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Exxon lost US$1.1 billion in the second quarter, Friday, July 31, 2020, its economic pain deepening as the pandemic kept households on lockdown, diminishing the need for oil around the world. (AP Photo/Richard Drew, File)

Exxon CEO plans lay-offs, underscores faith in fossil fuels

Exxon lost US$1.1 billion in the second quarter, Friday, July 31, 2020, its economic pain deepening as the pandemic kept households on lockdown, diminishing the need for oil around the world. (AP Photo/Richard Drew, File)

Exxon Mobil Corp plans to lay off an unspecified number of employees as low oil prices force the company to delay major projects, Chief Executive Officer Darren Woods said in an e-mail to staff.

Woods also mounted an extensive defence of fossil fuels, calling them a “higher purpose” that aids global prosperity at a time when European peers are looking at renewables as the future.

“These are difficult times,” Woods said in the message, the text of which was released by the company Wednesday. “We are making tough decisions, some of which will result in friends and colleagues leaving the company.”

(File photo)

The oil behemoth’s job cuts are just the latest sign of struggle among US energy producers navigating the industry’s worst downturn in recent memory. This week two high-profile mergers were announced as explorers seek to gain scale and cut costs to survive the devastating impact of COVID-19 on global demand for fuel. Many have succumbed to bankruptcy.

Exxon’s stock has plunged 52 per cent this year and the company all but ended its aggressive, US$30 billion-a-year counter-cyclical growth strategy. The company was forced to slash its capital spending budget by a third — or US$10 billion — after crude dropped to the lowest in a generation. Rivals such as BP Plc and Chevron Corp have also announced large lay-offs in recent weeks.

BP has layed off employees in recent weeks (File photo)

“Our plan is to continue to stage project execution and spending,” Woods said. “Making the organisation more efficient and more nimble will reduce the number of required positions and, unfortunately, reduce the number of people we need.”

But Woods was clear that the cutbacks are not a sign that his faith in oil and gas is in any way diminished. Fossil fuels will remain about half of the global energy mix by 2040 and often provide the most cost-effective pathway to development in poor countries, especially those in Africa and Asia, Woods said.

“We often talk of companies having a higher purpose,” he said. “Well, I can think of no higher purpose than helping people and communities around the world grow in prosperity and achieve their aspirations for a better life through affordable energy.”

Most of Europe’s large energy companies have adopted aggressive targets to become carbon neutral by mid-century, in part involving big investment in wind, solar and battery storage. Exxon, under Woods, won’t be taking this course. Renewables on their own are not enough to solve climate change, according to Exxon, which claims to be focusing on novel technologies in partnerships with universities and start-up businesses.

Several large energy companies in Europe have adopted aggressive targets to become carbon neutral by 2050 by investing in wind, solar and battery storage. (File photo)

“Today’s alternatives don’t consistently offer the energy density, scale, transportability, availability — and most importantly — the affordability required to be widely accepted,” he said.

The stance appears to be at odds with a growing trend this year. Just last month China pledged to be carbon neutral by 2060, a shift that would set into motion a drop in oil and gas consumption, according to government-affiliated researchers. The EU is aiming to reach neutrality across all greenhouse gases by 2050. California announced a new plan to end the sale of gasoline-powered cars by 2035.

Significant investments are needed by oil and gas companies such as Exxon to meet projected long-term consumption, Woods said.

“This is a compelling investment case for the industry and our company — and is foundational to our long-term strategies and plans.”

— Bloomberg