As the global economy tightens under severe pressure brought on by the COVID-19 pandemic, demand for oil has plummeted to an all-time low creating a supply glut that has seen prices plummet as the world runs out of storage capacity.
The collapse in oil prices have been forcing companies to dramatically cut expenditure, shut in production, lay off staff and for those who have been hardest hit – file for bankruptcy.
For new oil producers like Guyana where ExxonMobil has so far found more than 8 billion barrels of oil equivalent resources, current market conditions have created a high degree of uncertainty with the big question being whether or not oil prices will recover.
“I know that there are a lot of different views on what the future holds, but I want to be clear on how we see it. The long-term fundamentals that drive our business have not changed. Despite the current uncertainty and volatility, the fundamentals that underpin our business remains strong,” Darren Woods, Chairman and Chief Executive Officer of Exxon Mobil Corporation said on Friday.
Woods said global population will grow to more than 9 billion people by 2040 up from just over 7 billion at present which means that billions of people will enter the middle class and seek lifestyles and products that require energy. “Economies will expand once again. Of course, there are likely to be some bumps in the road over the short-term, but historically periods of economic contraction are followed by periods of significant growth.”
He said as a result of growing populations, increased prosperity and economic expansion, energy consumption is set to increase.
“Even with the current downturn, projections show energy consumption growing by 20% through 2040. Most of the growth will be in developing nations and more than half of that energy demand will be met by oil and natural gas,” he told investors on the company’s Q1 earnings call.
The CEO pointed out that ExxonMobil’s long-term outlook means it is taking the necessary steps now that would allow it to prevail into the future.
“We’re taking advantage of the options a deep portfolio and strong balance sheet provide reprioritizing spend to conserve cash, while progressing projects that structurally improve the company. We remain committed to our capital allocation priorities investing in industry-advantaged projects that grow cash flow and support a reliable growing dividend and strong balance sheet,” he stated.
Oil production at the Stabroek Block offshore Guyana where ExxonMobil is operator has been “largely unaffected by the pandemic” Woods said, although some projects will face delays.
Startup of the second phase of field development remains on target for 2022, with the Liza Unity production vessel currently under construction. As the company waits for government approval to proceed with a third production vessel for the Payara development, some 2020 activities are now being deferred, creating a potential delay in production startup of six to 12 months.
Nevertheless, Woods told investors Guyana remains a key part of the company’s long-term growth plans and activities are expected to continue in earnest.