A Billion A Day

Jim Brown
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Exxon Mobil spends a billion dollars a day. That number is astounding but given the scope of their business it should come as no surprise.

Exxon CEO Rex Tillerson was interviewed last week on his outlook for the oil industry and for Exxon. He said the company expects to spend $37 billion on capital projects in 2011 and continue spending an average of $35 billion a year through 2015. A billion here, billion there and pretty soon you have some real money. Tillerson said Exxon spends more than $1 billion a day in the normal course of business.

Exxon will spend about 9% more in 2011 than 2010. Tillerson said the company would spend more if they could find someplace to spend it. Exxon continues to be held back by the lack of available resources to explore. He said despite the existing shale plays in the U.S. the majority of resources in the USA are locked up by the government and are not available to be explored.

Exxon acquired gas producer XTO Energy for $25 billion in 2010. Tillerson said that was in recognition of how significant the unconventional resources are going to be. Tillerson expects unconventional resources, including shale oil and gas, to increase by 500% over the next five years.

He believes global oil supply will be the determining factor for oil prices over the next several years because demand will continue to be sluggish. He expects the global economy to continue growing but at a slower pace than previously anticipated. He said the U.S. is going to remain fairly sluggish and the global economy is also going to lag. He blames the lackluster global demand growth on current conditions in Europe and the U.S. regardless of how well Asia performs.

Tillerson is not a peak oil guy. He believes there are plenty of resources available but they are being locked away by governments for various reasons. Environmentalists are the main deterrent in the USA but he also blames lawmakers for being uncooperative. He said in other countries the oil and gas is owned by the state and the government is cooperative in getting it produced because it provides revenue for the state. In the U.S. the oil and gas belongs to the people in many cases and the government prevents them from producing it.

He complained about the administration being anti business but that is nothing new. Every corporation is complaining loudly about that today.

He said 2012 is shaping up as a decent year for oil supply coming on the market. Unfortunately you have to take everything he says and consider his world view. You don't know how much attention he pays to global depletion. Does he only consider his own assets and how much he can increase those? Also, with his new focus on natural gas does that color his perception of hydrocarbons in general.

Tillerson is very evasive when interviewed. He should be a politician. When asked direct questions he normally answers in generalities as though he does not want anyone to be able to quote him and use it against him. He is a cheerleader for Exxon and it is the largest private oil company on the planet. I guess he has a valid reason for not being a target. Exxon has a lot to lose if lawmakers start taking shots at something he said. He is better off being evasive and calm and producing $11 billion in profits a quarter. That ensures his paycheck continues to grow for years to come.

Jim Brown

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