Contents

COMPANY OVERVIEW............................................................................................ 4
Industry Challenges Analysis....................................................................................... 4
Current Challenges................................................................................................. 4
Frontier acreage and access to reserves:........................................................4
Unconventional resources:..............................................................................4
Conventional reserves in challenging areas:...................................................4
Rising emerging market demand:...................................................................4
NOC-IOC partnership:...................................................................................... 4
Investing in Innovation and R&D:............................................................................. 5
Alternative fuels, including second generation bio fuels:................................5
Worsening Fiscal terms:................................................................................... 5
Price volatility and role of speculators:............................................................5
Corporate social responsibility:........................................................................5
Industry Transformational Challenges........................................................................6
Shift in Supply and Demand Fundamentals:....................................................6
Saudi Arabias strategy:.................................................................................. 6
Demand:............................................................................................................... 7
New trading pattern emerging:.......................................................................7
EXTERNAL ENVIRONMENT:................................................................................... 7
Global environment:............................................................................................... 7
Competitor Analysis:....................................................................................... 7
Competitors Firms:................................................................................................. 8
Oil Industry...................................................................................................... 8
Natural Gas Industry....................................................................................... 8
Chemical Industry:........................................................................................... 8
Current Strategy :.................................................................................................. 9
Business Strategy:........................................................................................... 9
Corp. Level Strategy:....................................................................................... 9
Technology:......................................................................................................... 10
Trend to Invest in New Technology:..........................................................................11
Water, Big Data Technology to Remain Focus in future....................................................12
Economical:......................................................................................................... 12
Major economic crises in past:......................................................................13
The current situation:.................................................................................... 13
World economic growth in 2014:...................................................................14
 OECD global growth in 2015:........................................................................15
Political analysis:.................................................................................................. 15
Whats happened in the past?.................................................................................... 16
Russia and Ukraine................................................................................................. 16
Legal Analysis...................................................................................................... 17
Production Sharing Contracts........................................................................17
Licensing Systems......................................................................................... 17
Current Scenario............................................................................................ 18
Demographic Analysis........................................................................................... 18
Picking up the slack.............................................................................................. 18
Lack of loyalty..................................................................................................... 18
Different perspective............................................................................................. 19
INTERNAL ANALYSIS............................................................................................ 19
Mission and Vision:............................................................................................... 19
Value System:...................................................................................................... 19
Ethics policy:....................................................................................................... 19
Conflicts of interest policy:..................................................................................... 19
Corporate Assets Policy:........................................................................................ 19
Internal Audits:.................................................................................................... 19
Bribery and Corruption:........................................................................................ 20
Training:............................................................................................................ 20
Control Systems:.................................................................................................. 20
Organization Structure:......................................................................................... 20
Human Resources:................................................................................................ 20
Technological Capabilities:..................................................................................... 21
SWOT ANALYSIS................................................................................................... 22
Strength.............................................................................................................. 22
Weakness............................................................................................................ 22
Opportunity........................................................................................................ 23
Threat................................................................................................................ 23
Strength: Strong market position..................................................................23
Weakness: Litigations and contingencies......................................................24
Opportunity: Rising global energy demand...............................................................25
COMPANY OVERVIEW
Exxon Mobil Corporation (Exxon Mobil or 'the company') is an integrated oil and gas company
engaged inthe exploration and production of crude oil and natural gas; manufacture of petroleum
products; and transportation and sale of crude oil, natural gas, and petroleum products. In addition, the
company manufactures and markets commodity petrochemicals. Exxon Mobil operates in the
Americas, Europe, Africa, the Middle East, and Asia Pacific. It is headquartered in Irving, Texas and
employed 73,500people as on December 31, 2015.
The company recorded revenues of $259,488.0 million during the financial year ended December
2015(FY2015), a decrease of 34.2% compared to FY2014. The operating profit of the company was
$22,277.0million in FY2015, a decrease of 57.1% compared to FY2014. The net profit of the
company was$16,150.0 million in FY2015, a decrease of 50.3% compared to FY2014.
Key Facts

Industry Challenges Analysis

Current Challenges
Frontier acreage and access to reserves:
Frontier acreage challenge represents exploration and development of new fields that previously
regarded as too difficult, too expensive or too politically unstable to justify operations. I would add
also the remote locations, with newly discovered reserves, like Arctic, far North Sea, pre-salt basins in
deep water of Brazil etc. Access to reserves involves competition for access to proven reserves what
became more difficult in comparison to decades ago due to expansion of government role.
Unconventional resources:
These resources were not commercially viable until recently. Only due to technology advancement,
unconventional became so popular nowadays resolving partially the issue of global demand. The
unconventional resources are shale gas, oil sands and coalbed methane (CBM). Although it is a
convenient solution for our energy needs, the technology it involves, i.e. hydraulic fracturing, raises
debates among communities and professionals about harm it makes to nature conservation and water
resources. This in turn might impede its development through government unfavourable legislation.
Conventional reserves in challenging areas:
This represents mostly unstable political regime, what in turn leads to lack of security for investments.
There are countries with unstable political situation (Nigeria, Lybia, Iran) or areas with new
discoveries in unfamiliar environments where environmental legislation is represented by soft law.
(Arctic Environmental Protection Treaty).
Rising emerging market demand:
As per the Energy Institute, 51% of oil and gas respondents reported making significant investments
to achieve growth in emerging markets, i.e. China and other Asian economies. Since performance in
emerging markets mostly is dependent on government pricing policy, a significant risk is involved for
any foreign direct investments and creates the issue of bargaining power of the state.
NOC-IOC partnership:
I would not call this a stable partnership. One of the main goals of this partnership from the IOC
viewpoint is access to acreage, which is another big challenge. National Oil Companies (NOC) are the
gatekeepers of their national reserves, while International Oil Companies (IOC) are the gatekeepers of
their advanced technology. The growth of NOCs not only in their states but also outside their home
markets, will lead to increase in power and possibility to acquire the necessary technological
knowledge, what have to be very alarming for IOCs future concerns.
Investing in Innovation and R&D:
Every company understands nowadays, that R&D and Innovation is a key to growth and prosperity.
This position creates severe competition between market-players with sufficient resources for R&D.
Alternative fuels, including second generation bio fuels:
The environmental pressure and market demand that oil companies experience today force them to
explore new industries, i.e. renewable. According to Petroleum Review, 47% of respondents had
already invested in cleantech. This urge requires additional resources, company policy and revised
strategy.

