A dinosaur still hunting for growth: Lee Raymond - ExxonMobil
The oil chief makes no apology for his company's dominance - or
for his 'political incorrectness', he tells
Buchan and Sheila McNulty Financial Times 2002.3.12
When Lee Raymond,head of ExxonMobil, said last week of Enron,
collapsed US energy trader, "I don't take a lot of pleasure
in seeing folks run
into trouble", no one believed the "folks" he sympathised
with included Jeff
Skilling. Enron's former chief executive once listed ExxonMobil
corporate dinosaurs who "will topple over from their own weight".
Raymond said ExxonMobil was still standing and "dinosaurs were
for a long time".
Solidity is not an issue - ExxonMobil has increased its dividend
for 19 years
and has a triple-A credit rating - but size is. Exxon, under Mr
merged with Mobil in 1999 to form the world's largest listed oil
market value, at Dollars 294bn (Pounds 207bn), is now Dollars 100bn
of its nearest rivals, BP and Shell. Is ExxonMobil now too big to
Last year, ExxonMobil found 2.5bn barrels of new oil equivalent
- as much
as the entire reserves of a Conoco or 111 per cent of ExxonMobil's
In a world where hydrocarbons will eventually run out, "it
would be naive to
assume reserve replacement can go on for ever", Mr Raymond
says at the
Houston base of his company's upstream oper-ations. But increasing
reserves is "also a function of cost". He takes comfort
in the decline in
ExxonMobil's average finding costs from Dollars 4 a barrel in the
Dollars 1 in the late 1990s and to 66 cents in 2000 and 2001.
As for acquisitions, Mr Raymond has no appetite for small portions.
company should make acquisitions when their impact is noticeable.
go out and buy some assets makes no sense. Rarely has the purchase
single asset or oilfield turned out to be economic."
But are sizeable acquisitions possible when the company is already
antitrust regulators' tolerance to the limit?
Mr Raymond concedes concentration is a problem in downstream activities,
nearer the consumers that competition authorities are keen to protect.
German cartel office has, for instance, prohibited ExxonMobil from
up any of the petrol stations that it wants BP and Shell to sell.
But antitrust authorities do not care about concentration in upstream
gas fields. The lesson for Mr Raymond is that "if you're going
something, it (had) better have a big upstream component to it".
or petrochemical plants can always be sold off at the regulators'
ExxonMobil is not so large that it can go it alone in upstream
all oil companies, it joins consortia to spread exploration risk.
But it has
weight to throw around. Among partners, says an industry analyst,
commands a great deal of respect but little affection. If Exxon
were a school
child, it would get the kind of report that says 'plays poorly with
children'." But when it comes to dealing with national oil
companies of the
Organisation of Petroleum Exporting Countries and other oil-rich
states - the
trickiest diplomatic dimension of the industry - Mr Raymond rejects
that "being straightforward does not mean you are politically
He points out that Saudi Arabia has chosen ExxonMobil to lead
two of the
three foreign consortia negotiating gas joint ventures in the country,
negotiations are dragging on. His meeting last month with Saudi
brought no breakthrough. However, the 63-year-old career Exxon executive
says delays are "not surprising when you're trying to put together
20bn joint ventures".
Another instance of ExxonMobil sensitivity to local needs, he
be found in Angola. Although he is "not sure" the governance
Angola's leaders is satisfactory, he says his company has scrupulously
observed its contract confidentiality agreement with the government.
He contrasts this with "one company which has run into deep
disclosed last year it had paid Dollars 111m to the Angolan government
win an exploration licence. Although the payment was routine its
was not - and the Angolan national oil company reacted angrily.
Mr Raymond says disclosing a government's revenue in this way
seen as influencing how it is spent and this is not a proper role
companies. In Chad his company leaves that role to the World Bank.
notion that ExxonMobil should be telling the government of Chad
spend its money, like Shell telling the UK government how to spend
money, wouldn't go (down) well."
However, ExxonMobil has not been shy in letting governments, especially
Europe, know its concern that gas deregulation will damage the security
supply. It worries that commercial uncertainty and price volatility
undermine the funding of expensive, long-distance pipelines.
Mr Raymond believes that the US and Europe are both adjusting
imports of higher-cost gas and that "we're in this volatile
period until we
finally get a level (of price) that would justify some major investments".
In the US, which deregulated gas in the 1980s, Mr Raymond believes
prices have still not settled at a high enough level to justify
to pipe gas from Alaska.
The company prides itself on being relatively immune to oil industry
that come and go with price and profitability cycles.
If there is one "fashion" ExxonMobil most stands out
against it is the
gathering concern about the role of hydrocarbons in global warming.
Raymond has become famous, or infamous, for his outspoken scepticism
about the scientific evidence that energy use is changing the world's
ExxonMobil has the Bush administration and many Americans on its
although US environmentalists are trying to influence the company
shareholder resolutions. But in Europe, under its Esso name, it
an ogre to many - and in the UK green groups have organised a boycott.
Mr Raymond claims the boycott is having little commercial effect.
voices particular "disappointment" at being "demonised"
in the UK "where
we're supposed to have an open society in which all points of view
expressed". He says ExxonMobil intends to "stay the course"
scepticism "until someone comes along with new information".
Nor, pending new breakthroughs in green energy, does ExxonMobil's
chairman and CEO intend to take the group it back into renewables.
been there, done that," he says. In the early 1980s he helped
investments in solar, wind and battery power on which Exxon spent
500m before selling out. He vaunts Exxon's research into fuel efficiency
portrays European suggestions that Americans should use smaller
neo-colonialism. "In Europe you like to tell people what kind
of cars they
ought to use. Most Americans like to make that decision themselves
that's why they left (Europe)."
Mr Raymond concedes that by being "politically incorrect"
and proud of it,
ExxonMobil has allowed BP and Shell, its closest rivals, to seize
high ground. But he is not bothered. Rivals may paint ExxonMobil
dinosaur but it is in the American mainstream and they are not