Posted on 03/25/2008 5:01:44 PM PDT by shrinkermd
Exxon's flat oil forecast was even more surprising because it came during a meeting when the company was trumpeting a big increase in capital expenditures -- to at least $25 billion a year going forward, up from $21 billion last year. The company also outlined a slew of big projects, 12 of which are starting up this year. These include the 600 million barrel Kizomba C development off the coast of Angola years.
But how could oil production be flat? Peer into Exxon's historical numbers and you see the problem Tillerson faces. Since 2000, Exxon's oil output from two of its largest regions, the U.S. and Europe, declined a startling 37%. That's 500,000 fewer barrels a day in just seven years. Exxon reported 100,000 fewer barrels per day last year alone due to the nature of that began producing on New Year's Day and another in a string of giant liquefied natural gas facilities in Qatar.
Exxon plans on bringing new fields online in Russia, the Middle East, and Africa over the next four years but they won't be enough to generate growth beyond what the company is losing due to the maturation of its fields in the North Sea and Alaska, the nationalization of its fields in Venezuela, and volumes lost due to those production sharing agreements with other countries. "It has always been a challenge to grow volumes when you are working off of a base as large as ours," Tillerson told the analysts. Indeed, Tillerson got more bad news on Mar. 18 when a British judge freed up the foreign assets that Exxon had sought to freeze in its ongoing dispute with the government of Venezuela
(Excerpt) Read more at news.moneycentral.msn.com ...
The windfall taxes are mere threats during a campaign season. Exxon also has the Exxon Valdez case hanging fire, a few more $ billion, that is reality. It is not easy or cheap to ramp up production anymore unless they find another elephant such as East Texas or Prudhoe. Even Saudi can’t increase production by much. This is peak oil. Maybe they will find some more elephants, but it has been quite a while.
And mean while China drills for oil for the Cubans off the Florida coast.
Why Exxon Won't Produce MoreWhy?
Most sound economic theory states that the higher the price of a product, the more of that product that a supplier would want to offer for sale. If Exxon cannot product more oil or gas in the USA, it is only because our own government won't let it.
ML/NJ
Peak Oil! Peak Oil!
Bingo. It costs them a lot less to simply charge more for what they are producing, rather than tying up a bunch of money in new production that will just reduce their profits by increasing supplies. That's what happens when you have a captive market and an inelastic demand.
We have elephants waiting to be exploited in ANWR, North Dakota, and ridiculous oil off our coasts.
For some ridiculous reason, we are allowing the liberals to control the debate.
Oh, and more production really doesn't help much without more refineries...
[These include the 600 million barrel Kizomba C development off the coast of Angola years. ]
“years”??? What does this mean?
Exxon has every incentive to increase production. Every oil company in the world is trying to capitalize on these prices to find and sell as much as they can.
But, America severely limits their ability to do so, and crackpot leaders like Hugo Chavez are doing everything they can to discourage further investment in known oil basins.
But there is a more subtle reason why it's hard for Exxon or any large oil company to report great reserve additions. It's easy for a new or small oil company to double their reserves within five years because they started from a small baseline.
But a supermajor faces an impossible task in doing that. They'd have to discover and own every barrel on the planet and then start finding oil on other planets to keep doubling their reserves. It's just not possible.
Sure
Their gas around here is always 15 to 20 cents higher than all other name brands also. I have not purchased any Exxon gas in years because it is always higher everywhere we went.
How dare you say that, let the market work....it always works /sarcasm on
You’re making me tear up. I guess those record profits must be a real burden on the company.
Indeed it is curious, considering that Al Gore himself wanted gas to be $5/gallon in order to curtail demand and cut the burning of fossil fuels. Funny how the liberal media never mentions that in all their oil-companies-are-gouging-us hit pieces.
Exactly. The excerpt here doesn't contain the money quotes:
"The first hand that shot up was that of Deutsche Bank (DB) oil analyst Paul Sankey, who wanted to know why the company wasn't showing any volume growth. "We don't start with a volume target and then work backwards," Tillerson explained. Instead, he said, his team examines the available investment opportunities, figures out what prices they'll likely get for that output down the road, and places their bets accordingly. "It really goes back to what is an acceptable investment return for us," Tillerson said. In other words, producing incremental barrels just to ease prices for consumers is not part of the company's calculations. Last year, ExxonMobil led the industry with a return on capital of 32%."(...)
"Less supply of a commodity means higher prices. Higher oil prices mean more profits for the oil companies."
How do you produce more if your source of supply decreases?
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