The climate change in Exxon Mobil’s board room is real. (So is climate change, duh.)
New members of the board have pressed the company to reconsider two massive, multi-billion dollar oil and gas projects, according to The Wall Street Journal, in what could signal a major philosophical shift at America’s largest energy firm.
Shrinking Profit Carbon
Earlier this year, environmentally-inclined activist hedge fund Engine No. 1 won the backing of BlackRock — one of Exxon’s biggest investors — in a successful campaign to put three new members on the oil giant’s board.
Engine No. 1 argued the company was too focused on projects with low-returns and had no clear strategy to transition to lower-carbon fuels, two things traditional investors who care about bottom lines could get behind. While high gas prices have helped Exxon’s bottom line this year, the company suffered a $22 billion loss in 2020 and was struggling well before the pandemic (net income fell 31% in 2019).
According to the Journal, the new board members are highlighting projects they say raise concerns:
- Off the coast of Mozambique, Exxon is preparing a natural gas project that will cost an estimated $27 to $33 billion, according to government estimates.
- In Vietnam, Exxon plans to develop an offshore gas field that Vietnamese officials say could generate $20 billion in government revenue (this will cost billions, but exact figures haven’t been disclosed).
In addition to weighing the risks of long term gas prices (the two projects could take years to produce a drop), Exxon’s new board members are concerned about an Islamic State insurgency in Mozambique, which has led to 3,000 deaths and halted a $20 billion gas project by TotalEnergies.
Deflated Chief: In 2018, Exxon CEO Darren Woods launched a $230 billion effort to pump one million more barrels of oil and gas every day by 2025. The new board may not like that.
Low Carb(on) Diet: Exxon is planning to up its original $3 billion investment in a new low-carbon unit launched in February that’s developing carbon capture and storage, hydrogen, and biofuels — but those businesses don’t turn a profit.