Climate ignored as Exxon Mobil takes earnings hit

US supermajor’s profits have halved since last year, on a $2bn write-down of gas assets, but executives still don’t mention climate risk

(Flickr/Paul Lowry)


In a much-repeated quote, Rex Tillerson told Energy Intelligence in 2015: “we don’t do write-downs.”

That’s how confident Exxon Mobil’s former CEO was oil and gas reserves would withstand volatility in the market – not to mention the impact of a clean energy transition.

No sooner was Tillerson out of the door, though, than the US supermajor slashed US$2 billion from the book value of undeveloped Rocky Mountain gas fields. Profits have halved since last year.

His successor Darren Woods blamed persistent low oil prices. What did not come up in Exxon’s annual results media call on Thursday was the role of climate policies in shaping the market.

“They are not talking at all about the disruption going on in market dynamics and they are also not talking at all about climate risk,” said Shanna Cleveland, director of sustainable investor network Ceres. “This is a real disappointment.”

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Now Tillerson is set to be appointed as Donald Trump’s chief diplomat, things are looking up for another of his big gambles: a hefty stake in Russian Arctic oil fields.

But a more oil-friendly White House does not alter the global direction of travel towards renewables and electric vehicles, said Cleveland.

That was reflected in Saudi Arabia’s strategic decision to keep pumping oil as the price fell, protecting market share in a world where some hydrocarbons may be unburnable.

“It seems increasingly likely that not all barrels of technically recoverable oil will be extracted,” BP’s chief economist Spencer Dale admitted last week.

Shell has said oil demand could peak as early as five years’ time, depending on the speed of clean technology development and climate policies.

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Exxon is facing multiple legal challenges on allegations it spread misinformation about the dangers of climate change.

Meanwhile shareholders, including Ceres’ coalition with assets of more than US$13 trillion, are challenging the oil major to justify its bullish expectations for fossil fuel demand.

If governments succeed in holding global warming below 2C, as agreed in Paris, oil demand – and profits – will take a hit. That matters to pension funds and other long term investors.

In response to such pressure, Exxon has appointed a climate scientist to its board for the first time. Susan Avery, former director of Woods Hole Oceanographic Institution in Massachusetts, told a renewable conference in 2014: “Clearly climate science is telling us get off fossil fuels as much as possible.”

Cleveland said: “It is good for them to be adding someone who has a clear expertise on the issue, but we really need to see more from them in terms of governance.”

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