ExxonMobil in China

The group met with an executive in ExxonMobil's Beijing office. ExxonMobil (XOM), the world's second largest energy firm by market capitalization, sponsored the group's trip. We discussed several trends that are shaping the energy world and XOM's business. 

Conventional projects are falling as a share of XOM's portfolio, and will drop to only 60% of XOM's production by 2010, from 80% in 2006. “Unconventional” sources include deepwater, heavy oil and sour gas, tight gas, and LNG.

Given retail price caps on oil products in China caps, the break-even price of crude for refiners is $55, which means huge losses in the downstream oil business. XOM offsets these losses with huge profits in petrochemicals industry.

In this high-oil-price environment, the international oil companies (IOCs) are expendable to producer countries, and thus are not needed to provide expertise, capital, and technology. The Chinese NOCs, the XOM representative said, go to countries where XOM simply cannot go, such as Zimbabwe and Sudan.

He noted that China’s equity oil in Saudi Arabia doesn’t count against Saudi Arabia’s OPEC allocation.