Introduction
The Exxon Mobil Corporation (XOM) is a significant oil and gas conglomerate worldwide. The Standard Oil Company was founded in Ohio in 1870, and by 1880, it had evolved into an oil empire that controlled between 90% and 95% of all oil produced in the United States. Extraction of crude oil and natural gas and their transportation and storage are Exxon Mobil’s primary commercial operations carried out through its divisions and associate companies. The company also produces and sells crude oil, natural gas, petroleum products, and petrochemicals. (Morán & Bluher, 2019). According to CSI Market, Exxon Mobil no longer has the same market share as its progenitor in the late 1800s. However, it still has the largest share of revenues in the combined upstream, downstream, chemical, and other divisions of the oil and gas industry in the United States.
Exxon Mobil works not just in the United States but also in other parts of the world. Exon Mobil’s most recent venture is the discovery of oil in Guyana. Exxon Mobil Corp (XOM.N) announced in September that it had made a discovery at Pinktail in the Stabroek Block off the coast of Guyana as part of the development of a significant new oil and gas discovery (Mahmood & Furqan, 2021). The business operates the 6.6 million acres Stabroek Block in collaboration with Hess Corp (HES.N) and China’s CNOOC Ltd. (0883. HK). The company has made at least twenty significant discoveries there.
Additionally, the business stated that the discovery would increase the company’s earlier estimate of recoverable resources of more than 9 billion barrels of oil and gas without detailing the number of reserves in its latest discovery (Sanzillo, 2020). The Liza Unity, the company’s second offshore production plant, sailed from Singapore to Guyana in early September. According to Refinitiv Eikon vessel tracking data, the floating production storage and offloading (FPSO) vessel is now crossing the East Indian Ocean and is expected to arrive in Guyana on November 15.
The Unity FPSO will be used for the Liza Phase 2 development, with production projected to commence in early 2022 at around 220,000 barrels per day (BPD). By 2027, the company anticipates the Stabroek block to produce at least 1 million barrels per day via six FPSOs. Additionally, Exxon expects to submit a development plan for Yellowtail, its fourth Guyana project, later this year.
However, the International community is fighting against the use of fossil fuels, which includes oil products. Organizations such as the International Energy Agency (IEA) have acknowledged the pollution that fossil fuel is associated with and are now campaigning for the use of renewable energy (Valle & Marks 2021). The IEA has a campaign dubbed Net-Zero by 2050, implying that the organization intends to achieve zero emissions from fossil fuels in 2050. The prospects by the Exxon Mobil company in Guyana are, however, going against the desired international direction since they involve the exploitation of fossil fuel, which pollutes the environment.
Despite the international needs, Guyana considers the exploitation of the oil since it might benefit it economically. The country is speculating a future where the newly discovered oil reserves will be running the economy of Guyana. Other nations have become successful economically due to the presence of oil in the countries. With Guyana, it is only fitting to speculate success from the sale of the oil (Sanzillo, 2020). However, success cannot be guaranteed as the world is shifting away from oil and other environmentally friendly and renewable forms of energy. The oil price is also shrinking. Therefore, Guyana needs to counter-check whether they would reap from allowing the venturing into the exploitation of the oil reserves or whether they should abort the project before they land on losses.
Environmental Analysis
The exploitation of oil by Exxon Mobil company in Guyana will be affected by several factors, that is either external or internal. The success of an oil-producing nation widely depends on the acceptance of the oil from the global community. International sanctions and campaigns against oil-producing activities can adversely affect the country, leading to losses (Mahmood & Furqan, 2021). The PESTEL analysis below showcases the external forces that affect the oil industry, and consequently, Exxon Mobil. Political, economic, social, technical, environmental, and legal aspects are all included in the PESTEL analysis tool. This tool will be beneficial to the organization in evaluating the external factors that will affect the company.
Political Factors
Oil and gas companies are well aware of the influence that political statements and conflicts between countries may have on the industry. The global oil market, for example, can be immediately destabilized by tensions between the United States and Iran (IEA, 2021). The Strait of Hormuz (near Iran), which is essential to world oil supplies, may also be affected by the conflict. The oil and gas business is vulnerable to instability in the Middle East. Several regional allies, most notably Egypt and Saudi Arabia, have a close relationship with the United States as a result of this.