Worsening Fiscal terms:

The fluctuation of fiscal regime in Host-Governments makes enormous pressure on oil companies,
creates insecurity for the entire company financial strategy and investment policy. According to the
first meeting of UK OIl and Gas Fiscal Forum, (Oil and Gas UK), the industry needs secure and
predictable fiscal regime as there is 2.3 billion drop in expected tax revenues due to dramatic fall in
exploration drilling and production. Thus, measures to stimulate investment need to be introduced as
a matter of urgency. Brazil might be another example of concerns with oil and gas industry fiscal
regimes, (Deloitte), as current tax policy is extremely complex and impedes the growth of the
industry. Innovation in tax regimes is another headache for Operating companies. China recently
introduced experimental resource tax on crude oil and natural gas products with 5%-10% on sales.
(BBC).
Price volatility and role of speculators:
The role of speculators involves huge debate between the leading energy agencies, as well as
investment institutions and governments. However, this is only one of the influencing factors on oil
and gas prices. The fundamental economy drivers play currently main role in reaching the equlibrium
in natural gas prices. As we see, the abundance of supply today leads to lower prices. US is a perfect
example. (FT).
Corporate social responsibility:
This challenge includes relations with various stakeholder groups, health and safety concerns, i.e.
human rights, employee rights, stakeholder rights, environmental protection, community relations,
transparency and corruption issues. CSR requires oil companies to success in each criteria in order to
build a reputation as a reliable potential partner for public-private strategic partnerships: cross-sector
and government.
The above challenges represent only tiny part of concerns of this extremely complex industry.
However, it provides brief overview of trends the interested party, whether it is oil company or
investment institution, needs to take into consideration while building its strategy.

Industry Transformational Challenges

Shift in Supply and Demand Fundamentals:
Fast-growing oil production in the United States has eaten into OPECs market share. This benefited
oil companies worldwide but negatively impacted.
Saudi Arabias strategy:
In order to regain market share, OPEC decided to maintain production output, because their
breakeven cost is minimum of around $27, which naturally sent oil prices falling. The low price of oil
will negatively impact high-cost shale oil producers in the United States.

Demand:
The worlds biggest demand centre are also shifting. According to Baker Institute, the Asia Pacific
region will account for an estimated 70% of global demand from 2010 to 2020 and the countries in
the region will emerge as beneficiaries.
New trading pattern emerging:

US-Canada-Mexico
Russia-China-India
 Weakening of OPEC
OPEC under pressure

EXTERNAL ENVIRONMENT:
Global environment:
1. Political conflicts continue to escalate in oil-producing regions;
2. The effect on the industry of climate change (and resulting regulations) remains
unknown.
3. The slowdown in economic growth among emerging economies has led to a hiccup in
energy demand, with no clear indication of how long that slump will last
4. Another major factor is rapid innovation in hydraulic fracturing and other technologies.
This has not just reduced the cost of unconventional oil and gas plays, but it has led to
oscillating returns on investment in new fields. The broadening array of operating
environments, from these unconventional plays to mature fields to ultra-Deepwater
exploration, is challenging the traditional portfolio strategies of many oil and gas
companies. No single company, not even the integrated majors like ExxonMobil, Shell,
and BP, has the technical, operational and commercial capabilities to succeed in all the
new oil and gas operating environments.
5. Constant shift if Supply and Demand.
Competitor Analysis:
ExxonMobil operates in three major industries: oil, natural gas, and chemicals. Since the dynamics,
opportunities, and challenges in each are very different, the competitors in each industry are analysed
separately.

Competitors Firms:
Oil Industry
The world oil market is dominated by government-controlled companies that actually control the
majority of both current production (more than 52 percent in 2007) and proven reserves (88 percent in
2007). The companies operating in the world oil market can be broadly classified into three
categories:

National oil companies that function as corporate entities but have strategic and operational
autonomy and support of national governments. Examples are: Petro bras (Brazil), Statoil
(Norway), Petro China (China), and ONGC (India).
National oil companies that operate as an extension of the government Saudi Aramco
(Saudi Arabia), Pemex (Mexico), and PDVSA (Venezuela). They support their respective
governments programs like subsidizing fuels to domestic consumers.
Investor-owned oil companies (ExxonMobil, Shell, and BP) form a relatively smaller segment
of the world oil market and sell their output in competitive markets. ExxonMobil is the largest
among the six big non-states owned, vertically integrated oil companies, popularly known as
Big Oil (or super majors) companies; the others in these 16 categories are Royal Dutch
Shell, BP, ConocoPhillips, Chevron, and Total S.A. In addition, there is increasing competition
from national oil companies like Saudi Aramco, Gazprom and China National Petroleum
Corporation (CNPC). Though the big oil companies have the technological know-how and
large assets at their disposal, they are at a disadvantage when it comes to access to oil reserves,
as OPEC controls the majority. Access to high growth markets in non-OECD countries is
 difficult as these markets are already served by incumbent, local, state-owned companies like
Petro bras in Brazil, Oil and Natural Gas Corporation (ONGC) in India, and Petro China in
China.

Natural Gas Industry

Though the oil business has been dominated by the Big Oil companies, the natural gas
business in the U.S. was, until recently, managed by small, independent, non-integrated
companies. With replacement ratios for oil dropping and the oil-rich regions becoming more
politically unstable, Western oil companies are scrambling to find new ways to address
growing energy demand. Big Oil companies started foraying into natural gas, an adjacent
market. Globally, there are big state-owned companies. Gazprom, of Russia, has 17 percent
of the worlds natural gas reserves. ONGC is an Indian state-owned oil and gas company that
contributes 81 percent of India's natural gas production. The Chinese market is dominated by
three local companies: China National Offshore Oil Corporation (CNOOC), CNPC (parent of
Petro China), and China Petrochemical Corporation (parent of Sinopec). The natural gas
market is highly fragmented, with dominant players in each region and no single company
having control over multiple geographies.
Chemical Industry:
ExxonMobil also manufactures and sells commodity petrochemicals and a wide variety of specialty
products. The competitors for ExxonMobil in this market are: BASF (Germany), Dow Chemical,
Ineos (UK), Saudi Basic Industries Corporation, DuPont and Chevron Phillips Chemical Company
LLC (CP Chem). Primary Competitors Oil The primary competitors for ExxonMobil in the oil
industry are the other Big Oil companies: Shell, BP, ConocoPhillips, Chevron, and Total S.A. See
following Exhibit for a detailed comparison of competitors. The common trend across all competitors
is the rise in production of natural gas. This indicates that the Big Oil companies are now adjusting
their energy portfolio to account for the depleting oil reserves. ExxonMobils jump in
Current Strategy :
Business Strategy:

