ExxonMobil has abandoned the country’s upstream hydrocarbon industry, a move the Institute for Energy Security (IES) says is strategic and will help it concentrate on quality assets in other jurisdictions.
Consistent with ExxonMobil’s global position, IES said the oil major might have decided against pursuing its Ghana business because the quantum of oil found during the initial exploration of the Deepwater Cape Three Points (DWCTP) did not fall within its threshold, and therefore does not make commercial sense to pursue.
The other reason, the energy think-tank proffered, is the oil producer’s expectation of tax exemptions from the initial exploration activities, which IES adds, went off the table.
“The exceptions could have provided some form of free cash flow for the company to attempt drilling further wells to confirm the results or otherwise from the initial seismic survey,” IES said in a statement.
These domestic experiences of ExxonMobil coupled with its global position of focusing on few priority areas that would generate decent returns, IES says, makes business sense for ExxonMobil to relinquish its 80 percent operating stake in Ghana’s DWCTP block. “The next is to focus their plans to mitigate climate risk and establish new plans that are projected to be consistent with their goals of the Paris Agreement,” the statement further read.
Following the severe negative impact of the COVID-19 pandemic on its operations, the oil major resorted to adjusting its capital investment plans, reducing spending by more than 30 percent going forward. Currently, ExxonMobil is developing plans that are more flexible to market conditions and focusing on few priority areas that will deliver the strongest returns.
The American multinational oil firm, whose entry into the domestic upstream petroleum industry, was seen as a major boost for Ghana, is now expected to focus on high-performing chemical projects, refinery upgrades, and advantaged assets in Brazil, Guyana, and the Permian basin in the US. “The reorganization along the value chain is to help ExxonMobil reduce operating costs and to improve on operational efficiencies, to better position the company for the future. This is the global position,” IES added.