see an opportunity in displacing coal.

Gas releases only about half as much carbon dioxide as coal when used to generate the same amount of electricity, and also avoids the local pollution such as smog caused by burning coal.

The shale boom has also led to a surge in production and a slump in the price of gas in the US, making it increasingly competitive as a fuel for power generation even before most of the new regulations on coal plants proposed by the Environmental Protection Agency have taken effect.

Exxon forecasts that in 2030 gas will be the cheapest option for power plants in the US, even without government curbs on greenhouse gas emissions. For planning purposes, it assumes an effective carbon price of $60 per tonne that year, not necessarily as a direct tax or cost of pollution permits, but as a proxy for rules to limit emissions.

With the addition of that carbon price, the cost advantage for gas over coal looks overwhelming, it said.

As a result of the global shift from coal and into gas, Exxon expects that global greenhouse gas emissions will peak at about 2030 and then begin to decline.

However, the IEA has published scenarios suggesting that emissions profile would lead to a four degree centigrade increase in global average temperatures: an increase that the World Bank has said would have “potentially devastating” consequences.

The World’s Greenest Oil Company?

France’s Total is hedging against a low-carbon future by investing in solar and biofuels. 

A SunPower/Total photovoltaic power plant in Kern County, California (AP)

When Total, the French oil and petrochemicals conglomerate, announced a joint venture yesterday with California biofuels company Amyris to produce low-carbon jet fuel and diesel, it was just the latest move into renewable energy by the fossil-fuel giant.

During the height of the green-tech investing boom before the 2008 global economic crash, oil companies from BP to ExxonMobil poured hundreds of millions of dollars into solar and biofuels. That served as both a hedge against a low-carbon future, and, not coincidentally, as a way to generate some green goodwill. It’s not a new phenomenon. Oil company Atlantic Richfield, for instance, bought an early solar panel maker back in 1977.

Total, however, has accelerated its investment in renewable energy. As BP was shutting down its solar business in 2011, Total bought 60 percent of SunPower, the Silicon Valley photovoltaic panel manufacturer and power plant developer, for $1.4 billion. “We see [solar] as a huge potential in the very long-term future,” Total executive Philippe Boisseau told me when the deal was announced. “As we look 20 years down the road, it can represent a significant part of the electricity mix and therefore the energy mix.”

The company has invested in biomass startups and Total also bought 18 percent of Amyris. The San Francisco Bay Area company makes genetically engineered yeast that ingests sugarcane and excretes a renewable version of farnesene, an industrial hydrocarbon that can be refined into biodiesel and low-carbon jet fuel.

In the joint venture announced yesterday, Amyris and Total will form a company in Brazil called Total Amyris BioSolutions to make renewable jet fuel. With the European Union and Australia imposing carbon taxes on aviation emissions, the demand for green jet fuel is expected to skyrocket and all the major airlines have flown test fights powered by everything from used cooking oil to algae.

“As far as commercialization is concerned, the new joint-venture will benefit from the know-how and customer access of Total, which operates in more than 130 countries and is aiming to become a key supplier in renewable fuels,” Boisseau said in a statement.

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