PR reordered

 

ExxonMobil’s departure as a sponsor of the Iditarod Trail Sled Dog Race this week might have come as a surprise to some fans of the self-identified Last Great Race, but it shouldn’t have.

Forget the posturing by People for the Ethical Treatment of Animals (PETA) which has claimed credit for the split. The rat-is-a-pig-is-a-dog-is-a-boy organization is ready and happy to claim credit for anything anywhere that it believes a benefit to its agenda.

But the reality is a plethora of environmental organizations and activists regularly beat on Exxon like a drum, and PETA is the least of them. Exxon has bigger problems to worry about than an environmental fringe group.

Which is why the Iditarod exit shouldn’t have come as a surprise.

As Loren Steffy wrote at Texas Monthly back in November, “Exxon reported a third-quarter loss of $680 million. That’s a big number, but it’s actually an improvement from the record $1.1 billion loss it saw in the second quarter. So far this year, Exxon has lost a staggering $2.4 billion—the first time in the Irving-based company’s 138-year history that it’s reported three consecutive quarterly losses. In August, Exxon was ousted from the Dow Jones Industrial Average, America’s preeminent stock market index, after being a member for almost a century. One of the companies that replaced it was Salesforce, a cloud software company. Apple, with a market value of some $2 trillion, is now worth more than all the major oil companies combined.”

Put simply, Exxon has some money problems. When businesses have money problems, they look around for unnecessary expenses that can be eliminated whether big or small.

All of which begs a question bigger than Iditarod.

Bye-bye Alaska?

Does Exxon’s departure from Iditarod signal an impending departure from Alaska? BP –  the British-based company considered another of the oil industry supermajors – is already gone, and it’s assets in the 49th state were more valuable than Exxon’s.

Exxon’s big play in Alaska has been Point Thomson, and Point Thomson has been largely nothing but headaches for the company.

At least $4 billion has been poured into trying to develop what is largely a very high-pressure gas field, and the return has been a trickle of gas condensates that are mixed in with crude oil and pumped down the trans-Alaska pipeline.

The company describes this “phase” of development as an effort to build the “critical infrastructure and provides the experience and learning for current and future Point Thomson development. Lessons gained from this high-pressure gas condensate cycling project on the North Slope will be key to helping unlock Point Thomson’s potential.”

There is no doubt potential beneath the ground at Point Thomson. The field on the state’s North Slope is estimated to be situated over about 8 trillion cubic feet of natural gas.

The gas would be highly valuable if there was some way to economically move it to market, but at the moment there isn’t. Low market prices for gas, and the $40 billion or more cost of a long discussed Alaska gas pipeline makes construction look unlikely any time soon.

Exxon did in late 2019 reveal it was working with Qilak LNG Inc., a subsidiary of Lloyds Energy of Dubai, on a plan to pump gas to an offshore liquefied natural gas facility in the Beaufort Sea where ships could pick up the cargo for transport to Asia.

“As the largest holder of discovered gas resources on the North Slope, ExxonMobil has been working for decades to tackle the challenges of bringing Alaska’s gas to market,” ExxonMobil Alaska president Darlene Gates told Petroleum News at that time. 

The Beaufort Sea is shallow. When the Alaska Outer Continental Shelf Office of the federal Bureau of Land Management examined the idea of shipping oil and/or gas off the North Slope in 1981, it concluded that “ice-breaking tankers would require a minimum of 30 meters (of water) which might require a loading facility offshore.”

Such a facility would likely need be built on a manmade gravel island. Costs and environmental opposition can be counted on to increase the farther offshore the site. 

ExxonMobil has said little about its long term vision for Point Thomson. Others in the oil industry are of the opinion the company is sort of stuck with the project because of the lack of a buyer willing to purchase it for anywhere near the worth of the potential gas production.

Cutting losses

Oil production is a tough business with huge upfront development costs. Were Exxon to decide to bail on Alaska after investing billions in a problem-plagued project, it wouldn’t be the first supermajor to do so.

Royal Dutch Shell spent about $7 billion trying to develop offshore oil in the Chukchi Sea west of Point Thomson before its 2015 decision to abandon the Arctic as too problematic.

The odds are Exxon will stay the course in Alaska for the simple, earlier stated reason that Point Thomson appears too good an asset to just walk away from. But one does have to wonder.

Exxon’s contribution to Iditarod was what is considered “image advertising.”  It was intended to make Alaskans – the biggest fans of the Iditarod – feel better about a company that spilled 11 million gallons of crude oil in Prince William Sound in March 1989.

The spill created the biggest manmade mess in state history. Exxon’s image has never fully recovered. Backing the Iditarod certainly didn’t hurt the company’s reputation in the 49th state and probably helped.

And there have been no reports of motorists in the Lower 48 boycotting Exxon gas stations because of the company’s involvement with Iditarod. Proposed boycotts, the effectiveness of which are hard to judge, have focused more on Exxon’s role in global warming.

“Exxon is a gasoline company that is one of the top 100 companies producing 71 percent of climate change,” says the “Boycott Exxon” page at Change.org. “They originally discovered their effect on the environment in 1977, but kept it a secret so that they could sell gasoline.”

The boycott was posted a year ago and has but 439 signatories. With so few willing to boycott Exxon to save the planet, it’s hard to believe sponsorship of a dog race in far-off, out-of-sight, out-of-mind Alaska could pose much, if any, threat to the company’s bottom line.

But the company does have problems on that front. The Connecticut attorney general has accused Exxon of covering up the environmental problems caused by hydrocarbon development and sued for “remediation for past, present and future harm from climate change, restitution for investments already made due to climate change, disgorgement of corporate profits, civil penalties, disclosure of all climate research, establishment of a third-party controlled education fund….”

 

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