Exxon’s $1 Trillion Hurdle

As Oil Reserves Dwindle,
Giants Find That Size
Can Often Be a Liability

Exxon Mobil this week became the first company worth more than $500 billion since the millennial stock boom burst. The Texas oil producer is now nearly twice as valuable as its nearest rival, Royal Dutch Shell. But the supermajor faces supersized obstacles if it ever hopes to become the world’s first $1 trillion company.

Size has traditionally been an advantage for Big Oil. As the world shrinks, the number of choice oil fields has diminished and new finds have become more expensive and complicated to tap. The trouble for Exxon chief Rex Tillerson is that to move the needle on a company bigger than most governments, he needs to broker ever larger deals.


Yet last year Exxon didn’t replace its reserves through the drill-bit for the first time, according to Oppenheimer research. That’s because more of the world’s oil reserves have become off limits to Exxon and other private drillers. Many are controlled by national oil companies, such as Saudi Arabia’s Aramco or Mexico’s Pemex. Expropriation by governments like Russia and Venezuela took other reserves off the market.

In the past, Exxon’s size gave it sufficient political sway to overcome such hurdles. Today, size may be a liability. It makes Exxon a continuing target for the environmental movement. And every time gas closes in on $3 a gallon, legislators talk of imposing windfall taxes. That’s not happened. But equally, Exxon has failed to persuade Congress to allow it to drill in Alaska and other environmentally sensitive places.

Wall St. Journal