ExxonMobil is buying Pioneer Natural Resources, a major US shale oil and gas producer. Will that add to global emissions or could it, perhaps, even lower them?
At face value it looks like Exxon Mobil’s $US60 billion acquisition of a US shale oil and gas producer is the oil giant doubling down on a “stronger for longer” outlook for fossil fuel demand, placing a major question mark over the world’s ability to achieve net zero emissions by 2050.
What Pioneer does bring to Exxon is flexibility. Shale assets have low operating costs, less capital intensity and far shorter pay-back periods on investments than conventional oil. They also have much shorter lives, depleting within about five years rather than lasting the decades of some of the larger offshore oil fields. Production can be dialled up or down in response to market conditions.
Exxon, until recently, was almost alone among the oil majors in its conviction that demand for oil and gas would hold up longer than most in the sector were predicting. While peers such as Shell and BP were selling oil and gas assets and investing heavily in renewables and related technologies, Exxon continued to invest in new production.
BP has changed its 2030 target of reducing oil and gas production by 40 per cent to reducing output by just 25 per cent by the end of the decade. There are widely divergent views in the industry as to when the continuing growth in alternate energy sources will see demand for fossil fuels peaking. OPEC has been extending the period until peak oil is reached in its recent assessments of oil’s long-term outlook. In a report earlier this month it raised its estimates of oil demand over both the medium and long term and said $US14 trillion of investment in new production would be needed. From around 100 million barrels a day now, the oil cartel expects demand to reach 110.2 million barrels a day in 2028 and 116 million barrels a day by 2045.