Oil exporting countries’ policies are coordinated and harmonized by OPEC (the Organization of Petroleum Exporting Countries) (OPEC, 2021). The organization has ten member states which align with its policies (McDonald & Üngör, 2021). The oil and gas business in each of these countries is affected by a variety of factors, including domestic politics, rules, and regulations.
The relationship between Guyana and the oil mining business will also impact the country’s ability to extract oil. Guyana’s current relationship with important countries like the United States is not strained (Mahmood & Furqan, 2021). It is possible that, as the country moves forward with its oil mining efforts, pressures will arise, preventing the country’s success. If the government goes it alone, OPEC will face tremendous opposition, which does not agree with the land.
Economic Factors
Among the world’s leading oil producers are the United States of America, Russia, Saudi Arabia, Iraq, Canada, China, UAE, Iran, Brazil, and Kuwait. The leading gas consumers in the world are The United States, Russia, Iran, Canada, Algeria, Qatar, China, Saudi Arabia, and the United Arab Emirates (Valle & Marks 2021). The top oil consumers globally are the United States, China, India, Japan, Russia, Saudi Arabia and Brazil, South Korea, Canada, and the United Kingdom. The oil and gas industry often has effects on the domestic economy in these countries.
For example, in the first week of August 2021, oil prices fell dramatically as China’s manufacturing activity growth slowed sharply. Economic growth, on the other hand, increases global demand for oil and gas. Economic growth in Africa’s oil and gas exporting countries has historically been driven by the oil and gas industry (Sanzillo, 2020). The oil and gas industry is responsible for millions of jobs around the world. As a result, this business has both beneficial and harmful repercussions for other industries. While the oil industry profits from a high oil price, many other sectors are adversely affected. Contrary to popular belief, reducing oil prices is bad for oil companies but suitable for different businesses.
Guyana poses as more of an oil-producing country than an oil-consuming country. The success of the oil-producing company depends on the demand by the leading oil-consuming companies. Thus, Guyana needs to look into the future of the oil demand and decide whether it should venture into oil exploitation or not. If the future proves that the world will demand oil, Guyana should venture into producing it since it will be assured of a ready market. Still, if the future shows that the world is moving away from oil, Guyana should abort the project since it will lead to losses in the long run.
Social Factors
A PESTEL examination of the oil and gas (petroleum) industry will now assess social aspects. The rise of the middle class in many developing and expanding nations has resulted in a massive increase in oil consumption. Because these countries consume so much oil, it is no surprise that they are among the world’s most populous nations. The demand for oil increases as more people own cars and travel by various forms of transportation for holidays.
Exxon Mobil and Guyana will intend to sell their oil to the most significant oil-consuming countries in the world. The government and the mining company should look into such countries’ social and cultural patterns and decide how much oil they will be producing at what time. For example, during the December holidays, most of these countries register high travel rates. Thus, oil production should be peaking as the world approaches such periods as the December holidays.
Technological Factors
Oil and gas companies are known for their delayed response to new technological developments. In contrast, many organizations are now spending significantly on big data and analytics, cloud computing, artificial intelligence (AI), and machine learning, robotics, and drones, 5G networks, as well as collaboration tools, as a result of digitalization (Morán & Bluher, 2019). The use of these technologies is likely to increase their operations’ efficiency and profitability.
Exxon Mobil can also adopt digitization procedures and invest in technological products to make mining processes and other business functions even more manageable. When Exxon Mobil finally decides to adopt specialized tools in its operations, it will reduce costs and make mining efficient, which will be a plus for Guyana.
Environmental Factors
The seasons and the weather have an impact on the demand for oil and gas. While oil usage rises during the summer travel season, gas consumption increases during the winter season due to increasing heating fuel demand. On the other hand, significant weather occurrences can impact the production of oil and gas. Increasing numbers of people turn to renewable energy sources and reject “dirty” fossil fuels in their daily lives.
The major environmental factor that will affect Guyana will be the new trend that people are now avoiding dirty oil and are embracing the use of more environmentally friendly sources of energy such as solar and electric energy. Guyana should use the rate at which people will adopt alternative energy sources to determine whether oil demands will remain high or dwindle.
