ExxonMobil board faces vote for “dissident” members

On Wednesday, ExxonMobil’s shareholders will vote on members of an expanded 12-strong board, with so-called “dissident shareholders” threatening one-third of those seats. The dissidents aim to push the oil major towards more sustainable environmental policies.

The candidates, Gregory Goff, Kaisa Hietala, Alexander Karsner and Anders Runevad, operate under the auspices of Engine 1, a hedge fund formed to mount a challenge to the company’s executive status quo.

While the candidates’ policies are not driven exclusively by environmental interests, as has been seen by so-called “activist investors” elsewhere in the oil and gas sector, they have proposed a range of operational and economic reforms which aim to improve ExxonMobil’s efficiency and environmental protection.

This runs against a backdrop of what Engine 1 considers to be years of economic underperformance at ExxonMobil. The candidates noted that ExxonMobil’s oil production per thousand dollars invested has declined sharply, from 38.8 in 2001 to just 7.9 in 2020.

The group also said that, compared to competitors Chevron, Shell, Total and BP, ExxonMobil has delivered around half the shareholder returns of its peers over a ten-year period, presenting the major as one that is not just struggling in terms of its own production, but in terms of profitability compared to its rivals.

The dissidents’ platform is one of investing in a narrower range of projects, which comply with stricter environmental criteria and boast strong potential returns on investment. This contrasts with the investment-heavy programme of the current board, which has resulted in the company’s net debt jump from $7bn to $63bn over the last decade.

Yet ExxonMobil has not simply allowed its operations to decay over the last decade, investing heavily in new projects. The company plans to spend up to $19bn in 2021, which will increase by up to $25bn per year by 2025. With shares in one-fifth of the world’s carbon dioxide capture technology, ExxonMobil has at least made efforts to adapt to a rapidly-changing oil and gas industry.

Despite the challenges of comparing the company’s current performance to that of a decade ago, Glass Lewis is keen to point out that the election of even one Engine 1 candidate could be something of a watershed moment for the company.

"We believe that electing even a portion of Engine 1’s slate would send a clear message of shareholder dissatisfaction with Exxon’s recent direction and strategy," wrote Glass Lewis.

Most reinvention-committed O&G companies expect twice the revenue of least committed

Prompted by the Covid-19 pandemic, oil and gas operators that are most dedicated to reinventing themselves over the next three years expect to grow their revenues and margins at twice the rate of companies least dedicated to reinvention, professional services company Accenture has found.

According to the new report, ‘Necessity is the Mother of (Re)invention’, companies should adopt new strategies to thrive in the energy transition as it identifies the best practices for reinvention.

Based on data from a global survey of more than 200 oil and gas executives, from 179 oil and gas companies across five continents, Accenture classified the 10% of companies setting the pace for reinvention as “Leaders” and those in the bottom 25% as “Laggards”.

Driven by the Covid-19 pandemic, all of the Leaders plan at least some level of significant changes to their business, with half intending radical reinvention, compared with only 9% of the Laggards.

Almost seven in 10 Leaders consider enterprise-wide transformation essential to this reinvention and 77% of Leaders see cloud as crucial to their business reinvention plans in the next three years.

The research also found that reinvention could drive substantial rewards. For example, Leaders expect a minimum margin growth of 7% on average in the next three years, more than double that of the Laggards (3%). Leaders also expect to grow revenues over the same period by at least 11%, compared with just 6% for the Laggards.

Accenture senior managing director at the Energy industry group Muqsit Ashraf said: “What’s required isn’t just piecemeal transformation but wholesale business reinvention, which is anchored in a new approach that we call our ‘5C’ model.”

The ‘5C’ model for reinvention focuses on competitiveness, connectivity, carbon, customer, and culture.

The report also emphasises that attaining carbon neutrality could be a key facet of the reinvention required to thrive in the era of accelerated energy transition. In fact, more than a third (37%) of respondents, including all the Leaders, expect margin improvements of 20% or more from their low-carbon businesses in the next three years.

Refocusing investments, operations, and products will also be key, with 97% of all respondents citing environmental performance as a priority and 33% naming it their top priority.

Hydrogen and renewable power were identified as the two low-carbon businesses with the most growth potential. More than half of the Leaders expect hydrogen (cited by 62%) and renewable power (54%) to account for more than 7% of their revenues within the decade.

US environmental regulator halts operations at Limetree Bay refinery

The US Environmental Protection Agency (EPA) has ordered the cessation of activities at the Limetree Bay refinery on St Croix, US Virgin Islands, after breakdowns.

The order to Limetree Bay Terminals and Limetree Bay Refining to halt the refinery operations for at least 60 days was passed on grounds of ‘multiple improperly conducted operations’.

EPA said these actions could pose ‘imminent risk to public health’.

The move comes in response to the release of oil droplets from Flare Unit #8 at the refinery on 12 May due to a glitch.

Subsequently, Limetree suspended operations at the refinery.

The flaring incident had affected the Enfield Green community, as well as some industrial sites, the firm said.

EPA noted that the incident also led to exceedance of the sulphur dioxide emission limit, posing risk to the health of nearby communities.

The latest EPA order requires Limetree to halt all refining operations at the facility and arrange for an independent audit of operations.

Limetree is also required to submit a plan to the EPA that addresses the recommendations made by the auditors for corrective measures at the refinery.

US EPA administrator Michael S Regan said: “These repeated incidents at the refinery have been and remain totally unacceptable. Today, I have ordered the refinery to immediately pause all operations until we can be assured that this facility can operate in accordance with laws that protect public health.

