Chief Executive Officer (CEO) of US oil major ExxonMobil, Darren Woods has confirmed that the Integrated Oil Company (IOC) will this year slash its capital spending by US$10 billion but its Guyana operations will remain unaffected, with the exception of a delayed start to the third oil field development at the Payara discovery in the Stabroek Block.
ExxonMobil CEO Darren Woods
The spending cuts, according to Woods, are as a result of too low oil and commodity prices, resulting from a global oversupply and demand weakness from the COVID-19 pandemic.
The company made the announcement on Tuesday, saying it now plans to spend about $23 billion this year, down from the previously announced $33 billion.
According to Woods, however, the biggest impact to the company’s worldwide operations as a result of the cuts would be in the Permian—Texas, USA.
“The largest share of the capital spending reduction will be in the Permian Basin, where short-cycle investments can be more readily adjusted to respond to market conditions, while preserving value over the long term.”
The Liza Unity under construction
Speaking to its Guyana operations in the Stabroek Block, ExxonMobil said “developing the numerous world-class deep-water discoveries offshore Guyana, remains an integral part of ExxonMobil’s long-term growth plans.”
According to Woods, “our objective is to continue investing in industry-advantaged projects to create value, preserve cash for the dividend and make appropriate and prudent use of our balance sheet.”
He said, the current operations onboard the Liza Destiny production vessel in the Stabroek Block are unaffected, and that startup of the second phase of field development remains on target for 2022.
The Liza Unity—Floating Production, Storage and Offloading Vessel—is currently under construction, he said.
The IOC’s Chief Executive Officer (CEO) noted, however, that as the company waits for Government approval to proceed with a third production vessel for the Payara development, some 2020 activities are now being deferred, creating a potential delay in production startup of six to 12 months. Speaking to the company’s decision to slash new expenditure by US$10 billion, Woods said, “after a thorough evaluation of the impacts of the pandemic and market conditions, we have worked closely with business partners to plan and execute capital adjustments that preserve long-term value, maximise cost efficiency, and put us in the strongest position when market conditions improve,”
According to Woods, “The long-term fundamentals that underpin the company’s business plans have not changed — population and energy demand will grow, and the economy will rebound” and capital allocation priorities remain unchanged.
He said ExxonMobil continues to monitor market developments and can exercise additional reduction options if required.
“As market conditions evolve, the company will continue evaluating the impacts of decreased demand on its 2020 production levels as well as longer-term production impacts.”
COVID-19
The company also noted that it is ramping up production of isopropyl alcohol, used to make hand sanitisers.
It will also be increasing production of materials used in the manufacture of protective gowns, masks and wipes. It is also supporting efforts to redesign and produce reusable face masks and shields.
“The company is maximising production of products critical to the global response, including isopropyl alcohol, which is used to manufacture hand sanitiser, and polypropylene, which is used to make protective masks, gowns and wipes. ExxonMobil is also supporting efforts to redesign and accelerate production of reusable face masks and shields to help alleviate the shortage for medical workers and first responders.”
“To minimise risks presented by COVID-19 and maintain operations, ExxonMobil has implemented enhanced cleaning procedures and modified work practices at sites around the world,” the company also related.
Guyana became an oil-producing nation in December 2019, with ExxonMobil so far making 16 oil finds in the Stabroek Block. Last year, the company made five discoveries. These discoveries have pushed the total estimated recoverable barrels of oil equivalent to over six billion.
In addition, Exxon has its Liza phase two project, which will contain approximately 30 wells and which has already received the requisite approval from the Environmental Protection Agency (EPA). Payara, meanwhile, is expected to have 45 wells that include production wells, water and gas injection wells.
Speaking to the company’s decision to slash new expenditure by US$10 billion, Woods said, “after a thorough evaluation of the impacts of the pandemic and market conditions, we have worked closely with business partners to plan and execute capital adjustments that preserve long-term value, maximise cost efficiency, and put us in the strongest position when market conditions improve,”