Balanced Business Model: ExxonMobil revenues and profit margins are significantly affected
by changes in oil, gas, and petrochemical prices. A decline in oil or gas prices lowers
ExxonMobil Upstream business profit margins, whereas an increase in oil and natural gas
prices lowers ExxonMobil Downstream and Chemical business profit margins. On an overall
basis, ExxonMobil profit margins are somewhat stable due to integrated operations and are
less impacted by changes of the commodity prices in either direction.
Cost Leadership: ExxonMobil maintains a competitive advantage through a cost leadership
strategy. They keep costs low primarily by superior capital allocation, investment in long-life
assets, and by maintaining their status as a technology leader in the industry. Long-life assets
allow ExxonMobil minimize depreciation and maintenance expense resulting in greater free
cash flow and lower procurement costs. Further, its next generation seismic imaging, reservoir
modeling and surveillance technology allow them to lower drilling and completion costs while
maximizing recovery (ExxonMobil, 2016)
Profits from Chemical Business: Exxon Mobil Chemical gets a lot less attention than the oil
and gas operations of the parent company, which is unfortunate because those chemical assets
have significant value as well and should help to ensure that XOMs profits remain positive
(excluding write-offs) regardless of what happens to oil prices. The chemical companys
principle products include olefins used in carpeting, ropes, and vehicle interiors; polyethene
 used in packaging and plastics, polypropene used in textiles and stationary; and adhesive
resins. Exxon Mobil Chemical is also the largest producer in the world of butyl rubber.

Exxon Mobil Chemicals earnings already contribute 24 percent of the

overall XOM profits and its feedstock supply chain is a critical factor in
driving those earnings. U.S. feedstock costs are among the lowest in the
world and that is a critical competitive advantage for XOM along with
various proprietary technologies in the chemical space that the company has.

Corp. Level Strategy:

Dominant Business & Market Penetration ExxonMobil groups its operations into three main
categories: Upstream activities, downstream activities, and Chemicals.
ExxonMobil business model involves the production, manufacturing, and sales of hydrocarbons and
hydrocarbon-based products to consumers, businesses, and refineries. The key revenue and cost
elements of ExxonMobil business model are summarized in the diagram below. It shows the different
types of products offered by ExxonMobil to different customer segments. ExxonMobil recognizes the
revenues from the sale of the physical products.

Influence or Lobbying US Government:

Exxon was drawn into the 2000 war of independence being waged in the Indonesian region of Aceh.
Exxon paid off Indonesian military forces to fight rebels from the Free Aceh Movement known by
its Indonesian initials GAM around the company's highly profitable natural-gas field. GAM
attacked Exxon employees, viewing the company as essentially in league with the Indonesian
government. Exxon lobbied its contacts in the U.S. government, and got the Bush Administration to
threaten to designate GAM as a terrorist organization if it did not stop attacking Exxon. Then U.S.
ambassador to Indonesia Robert Gelbard put it bluntly to GAM officials in a 2001 visit: "Do you
really want us for an enemy?" The U.S. and Exxon were indistinguishable.
Technology:
Technology will continue to transform the oil and gas industry in future.U.S. unconventional oil and
gas activity, which has transformed the United States into a potential liquefied natural gas exporter
and a significant oil producer, has been made possible by innovations in hydraulic fracturing and
horizontal drilling technology.

The oil and gas industry has faced a learning curve in terms of how to best produce shale oil and gas.
The technology and learning curve effects that the operators, service providers and drilling contractors
have put in place have achieved has substantially improved the breakeven point of shale plays.

Technological advances have improved the breakeven economics on wells for both shale oil and gas
wells, to the point where some companies are able to drill economic dry gas wells with break-even
prices of between $2 and $2.50/Mcf. The economics have improved due to operators making better
decisions on fluid choices, rigs and pressure pumping.

Its not so much a single point technology as it is the integration of technologies and how they bring
those together.

A major focus of unconventional drilling now and in future is the accuracy of where well laterals are
being placed. Measurement-while-drilling and logging-while-drilling tools are allowing oil and gas
operators to better pinpoint where to place laterals in some cases, 50 feet can make a huge
difference. In plays such as the Delaware Basin in West Texas, this accuracy can make the difference
between a well having a five percent return or a 40 percent return. This accuracy also is allowing
companies to maximize resources in the upper and lower bench of the Eagle Ford shale play.

Technology is playing a significant role in drilling efficiency, especially in a sensitive price

environment. In future, the manufacturing approach to shale plays will evolve to a customization
approach as operators seek to improve the performance of individual wells. In 2014, completion
activity focused around bigger fractures. In future, companies will instead focus on being smarter with
fractures, and seeking to understand the performance of individual stages in real-time.

In a tough price environment, being able to push out every bit of optimization matters.The idea of
factory drilling and feeding the rig monster has been in the industry for decades, but drilling and
completion technology has evolved over time and, in its latest rendition, has been applied to shale.
The industrys focus on the size of acreage has created the need for lots of drilling; hence the idea of
factory drilling.

The factory drilling approach has been a controversial topic in the oil and gas industry.Some totally
believe in factory drilling and efficiency driven by statistical production results. Others are advocating
a data-driven approach where you drill smart, consistently achieving top quartile production results,
not statistically, and hoping to not have too many poor producers.

The shale plays have been classic acreage plays. Once the shale concept took hold, independent
exploration and production companies sent their landmen out to get the biggest acreage positions
ahead of their competition and ahead of the technical work. The technology implementation always
chases the landman. Always has, and always will in the United States, which has private mineral
ownership.

The overall shale boom, which includes the dominant U.S. shale plays, has solidly left the
exploration, access and appraisal phases and entered the development drilling phase of field/play life.
The factory approach to field development is the most expensive part of the cycle. The development
era could last for many years, given the huge acreage positions companies have accrued.
Trend to Invest in New Technology:
North Americas unconventional, deepwater, tight and heavy oil resources have been the focus of
much of the investment made since 2003 in oil and gas exploration and production technology. Since
2003, more than $7 billion has been invested in new technologies to enhance oil and gas exploration
and production.

Unlike in the past, the oil and gas industry now embraces emerging technologies from adjacent
industries. Initial investments focused on making unconventional plays more productive, such as
hydraulic fracturing technology. Now, a group of companies are focused on giving operators more
information on the actual production process, such as micro seismic, chemical tracers, down hole fibre
optic sensors and temporary insulation to bolster production recovery from wells.

Operators more willing to quickly introduce new technologies for shale in order to remain competitive
in different oil price environments, unlike offshore conventional, where operators are more
conservative about introducing new technologies. Onshore shale producers have more operational
freedom in this respect due to greater number of wells and shorter life spans when compared with
deepwater wells.

