Exxon Seeks Growth in Russia, Appeals for More Access Worldwide
Source: Bloomberg.com
Excerpt:
Exxon Mobil has only the $12.8 billion Sakhalin-1 development in Russia. The project, off the country's Pacific coast, is based on a production-sharing agreement signed with the Russian government in 1996. The Irving, Texas-based company began pumping oil there in October.
Exxon Mobil's next biggest rivals, Royal Dutch Shell Plc and BP Plc, have bigger investments in the country, including the Shell-led Sakhalin-2 project and BP's TNK-BP joint venture. Exxon Mobil, Shell and BP ventures so far have been mostly unaffected by President Vladimir Putin's campaign to increase government control over the Russian energy sector.
Russia pumped 9.68 million barrels of oil a day during the second quarter, more than any other nation, according to the International Energy Agency in Paris. Saudi Arabia was No. 2 with 9.01 million barrels
Crude prices have more than doubled in the past three years as growing demand for petroleum-based fuels strains production and wars, hurricanes, labor strikes and political unrest disrupt supplies.
International oil producers such as Exxon Mobil and Shell have more expertise than state-owned entities that control some of the world's biggest oil fields, Tillerson said. That expertise is required to fully develop difficult-to-reach reserves, he said
Each $1 increase in the price of a barrel of oil boosts Exxon Mobil's per-share earnings by 1.5 percent, according to Citigroup Inc. estimates.
Exxon Mobil, which pumps more oil than every member of OPEC except Saudi Arabia and Iran, is expected to have profit of $37.5 billion this year, based on the average estimate from 14 analysts surveyed by Thomson Financial. That would surpass last year's $36.1 billion, a record for any company in U.S. history
Shares of Exxon Mobil rose 38 cents to $70.21 in New York Stock Exchange composite trading. The stock has climbed 25 percent this year.
Tillerson said unilateral tax and royalty increases may discourage investment by international oil companies, jeopardizing future petroleum supplies.
Venezuelan President Hugo Chavez has raised royalties on oil companies and forced them to convert operating contracts to joint ventures in which the state oil company holds majority stakes. The U.K. has increased taxes on North Sea production twice in four years.
"Investment is needed across the industry,'' Tillerson said. ``And to encourage such investment, stable fiscal terms are needed, even in times of high earnings."
Exxon sold its 25 percent stake in Venezuela's Quiamare-La Ceiba oil field to Repsol YPF SA in December rather than convert its operating contract to a joint venture with Petroleos de Venezuela.
Since October 2004, Exxon Mobil's royalties on its Cerro Negro heavy-oil venture have risen to 33.3 percent from 1 percent. State-owned Petroleos de Venezuela SA has signaled it plans to take a majority stake in the venture
Exxon Mobil could also face higher income taxes. Venezuelan lawmakers are debating a bill that would raise the rate on heavy-oil ventures to 50 percent from 34 percent.
When asked whether Exxon Mobil would sue Venezuela over the changes, Tillerson said, ``I think there are a lot of other things we can talk about before we get to that point. I think that's down the road.''
Tillerson also noted that Exxon Mobil plans to increase production in Nigeria at a time when other oil companies are idling wells because of militant attacks and sabotage.
The company's Nigerian output will probably increase to 600,000 barrels of oil a day from 500,000, Tillerson said. The fact much of the company's operations in Nigeria are offshore has helped, he said.
The deepwater Erha field will drive much of the gain in production. The field began producing earlier this year.