Legal Factors
For example, the United Kingdom’s Petroleum Act, the United States’ Federal Oil and Gas Royalty Management Act, the United Nations Framework Convention on Climate Change, and the Petroleum and Natural Gas Rules of India each have their own rules governing oil-and-gas operations (Varga et al., 2021). Consider the fact that many countries have multiple laws. International oil and gas firms are allowed in some countries, while others have strict ownership restrictions.
The legal factors that will affect oil exploitation in Guyana will be internal and external. The internal legal factors will include the rules of the a=land set by Guyana on how the Exxon Mobil company should operate and how the oil mined in the company can be best be used locally (Valle & Marks 2021). External factors will involve how other countries will react to the oil from Guyana. Some countries might have alliances with other oil-producing companies and will thus limit the oil originating from Guyana, while some countries will readily accept the oil from Guyana. Therefore, Guyana should study the possible receptions that its oil might receive in the global arena.
Stakeholder Analysis
Stakeholders
Several stakeholders exist in the oil-producing business. The stakeholders in the oil business mainly include states, state-owned companies, and other major private investors. In Guyana, the major stakeholders involved are the state, Guyana, and private investors, the Exxon Mobil company (Canadian Audit and Accountability Foundation, 2021). Exxon Mobil identifies the oil fields and mines the oil with permission and on behalf of Guyana. Both parties will benefit since Guyana will receive profits from the sale of the oil and will also register employment opportunities for the people that will work in the oil firms. Exxon Oil will work on behalf of the government and will receive a percentage of the revenue that the government will make
Potential Benefits to Guyana
The discovery of oil in Guyana is good news for the country due to the value that oil products have. Oil is essential in almost all aspects of life, and its demand is always high. Further, most of the wealthiest countries have amassed their wealth from oil products (McDonald & Üngör, 2021). The discovery of oil will help Guyana earn foreign exchange from the sale of oil to external countries. The foreign exchange will increase the country’s cash flow and lead to the development of business activities.
Guyana is among the poorest nations in South America. Employments rates are high, and many people in the country live below the poverty line. However, with the discovery of oil, the fate of the people of Guyana can change. The discovery of oil allows the people to work on oil firms and other support establishments that work with oil products. The discovery of oil in Guyana will also lead to job opportunities and an increase in business activities in the country. Further, when the government uses its oil, it will improve its economic activities and rise in national revenue.
Potential Benefits to Exxon Mobil
Exxon Mobil benefits from dealing with oil. The company identifies oil deposits, conducts studies on the oil deposits, and establishes whether the deposits are enough for exploitation. Its activities in Guyana have enabled it to be able to secure its largest deposits yet. The company will benefit from the management and the sale of the oil on behalf of the Guyana government (Sanzillo, 2020). The massive discovery by Exxon Oil and the subsequent mining operations by the company will also raise its reputation, and any other countries that might have oil reserves will always be considering Exxon Mobil for a tender in identifying the resources and managing the reserves for them, just like in Guyana.
Potential Dis-Benefits to Guyana
The operations by Exxon Mobil in Guyana, however, are characterized by significant criticism from international institutions. Many critics believe that Exxon Mobil has only ventured into Guyana, not to profit the country but only to fend for itself (Rahman, 2021). The critics think that Exxon Mobil will only stay in Guyana till the oil fields run dry and then leave after making millions of dollars. The activities by the Exxon Mobil company are also expected to degrade the Guyana environment and adversely affect other economic activities such as fishing, which plays a massive role in keeping the people of Guyana alive.
Exxon Mobil has agreed that its activities will adversely pollute the environment by emissions of fumes and fluids into the rivers. Exxon Mobil company is, however, in Guyana only due to its business interests. They do not share the same claims of Guyana, which will still be there even after the oil fields have been depleted. Thus, the negative environmental impacts of the activities by Exxon Mobil in Guyana will leave the company in a poorer position than it is today in terms of environmental safety. People in Guyana will lead lower quality lives due to the adverse effects of oil mining on the country’s environment.
Project Lifecycle Model
Exxon Mobil mining has a variety of project models that they can adapt for their projects. However, the company can choose a five-factor project lifecycle model, which includes the following steps; exploration, appraisal, development, production, and decommissioning (Varga et al., 2021). The exploration phase will involve Exxon Mobil conducting geologic and seismic site surveys. The step further involves exploration drilling, which will estimate the potential production of the reserve.