The next wave of investment in oil and gas technology will focus on improving recovery of tight oil
production. Single-digit recovery levels are currently seen in tight oil wells, compared with recovery
of between 20 to 70 percent from conventional wells. Currently, many operators are opting to drill
new wells rather than invest in currently producing wells to boost production.

Weaker oil prices will likely facilitate the more rapid adoption of new technology, such as fit-for-
purpose rigs for onshore drilling.

Water, Big Data Technology to Remain Focus in future

Water sourcing and usage will continue to be a cost driver for operators. For this reason, new
technologies for recycling and use of produced water in hydraulic fracturing could help minimize
these costs and provide environmental benefits as well..

Besides costs for acquiring water, companies also will seek technology solutions to help reduce the
amount of truck traffic on roads, which causes wear and tear on roads and creates safety issues, and
concerns over the environmental impact of hydraulic fracturing, such as the draining of aquifers.
These concerns have prompted discussions in some states about banning hydraulic fracturing.

Oil and gas companies will continue to seek out technologies that allow them to use less or no water
in hydraulic fracturing. Companies have been experimenting with using butane in hydraulic fracturing
instead of water. The fact that water already is scarce is some regions will drive the need for
innovation and collaboration in the oil and gas industry.

The oil and gas industry will continue to delve into Big Data as a means of gaining greater value out
of the massive amounts of data generated in oil and gas operations. The digital oil field was really one
of the first places that Fast Data started to appear, but now its in refineries, pipelines and
transportation, right the way downstream to the trader and the gas station forecourt.

Lets take machine reliability and that could be a rig upstream, a pump at the garage, a pressurized
vessel at the refinery or even a truck. Sensors on that machine allow us to see everything that is
happening motion, vibration, current, pressures, temperatures etc. Now, using all this data,
combined with historical records we can build a pretty picture of how reliable the machine is in given
circumstances how often it fails and what conditions cause it to fail more or less often.
This means that more robust maintenance strategies can be designed, but its still essentially
descriptive and doesnt help us when one of those conditions changes right now: theres a power
surge, a temperature rise etc.

So what we are now able to do is to monitor the stream of sensor data in real time and compare it to
the reliability model we have built. And there have been some stunning results; we expect to see much
more of this in future.

The Internet of Things (IoT) will gain a strong foothold across the industry.

The proliferation of sensors is going to keep exploding as we go forward. Infrastructures will need to
grow to support the growth in data, both wired and wireless.

As it brings new tools to manage growing amount of data at the edge of the infrastructure and deploy
analytics applications at the remote site to improve speed of decisions and accuracy, oil and gas
industry and suppliers are in the process of testing and crafting strategy on leveraging Fog Computing
phenomena to bring new applications and capabilities faster and to build a great competitive
advantage in processing data in Big Data age.

Economical:

Oil oversupply has been the key driver of oil prices recently and is likely to dominate. However,
investors should know that economic growth also plays an important role. When economic growth
slows, consumer demand declines. This has a negative impact on crude oil price movements.

Economic growth directly impacts international oil-producing companies such as Exxon Mobil
(XOM) and Chevron Corporation (CVX). It also impacts US oil producers such as Chesapeake
Energy (CHK) and Concho Resources (CXO).
Major economic crises in past:

The Great Depression in the 1930s is considered the mother of all financial crises. It lasted for almost
ten years. Some other financial crises include the Asian financial crisis of 1997, the 2000 recession,
and the 2008 global financial crisis, which is considered one of the greatest financial crises since the
Great Depression.

The common factor during an economic crisis is that economic growth slows down. Demand declines,
which have a negative impact on oil prices. During the 2008 financial crisis, crude oil prices declined
from the peak of $147 per barrel to $32 per barrel.

The current situation:

The European economy is still in the shadow of the 2008 financial crisis. It has high debts and high
unemployment. There are concerns that Europe and Japan, the fourth-largest consumer of crude oil,
might enter a recession.

Russias economic growth is also fragile. Its the fifth-largest consumer of crude oil.Russia could
possibly enter a recession in future.

World economic growth in 2014:

World economic growth in 2014 was weak and is still recovering at a slow pace. Economic growth
around the world is uneven.

Europe had slow economic recovery in 2014 due to a high debt burden and low investments.
Economic activity in the United States reflects faster recovery and shows improvement in
employment, the housing market, and financial conditions in 2014. Japans growth dropped in the
second half of 2014 due to an increase in the consumption tax. In the emerging markets, Chinas
economic growth slowed down due to economic transitions. However, other Asian economies such as
India are expected to have robust growth.

OECD global growth in 2015:

The above chart shows OECDs (Organization for Economic Cooperation and Development) GDP
(gross domestic product) forecast for major countries in 2015 and 2016. This is positive for the crude
oil market. It shows demand will increase in the long term, and higher demand will support higher
crude oil prices in the long term.

A stronger economy will boost consumption, and the demand for crude oil will increase. This will
lead to higher crude oil prices in the long term. In the near term, oil prices will be on a downward
trend due to an oil glut. As we saw earlier, lower crude oil prices will lead to low investments in new
oil projects. There is also a decline in drilling of new oil rigs. This will all lead to a decline in
production and will mean a lower supply in the long term. In turn, this will contribute to higher crude
oil prices in the long term.

The rise in crude oil prices will increase the margins of crude oil companies such as
Chevron Corporation (CVX), Exxon Mobil (XOM), BP (BP), Cenovus Energy (CVE), and
PetroChina (PTR).

Political analysis:

Geopolitical tensions impact crude oil prices. Political unrest affects production and reduces supply.
The consensus of a shortage of oil supply leads to an increase in oil prices. An oil price increase
directly impacts the profitability of oil producers such as Chesapeake Energy (CHK), Concho
Resources (CXO), BP (BP), Exxon Mobil (XOM) and Marathon Oil Corporation (MRO).

Whats happened in the past?

During the Gulf War that began in 1990, WTI (West Texas Intermediate) and Brent crude oil prices
doubled in the beginning of 1990 and dropped ~30% by the end of that year. The United States
invaded Iraq in 2003. During this war, Brent crude oil rose by 7% and then declined by 12% by the
end of the war.

These geopolitical tensions led to supply disruptions, which increased global crude oil prices. In the
Gulf War, supply dropped by ~7%, and in the Iraq War, supply dropped by ~3%. The 2013 Middle
East tensions didnt have much impact on oil prices due to increased production in the United States.

