Exxon Mobil Corp. chief executive Darren Woods knows his company’s pending purchase of rival Pioneer Natural Resources is a $60 billion bet on the future of oil. On Wednesday, Woods defended that bet during a Boston business leaders luncheon. Oil, he said, needs to be a big part of the energy mix for a long time to come.
Woods held forth with former State Street chief executive Jay Hooley — a member of Exxon’s board — at Wednesday’s meeting of the Boston College Chief Executives Club. The Pioneer deal, announced on Oct. 11, was top of mind. The acquisition will more than double Exxon’s acreage in the Permian Basin, an oil-rich region that stretches across the Texas-New Mexico border. Exxon is also about to complete another important acquisition, the nearly $5 billion purchase of pipeline operator Denbury; that deal is expected to close on Thursday.
One thing you won’t see Woods buying: a major wind or solar company. He made it clear to the Boston crowd that he doesn’t believe electricity generation fits with Exxon’s core business strengths. The Texas-based company will remain focused on molecules and not electrons. Translation: He’s sticking with fuels, and steering clear of electricity.
Woods talked about how Exxon was late to the game to invest in fracking — the process of blasting through rock to extract more oil and gas from the ground — and tried to catch up with the purchase of XTO Energy in 2010. More recently, Exxon has harnessed its immense research and development operations to build on that acquisition by improving its fracking technology, considered crucial to unlocking the full potential of the Permian’s oil reserves. (The acreage that Exxon and Pioneer control there essentially equal an estimated 15 to 20 years worth of oil inventory.)
“Over the course of the last five years, we have come up with unique approaches and technologies for more effectively recovering the resource out of this rock that looks like granite,” Woods said. “We’re getting more recovery at less cost. That’s magic in this business.”
Woods didn’t directly address the calls on Wednesday from Senate Majority Leader Chuck Schumer and other Senate Democrats to scrutinize the antitrust implications of the Exxon Mobil-Pioneer merger. (The Democrats also want another recent oil megamerger, Chevron’s $53 billion deal to buy Hess, to get similar scrutiny.) But Woods did pledge that the Pioneer deal will help lower oil costs — a potential tripping point in any antitrust scrutiny by the Biden administration.
“We’re going to recover more oil at a lower cost, which is good for the US economy,” Woods said. “It’s good for US energy security.”
Hooley noted that oil companies have been pilloried for not doing more to help with the clean energy transition away from fossil fuels.
Woods’s response? Those critics of oil and gas will be proven wrong.
“That’s a very superficial way of thinking about it,” Woods said. “We definitely think wind and solar will be an important part [of the country’s energy portfolio]. But they’re not sufficient in and of themselves. ... There is a somewhat superficial view that [if] you’re an energy company, you should go into wind and solar.”
That won’t be happening at Exxon, at least not under Woods’s watch. “My view is, we don’t bring a lot to that space,” Woods said. “We’re not an electron company. We’re a molecule company.”
“Molecules,” as Woods put it, can help with the clean energy transition. He mentioned carbon capture — Denbury, for example, specializes in pipelines used for transferring and storing carbon dioxide underground — as well as hydrogen and biofuels.
“We need as many solutions out there as possible,” Woods added. “We got very focused as a society on a narrow narrative that said, you’ve got to get rid of oil and gas.”
Policy makers, Woods said, should be more focused on managing the costs of this transition. Many low- and zero-carbon solutions, he said, aren’t economically practical at a large scale, particularly at the global level. While the federal government is providing subsidies for carbon capture and similar technologies, Woods said subsidies should not go on forever.
“I think of it as a catalyst,” Woods added. “Without market forces, we’re not going to get the best answers.”