Exxon's Tillerson Urges Governments to Relax Barriers
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By Joe Carroll and Bunny Nooryani
Aug. 22 (Bloomberg) -- Exxon Mobil Corp. Chief Executive Officer Rex Tillerson urged governments around the world to open more territory to oil and gas exploration to boost supplies and satisfy rising world demand.
``By providing timely access to resources, governments enable energy companies to bring the full extent of their technology and know-how to bear to new supply opportunities,'' Tillerson said today at an oil conference in Stavanger, Norway, according to a text of his remarks.
Crude prices have more than doubled in the past three years as surging demand for petroleum-based fuels strained global production beset by war, hurricanes, labor strikes and political unrest.
International oil producers such as Irving, Texas-based Exxon Mobil and The Hague-based Royal Dutch Shell Plc have more expertise than state-owned entities that control some of the world's biggest oil fields, Tillerson said. That expertise is required to fully develop aging or difficult-to-reach reserves, the 54-year-old civil engineer said.
``Artificial national barriers to competition can slow technological development and limit the long-term value of energy resources for suppliers and consumers alike,'' Tillerson said in his prepared remarks. ``Most energy technologies are developed with specific resources in mind. If these resources are made off- limits, the incentive for R&D is reduced.''
Unhealthy Prices
Exxon Mobil, which pumps more oil than every member of OPEC except Saudi Arabia and Iran, is expected to earn profit of $37.5 billion this year, based on the average estimate of 14 analysts surveyed by Thomson Financial. That would surpass last year's $36.1 billion, a record for any company in U.S. history.
Crude prices at about $72 a barrel today are harmful to world economies, Tillerson said during a press conference after his speech.
``A sustained price at this level is going to take its toll on economies around the world,'' Tillerson told reporters. Developing nations that spend a higher proportion of their gross domestic products on energy are already vulnerable, he said.
``Prices at this level are simply not healthy for economies anywhere,'' Tillerson said. Every $1 increase in the price of a barrel of oil boosts Exxon Mobil's per-share earnings by 1.5 percent, according to Citigroup Inc. estimates.
Shares of Exxon Mobil rose 38 cents to $70.21 in New York Stock Exchange composite trading. The stock has increased 25 percent this year, the No. 3 performer in the Amex Oil Index. Houston-based Marathon Oil Corp. is the top performer in the index, followed by Occidental Petroleum Corp. of Los Angeles.
Tax Regimes
Tillerson also told the conference that unilateral tax and royalty increases may discourage investment by international oil companies, jeopardizing future oil and gas supplies.
Venezuelan President Hugo Chavez has unilaterally raised royalties on oil companies, while forcing them to convert operating contracts to joint ventures in which the state oil company will hold a majority. The U.K. has increased taxes on North Sea production twice in four years.
``Investment is needed across the industry,'' Tillerson said during his presentation. ``And to encourage such investment, stable fiscal terms are needed, even in times of high earnings.''
Exxon sold its 25 percent stake in Venezuela's Quiamare-La Ceiba oil field to Repsol YPF SA in December rather than convert its operating contract to a joint venture with Petroleos de Venezuela SA.
To contact the reporters on this story: Joe Carroll in Chicago at HYPERLINK "mailto:jcarroll8@bloomberg.net" jcarroll8@bloomberg.net ; Bunny Nooryani in Oslo at HYPERLINK "mailto:bnooryani@bloomberg.net" bnooryani@bloomberg.net
Last Updated: August 22, 2006 16:08 EDT