Russia and Ukraine

The recent geopolitical tensions between Russia and Ukraine may slow down the Russian economy.
Usually, this kind of political unrest disrupts production. Supplies decline, thus impacting crude oil
prices. But a glut in crude oil supply could mean that political tensions in the near term may not
impact oil prices.
Legal Analysis

There are several contractual concepts used around the world by governments to permit international
oil companies (IOC) to carry out petroleum explorations and, in the event of a commercial
discovery, development and production operations. The type of contract selected by a government and
the terms and conditions agreed between the signing parties depend mainly on the government policy
and the relative bargaining strengths of host countries, which are directly linked to the petroleum
potential of the offered acreage and the international oil market situation .

Production Sharing Contracts (PSC) and Licensing Systems are among the most common types of
contractual arrangements used for petroleum exploration and development. The differences between
the types of contracts are of a conceptual nature mainly with regard to the levels of control granted to
the foreign contractor, compensation arrangements, and levels of involvement by the National Oil
Companies (NOCs).

Production Sharing Contracts

1. The concept of production sharing originated in Indonesia where the first agreement of this type
was signed in 1966 between PERTAMINA, the Indonesian state-owned company, and an American
company.

2. A production Sharing Contract (PSC) is a contract for cooperation between a National Oil
Company (NOC) and an international oil company (IOC). The foreign investor assumes all the
pre-production risks and recovers both his cost and his profit share from production, in predetermined
proportions, once commercial production from the contract area commences

3. Typically, the term of a PSC is between 20 to 30 years, with an option to extend. The contract
terminates, unless extended under agreed conditions, if no petroleum that can be developed
commercially is found within a pre-determined exploration period.

4. From the states perspective, obtaining direct foreign investment, freeing up scarce capital
resources for other activities, obtaining long term technology and skills transfer; and retaining control
over and ownership of oil and gas in the ground are among the reasons for using PSCs.

Licensing Systems

1. The Licensing system can be described as an agreement between government and an IOC whereby
the government grants the IOC the exclusive right to explore for, develop, produce, transport and
market the petroleum resource at its own risk and expense within a fixed area for a specific period of
time . The investor pays to the state fees and other taxes and other obligatory statutory charges

2. Under the old License system, the state was not directly involved in petroleum operations and its
petroleum revenues were only generated through taxation. In the modern form of licensing system,
the relationship between the government and the licensee has been modified. New provisions permit
the government to exercise a direct control on petroleum operations like submission to the
government by the licensee of an annual programme and budget of a development plan, the
government may participate with the licensee in case of a commercial discovery, to jointly develop
and produce such a field.

3. In addition to matters of control, state participation enables the NOC and its personnel to gather the
needed experience and expertise to be able to take over operations in the future.

4. In terms of disposition of production, the licensees are entitled to 100% of the production at the
wellhead but must, upon request (and in accordance with the terms of the License) pay royalties and
must supply domestic needs. The government only receives in kind part, if any, of production through
royalties, domestic supply obligation and state participation.

Current Scenario

1. The comparison of a modern license agreement with a PSC shows that, from a purely economic
point of view, it is theoretically possible to arrive at a similar government take in the revenues of a
commercial field, whatever the type of contract in force. The terms of the contract must be modulated
against the characteristics of possible discoveries to obtain these results.

2. The PSC system guarantees the investor stability of legal relations with the state as well tax
stability.

3. The adoption of standard contracts reduces costs and increases efficiency. It further ensures that all
contractors tender their services by using the same terms and conditions.

Demographic Analysis
The age demographics of the oil industry are disturbing. There is a substantial population of people in
their late 40s and early 50s, and there is a fair group of neophytes, but there are very few people with
ages between the two groups.
From small drilling contractors to the super majors, the problem is the same. Sadly, the problem is not
geographically isolated. The expansion of exploration and development activity is international and
affects manpower in every location where drilling is taking place. In fact, the shortage of personnel is
already a crisis in some areas.Day rates for rigs, equipment, and personnel have escalated yet even
with higher oil and gas prices, and with companies paying higher wages, the industry is unable to
attract new employees or to encourage current employees to remain.
Picking up the slack
Consultants and service companies are picking up the slack for some technical areas. For example,
companies such as Q&B Servios Ltda. in Rio de Janeiro have capitalized on the shortage of workers
in the industry and found a niche market - providing people. The company provides tool rental,
specific services, and skilled workers for drilling and production on well sites offshore Brazil.
Similarly, the Gulf of Mexico is seeing drilling activity expansion, and companies like Q&B are
working to keep up the supply of trained workers. Global Project Consultants of Houston is providing
engineering supervision, procurement, cost control, and inspection services on the Canyon Express
project, among others.
While there are more consulting companies springing up and more individuals striking out on their
own to provide consulting services, there is still a lack of resources. Many consultants are finding that
they are in such demand that they are stretching themselves very thin in order to meet their
obligations.
Requests for their services continue to pour in. However, consultants can only fulfill some of the
manpower needs. Oil companies need to find a way internally to address the shortages of skilled and
experienced people.
Lack of loyalty
Part of the problem is rooted in the lack of loyalty between companies and employees, a situation that
often cannot be remedied simply by throwing money and stock options at employees. Employees
know that employment can end high salaries abruptly.
Loyalty is like credibility; it's hard to build up. And a lot of it has been destroyed. Much of today's
distrust stems from the severe cuts in personnel in the last industry downturn.
Hindsight has shown that cutting personnel to satisfy the analysts for short-term gain was misguided.
The industry got caught up in the idea of saving money in the short term, which amounted to losing
much more in the long term. The amount of money it would have taken to keep people was
insignificant, compared to the costs those companies are incurring now in the search for qualified
professional personnel.
A small number of companies avoided the pitfall of personnel shortages, by investing in its
employees strongly over the years and adhering to its corporate policy of hiring only entry-
level employees, promoting from within, and rewarding competence and loyalty.
Sometimes, this kind of investment has meant softness in equity share prices during slow
times.
Different perspective
There are companies that have made significant efforts to preserve their work force during the slumps
in order to be ready for business when the industry cycles up.
Global Marine, an international driller like Rowan, did lay off some employees in the last downturn,
but management contends that the reduction in force was based on performance. In order to avoid
losing critical skilled offshore workers, Global Marine implemented a "Bump-back Program." Briefly,
an employee was asked to move to a position subordinate to his or her current position. If the
employee wasn't reinstated to the original position after six months, then his or her wage dropped to
that of the subordinate position.
In implementing this program, Global Marine ensured employees were made aware of a potential
wage cut and were given a timeline. More significantly, employees knew they would not lose their
jobs.

