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

source: David Buchan and Sheila McNulty Financial Times 2002.3.12

When Lee Raymond,head of ExxonMobil, said last week of Enron, the
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 among the
corporate dinosaurs who "will topple over from their own weight". Mr
Raymond said ExxonMobil was still standing and "dinosaurs were around
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 Raymond,
merged with Mobil in 1999 to form the world's largest listed oil company. Its
market value, at Dollars 294bn (Pounds 207bn), is now Dollars 100bn clear
of its nearest rivals, BP and Shell. Is ExxonMobil now too big to grow much
further?

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 2001
production.

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 1980s to
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. "Our
company should make acquisitions when their impact is noticeable. Just to
go out and buy some assets makes no sense. Rarely has the purchase of a
single asset or oilfield turned out to be economic."

But are sizeable acquisitions possible when the company is already testing
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. The
German cartel office has, for instance, prohibited ExxonMobil from picking
up any of the petrol stations that it wants BP and Shell to sell.

But antitrust authorities do not care about concentration in upstream oil or
gas fields. The lesson for Mr Raymond is that "if you're going to buy
something, it (had) better have a big upstream component to it". Refineries
or petrochemical plants can always be sold off at the regulators' behest.

ExxonMobil is not so large that it can go it alone in upstream ventures. Like
all oil companies, it joins consortia to spread exploration risk. But it has
weight to throw around. Among partners, says an industry analyst, "it
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 other
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 the idea
that "being straightforward does not mean you are politically sensitive".

He points out that Saudi Arabia has chosen ExxonMobil to lead two of the
three foreign consortia negotiating gas joint ventures in the country, though
negotiations are dragging on. His meeting last month with Saudi ministers
brought no breakthrough. However, the 63-year-old career Exxon executive
says delays are "not surprising when you're trying to put together Dollars
20bn joint ventures".

Another instance of ExxonMobil sensitivity to local needs, he claims, can
be found in Angola. Although he is "not sure" the governance record of
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 trouble". BP
disclosed last year it had paid Dollars 111m to the Angolan government to
win an exploration licence. Although the payment was routine its disclosure
was not - and the Angolan national oil company reacted angrily.

Mr Raymond says disclosing a government's revenue in this way could be
seen as influencing how it is spent and this is not a proper role for private
companies. In Chad his company leaves that role to the World Bank. "The
notion that ExxonMobil should be telling the government of Chad how to
spend its money, like Shell telling the UK government how to spend its
money, wouldn't go (down) well."

However, ExxonMobil has not been shy in letting governments, especially in
Europe, know its concern that gas deregulation will damage the security of
supply. It worries that commercial uncertainty and price volatility may
undermine the funding of expensive, long-distance pipelines.

Mr Raymond believes that the US and Europe are both adjusting to more
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 gas
prices have still not settled at a high enough level to justify mega- projects
to pipe gas from Alaska.

The company prides itself on being relatively immune to oil industry fashions
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. Mr
Raymond has become famous, or infamous, for his outspoken scepticism
about the scientific evidence that energy use is changing the world's
climate.

ExxonMobil has the Bush administration and many Americans on its side,
although US environmentalists are trying to influence the company through
shareholder resolutions. But in Europe, under its Esso name, it has become
an ogre to many - and in the UK green groups have organised a boycott.

Mr Raymond claims the boycott is having little commercial effect. But he
voices particular "disappointment" at being "demonised" in the UK "where
we're supposed to have an open society in which all points of view can be
expressed". He says ExxonMobil intends to "stay the course" in its
scepticism "until someone comes along with new information".

Nor, pending new breakthroughs in green energy, does ExxonMobil's blunt
chairman and CEO intend to take the group it back into renewables. "We've
been there, done that," he says. In the early 1980s he helped run
investments in solar, wind and battery power on which Exxon spent Dollars
500m before selling out. He vaunts Exxon's research into fuel efficiency but
portrays European suggestions that Americans should use smaller cars as
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 the moral
high ground. But he is not bothered. Rivals may paint ExxonMobil as a
dinosaur but it is in the American mainstream and they are not