Exxon Struggles To Move The Needle

by; Christopher Helman,

Its much-touted Qatar LNG project doesn’t seem to be enough to raise overall production. Does the answer lie in Ghana or Iraq?

Financially, ExxonMobil’s third quarter was in line with its Big Oil peers, but the takeaway from its report is that productionwise, the world’s largest energy company is running flat out just to stay in place.

Earnings were off 68% from last year to $4.7 billion. The icon of stability keeps investing ($6.5 billion in capital expenditures for the quarter) and giving cash to investors ($4.2 billion in share buybacks).

More interestingly, ExxonMobil said overall production of oil and gas was up a measly 1% over 2008. Within that, liquids volumes were up 2%, while gas volumes were down a little less than 1%.

These meager results are somewhat surprising, coming at a time when the company is heralding the start-up in Qatar of three liquefied natural gas projects, the biggest in the world. Culminating a decade of development, the fourth of these giant LNG trains, as they’re called, will be up and running by the end of the year.

All told, the Qatar LNG trains will generate 5 billion cubic feet of gas and 300,000 barrels per day of high-quality liquid hydrocarbons, all recovered from Qatar’s North Field. ExxonMobil’s share of the bounty is on the order of 30%. This is the kind of world-class project (at a cost of some $30 billion) that best leverages Exxon’s mighty balance sheet and prodigious engineering expertise. (See “ExxonMobil: Green Company Of The Year.”)

But for all that effort, total natural gas volumes in the quarter were flat at 8.8 billion cubic feet per day as declines from other fields offset new volumes from Qatar. Qatar’s North Field is so huge that production volumes are expected to remain steady for more than 30 years. Opportunities like that are hard to come by, and if Qatar can barely move the needle for ExxonMobil, what can? (See “Can Exxon Find Future Growth?”)