INTERNAL ANALYSIS

Mission and Vision:

Exxon Mobil Corporation aims to become one of the worlds leading company in petroleum and
petrochemical products. It is committed to attain high financial and operating results throughout the
financial years maintaining high ethical standards.
Value System:
The Company is driven by strong ethical policies and values. The board runs on a strong policies and
procedures (code of conduct) which is adherent to NYSE listing standards. The code applies to all
employees, directors and the chairman of the organization. The board affairs committee reviews any
issue under the code involving officers and reports to the board. The code consists of ethics policy,
conflict of interest policy, the corporate assets policy, the directorship policy and the procedure and
open door communication
Ethics policy:
The policy is in compliance with all government laws, rules and regulations applicable to its business.
The company follows the highest integrity and recognizes local custom, traditions and culture.
Conflicts of interest policy:
The Company is extremely against any conflict that may arise within their managers and the directors.
The employees, directors and managers are prohibited from any securities transactions and non-public
information they know from within the company.
Corporate Assets Policy:
The employees, directors and the employees are advised to protect the assets and resources of the
company and use them efficiently and judiciously for the benefit of the company. They are prohibited
from leaking the internal information of company like earnings, financial forecasts, business
forecasts, bids and technologies to public.
Internal Audits:
Regular internal audits are conducted within the organization to ensure proper and firm following of
the company policies. The internal audit team consists of more than 200 auditors auditing across all
the departments of the organization and thoroughly investigating the standards.
Bribery and Corruption:
Anti -corruption practices are followed within the organization. The company ensures that it follows
all the mandatory acts of the government such as US foreign corruption practices act. The employees
are prohibited from making any payments or financial transactions with the govt. officials.
Training:
The organization has pool of talented resources. The company ensures that the employees are trained
with the latest technology from the market for a sustainable growth. It is mandatory for the employees
to attain half day business practices review and anticorruption act.
Control Systems:
The organization has defined a essential principles and concepts that drives the business controls. The
controls are made in such a way to control the financial risks including procedures for mitigating
concerns, monitoring compliance with standards and reporting results to appropriate operations group.
Organization Structure:
Board of directors:
1. Michael J Boskin
2. Peter k Letmathey
3. Angela F Braly
4. Ursula M Burns
5. Larry R Faulkner
6. Henrietta H Fore
7. Kenneth C Frazier
8. Douglas R Oberhelman
9. Samuel J Palmisano
10. Steven S Reinemund
11. Rex W Tillerson
12. William C Weldon
13. Darren W Wood

Human Resources:
The employee strength of the organization is more than 75000 world wide.This function is integrated
with different business verticals of the company. The HR management manages a pool of smart,
knowledgeable and skilful resource which is the soul and strength of the company. These talented
resources support various business verticals within the organization. There is a cosmopolitan culture
within the company and the resources are hired from various countries. The organization provides an
exciting, challenging, rewarding work in the areas of:
1. Recruiting
2. Employee development
3. Corporate learning
4. Industrial/labor relations
5. Compensation and benefits
6. Employment equality and workplace diversity
7. Policy development
8. Organizational development
9. Change management
10. Recruiting
11. Employee development
12. Corporate learning
13. Industrial/labor relations
14. Compensation and benefits
15. Employment equality and workplace diversity
16. Policy development
17. Organizational development
18. Change management
The human resource at Exxon mobil is integrated with various line of business. The individuals are
dedicated to high integrity, high quality work and good corporate citizenship. The company supports
local employee networks to nurture an environment which is committed to diversity and dedicated to
quality. This helps in facilitating innovation and a competitive advantage over others.
It promotes respect for human rights and is committed to complying with all applicable laws and
regulations.
Technological Capabilities:
The company has successfully implemented few sophisticated and technologically advanced projects
and its employees are integral part of the worlds premier project design and execution which is deeply
committed to safety, security and health of its employees.
The company focuses on:
1. Unlocking new sources of energy in places which were thought to be inaccessible.
2. To develop supplies of clean burning natural gas.
3. Create partnerships and ventures to formulate fuels, lubricants and plastics.
4. Exploration of oil and natural gas across the six continents.

Exxonmobil seeks to advance innovation and technology to deliver the energy needed by the world
enable life.
It markets fuels and lubricants under four brands :
1. Esso : Branded fuels, services and lubricants for personal and business needs.
2. Exxon : services and lubricants sold in the US
3. Mobil: Mobil is known as performance and innovation. It is recognized for its advanced
technology in fuels lubricants and services.
4. ExxonMobil Chemical :It has a broad portfolio of petrochemical product brand and service
solution.

It uses advanced technologies such as carbon capture and sequestration, advanced carbonate fuel
technology, deep water drilling, energy efficiency cogeneration, seismic imaging, 4D seismic
technology, hydraulic fracturing, liquefied natural gas, hydrogen fuel cells in most of its major
projects.

Fig. 2. Technology gaps: oil production of both complex and deeper (offshore)fields requires the
development and application of advanced technologies. Newreserves need to be added by using (1)
new technology to discover new prospectsand to allow these reserves to be reported as proven. (2)
Production fromconventional oil is under duress as remaining reserves are in challenging
reservoirs;new technology is needed to maintain production volumes. (3) Production
fromunconventional reserves also requires deployment of new technology.

SWOT ANALYSIS
Exxon Mobil Corporation (Exxon Mobil or 'the company') is an integrated oil and gas company
engaged in the exploration and production of crude oil and natural gas; manufacture of petroleum
products; and transportation and sale of crude oil, natural gas, and petroleum products. The company
is one of the world's largest publicly traded international oil and gas companies. The strong market
position across the value chain enables Exxon Mobil to take advantage of emerging growth
opportunities around the globe.
Also, the resource and geographic diversity across business portfolio enables Exxon Mobil to mitigate
risks in a dynamic market environment and maximize profitability through changing business cycles.
However, challenging downstream industry environment characterized by weak demand and
overcapacity would pressurize the company's earnings and margins.

