Latest update April 25th, 2024 12:25 AM
Apr 08, 2020 News
– Says Stabroek Block oil production remains unaffected
American oil giant, ExxonMobil announced yesterday that its management has agreed to reduce 2020 capital spending by 30 percent as well as lower cash operating expenses by 15 percent in response to low commodity prices resulting from oversupply and demand weakness from the COVID-19 pandemic.
Elaborating in this regard, the company said that capital investments for 2020 are now expected to be about US$23 billion, down from the previously announced US$33 billion. It was noted that the 15 percent decrease in cash operating expenses is driven by deliberate actions to increase efficiencies and reduce costs, as well as the expectation of lower energy costs.
Commenting on the new measures, ExxonMobil’s Chief Executive Officer (CEO), Darren Woods, said that the company worked closely with business partners to plan and execute capital adjustments that preserve long-term value, maximise cost efficiency, and most importantly, place it in the strongest position for success when market conditions improve.
Woods said, “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. Our capital allocation priorities also remain unchanged. 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.”
In its statement to the press, it was noted that ExxonMobil will continue to monitor market developments and can exercise additional reduction options if required. As market conditions evolve, the company said it will continue evaluating the impacts of decreased demand on its 2020 production levels as well as longer-term production impacts.
Additionally, ExxonMobil said that 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 American oil giant noted that reduced activity will affect the pace of drilling and well completions until market conditions improve. Importantly, it was noted that the reductions will not compromise the scale, functional excellence and cube development advantages that are maximising resource recovery and value in the Permian.
With respect to Guyana, Exxon said that developing the numerous world-class deepwater discoveries offshore remains an integral part of the company’s long-term growth plans. Exxon said that current operations onboard the Liza Destiny production vessel are unaffected, and startup of the second phase of field development remains on target for 2022, with the Liza Unity production vessel currently under construction. As the company waits for government approval to proceed with a third production vessel for the Payara development, it said that some 2020 activities are now being deferred, creating a potential delay in production startup of six to 12 months.
Speaking to other aspects of its operations that will be affected, Exxon said that a final investment decision for its Rovuma liquefied natural gas (LNG) project in Mozambique, expected later this year, has been delayed. In the meantime, ExxonMobil said it will continue to actively work with its partners and the government to optimise development plans by improving synergies and exploring opportunities related to the current lower-cost environment.
Globally, ExxonMobil anticipates industry refinery output will decline in line with demand and available storage while noting that it will maintain the ability to return to normal operations as demand recovers. The company said that the timing of expansion plans for select downstream and chemical facilities across the company’s portfolio will be adjusted to capture efficiencies, slow spending pace and better align with a return in commodity demand.
Despite the reductions, ExxonMobil expects to meet its projected investment of $20 billion on U.S. Gulf Coast manufacturing facilities made in its 2017 ‘Growing the Gulf’ initiative. The company also expects to reach its proposed U.S. investment of $50 billion over five years announced in 2018.
“While COVID-19 has had a significant impact on the global economy, we are confident that trade, transportation, and manufacturing will recover,” said Woods while adding, “ExxonMobil continues to invest in the projects that will position us to support economic recovery and capture value for our shareholders.”
With respect to playing its part in the fight against COVID-19, ExxonMobil said it has implemented enhanced cleaning procedures and modified work practices at sites around the world. The company is also maximising the production of products critical to the global response, including isopropyl alcohol, which is used to manufacture hand sanitizer, and polypropylene, which is used to make protective masks, gowns, and wipes. ExxonMobil is also supporting efforts to redesign and accelerate production of reusable facemasks and shields to help alleviate the shortage for medical workers and first responders.
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