Insight: When the Exxon way stops working
By Tom Bergin, Reuters
9 hrs ago
London (Reuters) – When Exxon boss Rex Tillerson walked into a meeting with the President of Ghana on the sidelines of the United Nations General Assembly, he thought he was set to strike a deal with an important new oil producing nation.
Instead Tillerson – who had flown into town aboard an executive jet bigger than those used by many heads of state – was rebuffed by an irritated John Atta Mills, who had expected to be wooed rather than given a tough contract to rubber-stamp.
Exxon has struggled to access new oil and gas reserves in recent years. In March the company slashed growth plans and by some calculations slipped behind PetroChina as the world’s biggest listed producer of oil. Last week it revealed a fall in output and profits that knocked its share price.
A bossy approach worked well as long as oil-rich nations signed purely financial deals, and stuck to them. But when oil prices began to ramp up around a decade ago, a wave of resource nationalism blew through countries like Russia, Venezuela and Libya and changed the game.
There is little doubt that Exxon’s disputes have contributed to an increasing reliance on domestic fields. In 2011, 27 percent of Exxon’s reserves were in the United States, up from 19 percent in 2006. By comparison, only 17 percent of Chevron’s reserves are in the United States and 21 percent of Shell’s.
The problem for Exxon is that, while places like Ghana, Russia and Venezuela offer less legal certainty than developed markets, they have more oil and offer better returns.