Strength
Strong market position
Extensive upstream and downstream operations
Robust research and development capabilities
Diversified geographic revenue stream

Weakness
Litigations and contingencies
Declining financial performance and capital efficiency
Increasing financial leverage

Opportunity
Rising global energy demand
Strategic expansion of upstream, downstream, and
Chemical operations
Increasing demand for LNG globally

Threat
Challenging downstream industry environment
Environmental regulations
Economic conditions
Supply-related risks

Strength: Strong market position

Exxon Mobil has presence in almost every aspect of the energy and petrochemical business. The
company operates facilities or market products in most of the world's countries and explore for oil and
natural gas on five continents. Its business presence spans across downstream, upstream, chemicals, as
well as natural gas and power marketing activities.
Exxon Mobil is the largest global refiner and the majority of its refining capacity is integrated with its
lubes and chemical businesses. As of FY2015, the company had interests in 23 refineries, located in
14 countries, with distillation capacity of five million barrels per day and lubricant base stock
manufacturing capacity of 136,000 barrels per day. The company is also one of the world's major
suppliers of lube base stocks and the largest global marketer of finished lubricants. Moreover, the
company delivers project execution for a portfolio of diverse opportunities that includes conventional,
heavy oil, tight gas, shale gas,deepwater, LNG, Arctic and sour gas project. In FY2015, Exxon
Mobil's liquid production was 2.3 million barrels per day and natural gas production was 10,515
millions of cubic feet per day. The company's oilequivalent production was approximately 4.1 million
barrels per day. Furthermore, Exxon Mobil is also one of the largest petrochemical companies
globally. The company is the largest global manufacturer of aromatics, including paraxylene and
benzene. It is also one of the largest producers of olefins, such as ethylene and propylene, and
polyolefins, including polyethylene and polypropylene.
The strong market position across the value chain enables Exxon Mobil to take advantage of emerging
growth opportunities around the globe. Also, the resource and geographic diversity across business
portfolio enables Exxon Mobil to mitigate risks in a dynamic market environment and maximize
profitability through changing business cycles.
Extensive upstream and downstream operations Exxon Mobil have extensive upstream and
downstream operations. The company's upstream segment explores for and produces crude oil and
natural gas. The company's upstream business includes exploration, development, production, natural
gas marketing, and research activities. Exxon Mobil is engaged in various projects that include
conventional, heavy oil, tight gas, shale gas, deepwater, LNG,Arctic and sour gas projects. In the US,
the exploration and development are carried out primarily in the Permian Basin of West Texas and
New Mexico, the Bakken oil play in North Dakota and Montana, and the Woodford and Caney Shales
in the Ardmore and Marietta basins of Oklahoma. In addition, gas development activities were carried
out in the Marcellus Shale of Pennsylvania and West Virginia, the Utica Shale of Ohio, the
Haynesville Shale of Texas and Louisiana, the Barnett Shale of North Texas, and the Fayetteville
Shale of Arkansas. The company conducts exploration and production activities in 36 countries. A
total of 12.6 million net acres were held at year-end 2015 and 4.4 net exploration wells were
completed during FY2015. The company's downstream segment is engaged in manufacturing and
selling petroleum products. Exxon Mobil's downstream operations refine and distribute products
derived from crude oil and other feed stocks. The company's global network of manufacturing plants,
transportation systems, and distribution centers provides fuels, lubricants, and other high-value
products to customers. Exxon Mobil market its fuels products to millions of customers worldwide
through its 20,251 retail service stations and three global business-to-business segments: industrial
and wholesale, aviation fuels and lubricants, and marine fuels and lubricants. Exxon Mobil delivered
petroleum product sales of 5.8 million barrels per day in FY2015. Exxon Mobil had refinery
throughput of 4.4 million barrels per day in FY2015. Exxon Mobil's fuels and lubes marketing
businesses have a portfolio of renowned brands, which includes Exxon, Mobil, Esso and Mobil 1.
Extensive upstream and downstream operations provide the company with significant competitive
advantage over its peers. Moreover, it also helps the company to serve its customer better. This in turn
helps Exxon Mobil in increasing customer satisfaction and loyalty. Robust research and development
capabilities Exxon Mobil has strong research and development (R&D) capabilities. The company
conducts research to develop new products and improve existing products, as well as to enhance
manufacturing and production methods and to improve service. It spent $1,008 million on R&D in
FY2015. As a result of its strong R&D capabilities, the company continues to build on the seismic and
reservoir modelling technologies, which enable it to identify new resource opportunities, drill more
accurately, and improve recovery. Exxon Mobil also uses advanced molecule management technology
in its plants to optimize the value of every hydrocarbon molecule, while minimizing energy use.
Exxon Mobil is also progressing with a number of technologies to enable the commercial
development of situ bitumen, where this heavy petroleum resource lies too deep for surface mining
and is difficult to produce with conventional wells. Current efforts are also focused on the use of
solvents to access undeveloped resources, improve bitumen recovery, lower water use, and reduce
greenhouse gas emissions. These important advances are being applied and tested at the company's
heavy oil fields in Canada. Also in May 2016, the company and FuelCell Energy announced an
agreement to pursue novel technology in power plant carbon dioxide capture through a new
application of carbonate fuel cells, which could substantially reduce costs and lead to a more
economical pathway toward large-scale application
Globally.
The strong R&D capabilities enable Exxon Mobil to attain competitive advantage over its peers,
maintain technological edge over its competitors, and to stay ahead of industry trends.
Diversified geographic revenue stream. Exxon Mobil has wide presence across various regions. The
company's revenue stream is diversified in terms of geographies. Exxon Mobil divides its geographic
divisions as US and non-US. The non-US region covers Canada, the UK, Belgium, Italy, France,
Singapore, Germany, and other countries. In FY2015, the company generated 35.5% of its total sales
and operating revenues from the US, its core
market. Revenues from the UK accounted for 9.1%, Canada 8.8%, Italy 5.3% and Belgium 5.1%, of
the total sales and operating revenues. Moreover, the company's revenue for FY2015, from France,
Singapore, Germany, and other countries were 4.6%, 4.2%, 3.9%, and 23.5%, respectively. The
company's global operations and regional brand identity gives it competitive advantage and also
indicates that the company has a wider scope in increasing its revenues by utilizing its global
presence. Furthermore, its worldwide presence reduces exposure to economic conditions or political
stability in any one country or region.

