Exxon to scale down operations over global market uncertainty

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In the wake of the global uncertainty in financial markets caused by COVID-19, a number of businesses have had to reevaluate their operations. Among these companies are ExxonMobil, the world’s largest publicly traded oil company, which announced on Tuesday that it will seek to scale down its operations.

In a statement from the company, Chief Executive Officer (CEO) of ExxonMobil Corporation, Darren Woods noted that Exxon is evaluating ways to cut back on its investment costs. With a presence in numerous countries including Guyana, this could have serious implications for oil exploration and production, as well as the oil revenues for such countries.

“Based on this unprecedented environment, we are evaluating all appropriate steps to significantly reduce capital and operating expenses in the near term. We will outline plans when they are finalised,” Woods was quoted as saying in the statement.

“We remain focused on being a safe, low-cost operator and creating long-term value for shareholders,” Woods also said, adding that ExxonMobil has faced numerous market downturns throughout its long history and therefore has experience operating in a sustained low-price environment.

Exxon has a presence throughout the world, from Canada and the United States to Mexico and Brazil, to Australia and Russia and several European, Middle Eastern and African states. But it is the company’s holdings in Guyana that have lately captured the world’s attention.

After discovering 1.8 billion barrels of oil equivalent for last year, Guyana took first place for the most discoveries for 2019. So far, Esso Exploration and Production Guyana Limited (EEPGL), Exxon’s local subsidiary, has made 16 oil finds in the Stabroek Block, some 100 miles offshore Guyana.

The onset of coronavirus, also known as COVID-19, has had a serious impact not just on lives but also the global economy and specifically, oil. Last week, Brent crude fell to US$34 per barrel.

This was a steep drop as it was only a day ago being traded at US$48. Brent crude was being traded at US$66 per barrel when Guyana first started oil production in December 2019. Rystad Energy, a Norway-based research company that has written extensively on Guyana’s oil sector, has projected that the situation will get worse.

Indeed, checks by this publication on the Brent crude price showed that as of Tuesday, the price had dropped to US$28. According to Rystad in a recent missive, the spread of the coronavirus has dealt a blow to the global demand for oil.

It noted that in February of this year, the demand for crude dropped by 4.6 million barrels per day. China, where the coronavirus had originated, accounts for 2.9 million barrels of this cut to demand.

There has also been talk of the Organisation of Petroleum Exporting Countries (OPEC) reaching an agreement to cut production. A recent meeting resulted in no major consensus being reached on how to deal with the issue. Efforts to arrange further meetings have failed to take off from the ground.