“This already overburdened community has suffered through at least four recent incidents that have occurred at the facility, and each had an immediate and significant health impact on people and their property.”

In this year, the refinery suffered multiple accidents, which resulted in significant air pollutant and oil releases.

Iran prepares to make comeback into oil market as talks with US advance

Iran is reportedly preparing to boost oil production to re-enter the global oil market as talks with the US over the 2015 nuclear deal show sign of progress.

Iran’s National Iranian Oil Company officials were reported by Bloomberg as saying that the Iranian oil fields are undergoing overhaul operations. It is also re-establishing connections with oil buyers.

In an optimistic estimate, the country could reach almost four million barrels a day production capacity in three months, according to the Bloomberg report.

Talks are currently underway between Iran and other 2015 nuclear deal signatories, including the US. The two sides have signalled that an agreement is close by.

Under the 2015 deal, Iran agreed to dismantle most of its nuclear programme. It also agreed to open its facilities to more extensive international inspections in exchange for sanctions relief.

A positive outcome from the ongoing talks could reactivate the 2015 Iran nuclear deal from which the US withdrew in 2018 under the leadership of Donald Trump.

The move requires Iran to accept limits on its nuclear programmes in exchange for the US to lift sanctions imposed by the former US president.

In a separate development, NIOC is reportedly planning to award a $1.78bn contract to Iran’s Petropars to develop the Farzad-B gas field.

Petropars is expected to produce 28 million cubic metres of gas a day from the field in five years, Iranian energy news service Shana reported citing the country’s oil ministry official.

As per the estimates, Farzad-B holds around 500 billion cubic meters of reserves.

Earlier, ONGC Videsh-led Indian consortium was reportedly in talks with Iran to develop the field.

However, progress was delayed due to differences over investment volume and gas prices delayed, and negotiations were completely stalled following the US sanctions on Iran in 2018.

Blue Ocean Seismic Services trails underwater autonomous vehicle for surveys

Blue Ocean Seismic Services (BOSS), a marine seismic survey company, has announced that it has successfully completed autonomous sea trials for a prototype version of its underwater vehicle in Perth, Australia.

BOSS’ testbed ocean bottom seismic robotic vehicle is an early-stage prototype vehicle and associated communication, command & control system that uses the mechanical components of a host platform.

It was developed to allow for in-water testing of BOSS electronics and software, providing a platform for electronic and software progress while hardware components are being designed and manufactured.

The long endurance self-repositioning autonomous underwater nodes will conduct offshore seismic surveys for oil and gas exploration and reservoir optimisation and will monitor carbon storage opportunities under the seabed.

Blue Ocean Seismic Services is a joint venture between Blue Ocean, Woodside, and BP Ventures.

BP Ventures managing partner Erin Hallock said: “These sea trials are an exciting development, as BOSS makes a substantial step forward in its development of a revolutionary underwater vehicle. We are delighted to be working with BOSS as it heads towards its goal of disrupting and innovating the marine seismic acquisition and carbon capture and storage sectors.

“Once in production, this vehicle will make global offshore oil & gas exploration, reservoir optimisation, and other marine seismic applications cheaper, faster, safer, and importantly, less carbon-intensive.”

The vehicle has successfully crossed a series of waypoints while providing status updates to a master vessel. It has logged flight and engineering data that will be used for further systems development and optimisation, helping the final product ahead of commercialisation.

Woodside Energy general manager of technology Tony Almond said: “Woodside is pleased with the recent success of the sea trials, which mark a significant milestone in the development of BOSS’ first autonomous underwater vehicle.

"Woodside has invested in BOSS because we see a pathway for application of the vehicles in our business, as well as potential growth opportunities for BOSS globally.”

Following these initial trials, the platform will be used to further refine and extend the systems through hardware in the loop simulation and in-water trials. Data acquired on sensor performance, vehicle dynamics, and software performance will assist in the design and development of subsequent prototypes.

US revokes rules to relax safety regulations for Arctic oil drilling

Proposed in December 2020, Trump’s regulation would have reversed the rules proposed by former President Barack Obama to improve safety in the Arctic conditions.

Trump’s proposed rules included the removal of the need for oil operators to submit detailed operations plans prior to exploration and showcase their ability to contain spills rapidly in the event of a crisis.

The rollback effort forms part of US President Joe Biden’s wider federal agenda to tackle climate change.

Interior Department said in a statement: “The Arctic exploratory drilling regulations released in 2016 are critical to ensuring adequate safety and environmental protections for this sensitive ecosystem and Alaska Native subsistence activities.”

In 2016, then US President Obama passed regulations that banned new oil and gas drilling in federal waters through a five-year plan, which is due to expire in 2022.

Meanwhile, US Congressman Frank Pallone Jr, the representative for New Jersey’s 6th congressional district, is reintroducing legislation for a permanent ban of oil and gas drilling in the Atlantic Ocean.

The legislation would ban exploration, development, or production of oil or gas along the Atlantic Coast, including the North, Mid, and South Atlantic and Straits of Florida planning areas.

In a statement, Pallone said: “The reintroduction of Pallone’s bill coincides with a bipartisan effort across the country to permanently ban offshore drilling in U.S. federal waters in the Atlantic, Pacific, and Eastern Gulf of Mexico as the 2022 expiration date on the plan approaches.”

Earlier this year, the Biden administration imposed a temporary ban on all new leases for onshore and offshore oil and gas drilling on federal land and water.