CHICAGO (Dow Jones Newswires), Dec. 12, 2008
The top executive at Exxon Mobil Corp. asked president-elected Barack Obama to have a "realistic," long-term energy policy and confirmed the company will continue to spend as planned despite declining oil prices.
ExxonMobil Chief Executive Rex Tillerson also forecast that lower oil prices may translate in downward "adjustments" on how much national oil companies charge to access their reserves as some of these companies, he said, had a "very different view" on oil prices than ExxonMobil.
Tillerson, who spoke to reporters after a presentation in Chicago Thursday, confirmed the largest U.S. oil company by market value is planning to invest around $125 billion in capital projects over the next five years, the same amount it has previously announced.
Tillerson, however, said the total "could come down if we're able to capture some cost savings." Costs of materials such us concrete and steel skyrocketed when oil prices were soaring. Now, with oil prices hovering around $45 a barrel, or more than half the price of its all time high in July, cost are coming down.
ExxonMobil's decision to continue with its capital program is a sharp contrast with the announcement of several smaller oil and gas producers who recently cut up to 40% of their 2009 spending due to the economic downturn and the uncertainty about longevity of low oil prices.
The range of oil prices ExxonMobil uses to calculate the profitability of projects is very low, one reason why the company doesn't see any changes to its portfolio at current price levels, Tillerson said. He added that the abundant cash the company has available will continue to be targeted at dividends and share buybacks, as well as capital projects. The company will also continue to evaluate potential acquisitions, he said.
Tillerson, who typically is elusive with the press and avoids talking about politics, even had time to give some advice to the new president. The executive said the U.S. government needs to be "realistic" about renewable fuels in developing its energy policy and have a "different model" that eschewed a Big Bang approach in favor of multiple policy initiatives.
"A different model for the government's role is needed," Tillerson said. He added that the focus of an energy policy should be on initiatives that will still bear fruit at the end of the century, not the end of a presidential term.
Oil companies, including ExxonMobil, are expecting dark days ahead, under an incoming administration that wants to move the country away from traditional fossil-fuel production to more renewable and clean-energy sources.
Tillerson said the development of an energy policy should parallel the evolution of the Internet, which initially relied on government funding, but then flourished in the private sector.
Tillerson's remarks come one day after media outlets reported that Obama had formed a team to run his energy and environmental initiatives. Obama's environmental appointees -- all strong advocates for stringent greenhouse gas regulations -- are a signal to both Congress and industry that the future president will make a concerted effort to implement climate-change rules.
Tillerson also had time to talk about possible changes in the interaction between national and international oil companies, which in recent years -- as oil prices were going up -- gave more negotiating power to oil-rich countries and their oil companies.
"My expectation is that there will be some adjustments," he said, noting that some "very high prices" were paid to secure access to national oil companies reserves.
"They had to be operating with a very different view [on prices] than us," he said.
Copyright (c) 2008 Dow Jones & Company, Inc.
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