The second phase of the project will involve appraisal drilling, which is undertaken to establish the quality, quantity, and other characteristics of oil or gas in the newly discovered field. The appraisal drilling will help the Exxon Mobil company assess the economic viability and carry out the impacts that the drilling of the oil will have on the environment. The third phase is the development of the oil mines (McDonald & Üngör, 2021). The development phase will involve Exxon Mobil bringing in its tools for the mining and setting up the mining fields, ready for mining the oil. The development phase also consists in constructing the facilities such as roads, pipelines, and terminals. At this phase, the company also estimates the site remediation costs.
The fourth phase is the production phase which involves production management, transportation of oil and gas to the processing facility, and maintenance of the mining sites. The production phase signifies that mining has already started, and the company is expecting to start making income, and with constant production, it should start making profits. The final phase involves the acts of the company after the oil reserves have been depleted. The stage is termed decommissioning and involves the retreating activities by the company. The company conducts site remediation, removes its facilities and equipment, and monitors the site to eliminate potential health and physical hazards.
Strengths and Weaknesses
Strengths
The Exxon Mobil oil mining project will be successful. Exxon Mobil has existed for centuries and therefore understands how oil wells work. The company is consequently unlikely to venture into a project that will lead to a loss due to the experience that the company has. The company has also registered its largest-ever oil reserve yet (Rahman, 2021). The largest oil reserve means that the company will register massive mines and will thus register more significant revenues. The demand for oil all across the world has always remained constant. Oil is the reliable and cheaply affordable energy source, making it the first source of energy that every person and company worldwide prioritizes. Thus, the company will have a ready market for oil all around the globe.
Weaknesses
The use of oil is being discouraged by international organizations all across the world. The world is shifting from the use of oil due to its depredatory nature. International organizations have spearheaded the development and the use of more user-friendly energy sources such as solar and geothermal energy (Panelli, 2019). Thus, Exxon Mobil is bound to face stiff competition from international organizations cautious about climate change. The organizations are also influential, and they might create policies aimed at limiting oil use and production; in the process, Exxon Mobil and Guyana might end up making losses as the world turns to more environmentally friendly sources of energy.
Success Criteria
The success of the Exxon Mobil mining project in Guyana is only valid if both the country and the company make profits from the sake of the crude oil that it is mining. Exxon Mobil Company is in business and intends to make profits from its ventures in Guyana (Panelli, 2019). On the other hand, Guyana has found natural resources that are vital for the country’s development. Therefore, Guyana seeks to receive funds from selling natural resources, while Exxon Mobile also aims to make money from exploiting the oil in Guyana. Also, Guyana has to be wary of the environment of the country. The oil will deplete with time, but Guyana will remain standing. Thus, the success of the project is also when the company avoids environmental degradation during mining. The company can also adopt proper remediation methods to mask the mining activities’ effects on the environment.
Quality Management
The quality management practices for the project will involve timely updates, a process approach, and continual improvement. The Exxon Mobil Company will update the Guyana government and the outside world, describing the stages of the project they are in. Timely updates help the company keep track of activities and help the company relate well with the outside world by offering transparency (Varga et al., 2021). Following the five-point project lifecycle model as a process is beneficial to the project since it will keep the project on track and always state its requirements. Finally, continual improvement will improve the quality of the project. The constant improvement involves the company adopting better methods than the existing methods in executing the project’s requirements. When the company maintains the above three points, the quality of the project will always be maintained.
Conclusion
The Exxon Mobil company has discovered oil deposits in Guyana. The company intends to drill the oil and make Guyana among the oil-producing giants in the globe. However, the prospects of using oil as a source of energy are not guaranteed since the international society is now moving to utilize other renewable energy sources. The Exxon Mobil company is aware of the global position but intends to go on with the drilling. The drilling of the oil by Exxon Mobil is expected to be successful and will give profits to both Guyana and Exxon Mobil. However, Exxon Mobil will degrade the environment in Guyana and affect other economic activities through the mining that it intends to carry out. However, Guyana is a developing country. They should take advantage of the oil resource that has been discovered by Exxon Mobil and try to develop their country using the revenue that the company will gain.
References
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