[ Its no surprise that Exxon opted to buy Pioneer in a $60 billion
agreement. Energy analysts say fossil fuels will still account for
half the worlds energy mix by 2050. ]
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EXXON’S $60 BILLION BET ON FOSSIL FUELS  
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Catherine Boudreau
October 14, 2023
Business Insider
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_ It's no surprise that Exxon opted to buy Pioneer in a $60 billion
agreement. Energy analysts say fossil fuels will still account for
half the world's energy mix by 2050. _

ExxonMobil plans to acquire a major shale producer for $60 billion,
entrenching its future in oil and gas for decades. , REUTERS/Jessica
Rinaldi

 

ExxonMobil's $60 billion bet that the world will be hooked on fossil
fuels for decades is looking like a safe one — at least financially.

CEO Darren Woods has long said that fossil fuels will be central to
the world's energy mix for the foreseeable future. The company's
acquisition of Pioneer Natural Resources, the largest oil and gas
producer in the Permian Basin that spans from West Texas into New
Mexico, further entrenches Exxon in that future.

"This is proof of Exxon's strategy to stay in oil and gas as long as
possible," Mark van Baal, founder of the activist shareholder group
Follow This, told Insider. "It shows that the company doesn't think
there's any chance the world will achieve the Paris Agreement, because
if they did, they wouldn't buy new assets."

Nearly 200 countries adopted the Paris Agreement in 2016 that aims to
limit global temperatures from rising above catastrophic levels.
Thousands of the world's largest companies made similar promises. Yet
greenhouse gas emissions continue to rise, largely driven by burning
fossil fuels
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Renewables like solar and wind are gaining ground, but not fast
enough, according to climate and energy analysts.

Oil majors are under less pressure from investors
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and asset managers to accelerate their decarbonization plans after
earning record profits last year. The war in Ukraine sent energy
prices soaring and led Europe to search for new gas suppliers.
Meanwhile, the world is still approving new oil and gas projects, with
the US leading the way
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Big banks are willing to finance that expansion
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achieve net-zero emissions on their balance sheets by 2050.

Given the trends, it's no surprise that Exxon opted to buy Pioneer.
Many of the company's oil and gas fields are still untapped, and new
wells pay back in less than two years, analysts at Wood Mackenzie said
in a note. If the deal gets antitrust approval, Exxon would
immediately double its supplies to 1.3 million barrels of oil
equivalent a day, with a goal to boost production to 2 million barrels
a day by 2027. The deal secures decades of supply for Exxon's growing
plastics, chemicals, and liquified natural gas businesses, according
to Wood Mackenzie, a global research and consultancy firm.

Exxon already had plans to ramp up production in the Permian Basin
before announcing the deal, even as Pioneer's CEO Scott Sheffield
earlier this year predicted
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oil production could peak in the Permian in five to six years.

US oil majors have resisted pressure to diversify into renewables like
solar and wind, arguing that natural gas is a transition fuel because
it produces fewer emissions than coal. Exxon has instead focused on
reducing methane leaks along its infrastructure and developing nascent
technology that captures carbon emissions at power plants. But those
investments are a fraction of Exxon's spending on oil and gas
development through 2027, which will account for some 70% of capital
expenditures
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Exxon didn't respond to Insider's request for comment.

The International Energy Agency for the first time in September
predicted that fossil fuels — which meet 80% of the world's energy
demand — will hit peak demand this decade.

"Our latest projections show that the growth of electric vehicles
around the world, especially in China, means oil demand is on course
to peak before 2030," Fatih Birol, executive director of the IEA, said
in an op-ed in the Financial Times
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Even so, fossil fuels are still expected to account for half of the
world's energy mix by 2050, which is nowhere near the steep drop
that's needed to hit global climate goals. Exxon recently forecast
that oil, gas, and coal will account for 68% of the energy mix
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by that date.

Some analysts viewed the Exxon-Pioneer merger as a sign that an era of
major fossil fuel growth is coming to a close. They predicted similar
mergers on the horizon for other companies like Chevron and Shell.

"This deal is about scale and efficiency," Andrew Logan, senior
director of oil and gas at Ceres, a sustainability nonprofit that
works with investors, told Insider. He added that Exxon could've made
a worse deal, given its clear track record of doing little to tackle
climate change.

The deal reflects how many investors think they have to choose between
profits and protecting the planet, van Baal said.

"I really think that shareholders should think again about how they
deal with the oil industry," van Baal said. "They will have to pay for
the consequences eventually."

* Climate Change
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* ExxonMobil
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