Weakness: Litigations and contingencies

The company is involved in various lawsuits, claims, and legal proceedings arising out of the conduct
of its business. Some of these legal proceedings and claims seek damages, fines, or penalties in
substantial amounts or remediation of environmental contamination. For instance, in April 2105, the
company agreed to pay a $225 million settlement with the New Jersey DEP for contamination at
refineries and other polluted sites across the state. Furthermore, in November 2015, Exxon Mobil
received a subpoena from the New York Attorney General seeking documents from the 1970s in a
probe that aims to determine whether oil giant lied to investors and consumers, or withheld
information about the effects of climate change. Thus, such litigations and lawsuits will adversely
impact the image of the company besides resulting in huge financial penalties which in turn could
reduce the profitability of Exxon Mobil. Declining financial performance and capital efficiency. In the
recent years, Exxon Mobil has witnessed weak financial results. The company's revenues declined
from $394,105 million in FY2014 to $259,488 million in FY2015, representing a 34.2% decline.
During the same period, the company's operating profit decreased by 57.1% and the net profit decline
by 50.3%. Moreover, the downstream segment, Exxon Mobil's largest revenue contributor, recorded
revenues of $207,293 million in FY2015, a decrease of 35% as compared to FY2014. A sustained
decline in financial performance in future could result in lower cash flow and could negatively impact
the company's financial condition. Similarly, Exxon Mobil, over the years, has been unable to curb
declining capital efficiency. The return on capital employed (ROCE) evaluates profitability and the
efficiency with which capital is employed. The ROCE, which measures the performance of the
company in relation to the capital invested, declined to 7.9% in FY2015 from 16.2% in FY2014 and
17.2% in FY2013. Declining ROCE ratio reflect Exxon Mobil's inability to deploy its capital in
profitable avenues and indicate a need for improving operating efficiency. Increasing financial
leverage the company has been witnessing an increase in its debt since past few years. Exxon Mobil's
total debt has increased from $11,581 million in FY2012 to $38,687 million in FY2015. As a result,
the company's net debt to capital (as a percentage) has increased from 1.2% in FY2012 to 16.5% in
FY2015. Therefore,increasing debt obligations make it more difficult for Exxon Mobil to pay
principal and interest with respect to its debt obligations. It requires the company to dedicate a
substantial portion of its cash flow from operations for interest, principal, and lease payments. In
addition, high financial obligations also limit Exxon Mobil's flexibility in planning, and in reacting to
changes in business and industry.

Opportunity: Rising global energy demand

The demand for energy is expected to grow in the future. According to industry reports, the global
energy demand will increase 25% between 2014 and 2040, driven by population growth and
economic expansion. At the same time, energy efficiency gains and increased use of renewable energy
sources and lower carbon fuels, such as natural gas, are expected to help reduce by half the carbon
intensity of the global economy. During the period, the worlds population will increase by about two
billion people and emerging economies will continue to expand significantly. Most growth in energy
demand will occur in developing nations that are not part of the Organization for Economic Co-
operation and Development
(OECD). Additionally, natural gas is expected to meet about 40% of the growth in global energy
needs and demand for the fuel will increase by 50%. Nuclear and renewable energy sources including
bio-energy, hydro, geothermal, wind, and solar are also likely to account for nearly 40% of the growth
in global energy demand by 2040. By then, they are expected to make up nearly 25% of supplies of
which nuclear alone represents about one third.
Therefore, growing demand for energy represents an opportunity for Exxon Mobil to capitalize on this
market and to improve its profits. Strategic expansion of upstream, downstream, and chemical
operations. The company plans to strengthen its upstream and downstream operations in recent times.
In this regard, in the upstream segment, the company planned for the development of deepwater
project, such as Kizomba Satellites Phase 2 in Angola and Erha North Phase 2 in Nigeria. The
company has also started
seven major projects on Block 15, from Xikomba in 2003 to Kizomba Satellites Phase 2 in 2015.
Further,ZADCO, Exxon Mobil and its partners began studying options to increase Upper Zakums
production fromabout 500,000 barrels per day to 750,000 barrels per day in 2018, and to increase
production to onemillion barrels per day by 2024.
Additionally, Exxon Mobil continued to strengthen its downstream operations, by expanding the
sulfurhandlingcapacity of the refinery in Baton Rouge, Louisiana by 40%, enabling an increase in
sour crudeoil processing capability upon start-up in 2016. The Antwerp Coker project, with start-up
planned in 2017,will upgrade fuel oil from the companys northwest Europe refineries into higher-
value ultra-low sulphur diesel. At Rotterdam, Exxon Mobil is expanding the hydrocracking unit to
upgrade lower-value hydrocarbons into cleaner, higher-value products, including premium lube base
stocks and ultra-low sulphur diesel. The hydrocracker will use proprietary technology and be the first
to produce EHC Group II
Base stocks in Europe upon start-up in 2018. The company is also constructing a cogeneration unit
that will increase energy efficiency and reduce emissions. In lubes, the company is capturing value
from the recent expansion of higher-value Group II basestock capacity. Over the next two years,
Exxon Mobil will start up expanded grease and lubricant plant facilities that will allow it to optimize
raw material and shipping costs across the Exxon Mobil global manufacturing circuit. The Singapore
lubricant plant will be the only facility in Asia to blend Mobil 1 motor oil. Within fuels, Exxon Mobil
are investing in diesel and gasoline export logistics as well as enhanced marketing of the Mobil brand
in countries such as Australia.
Strategic expansion of upstream and downstream operations will help Exxon Mobil in developing a
significant competitive edge over its competitors, by expanding market share and profitability.
Increasing demand for LNG globally. The global demand for LNG is anticipated to grow significantly
over the long term. Nearly half the grow thin global gas demand through 2040 is expected to be met
through inter-regional trade, most of it using LNG. According to the companys forecast, LNG exports
are expected to almost triple by 2040, reaching nearly 100 billion cubic feet per day (Bcfd). Most of
this LNG will be headed to Asia Pacific. By 2040, almost half of Asia Pacifics gas demand is likely
to be satisfied by LNG, up from 35% in 2014. Significant new LNG exports are expected from the
US, East Africa and Australia. However, low-cost supply will be a determining factor for new LNG
supply sources, especially in the second half of the forecast period as capacity expands.
Inter-regional pipeline exports also are expected to grow, increasing by about 70% from 2014 to 2040
to about 40 Bcfd; most of this growth is projected to come from the Russia/Caspian region, which
serves both Europe and Asia. Europes dependence on imports will likely increase as its local
production declines. As its demand rises, Asia Pacific will become increasingly reliant on natural gas
imports. By2040, Asia Pacific is expected to get more than 40% of its gas from other regions, and
likely will have overtaken Europe as the worlds largest net gas importer. Similarly, North America is
on track to export natural gas from newly constructed LNG export facilities by 2016, and by 2040 it is
expected to surpass Asia Pacific, Africa and the Middle East to become the worlds second-largest gas
exporter.
Capitalizing the growing demand of LNG globally, the company can enhance its top line and
strengthen its revenue base.
Challenging downstream industry environment
The downstream industry environment remains challenging. In the short to medium term, global
refining margins could continue to remain under pressure. The weakness in demand and overcapacity
in there fining sector will continue to put pressure on margins. For instance, in FY2014, the
company's downstream earnings decreased by $404 million. Further, the company had, in FY2012,
cut its exposure to the refining industry by selling out of its business in Japan.
According to Exxon Mobil's long term, outlook the industry refining margins is expected to remain
weak as competition remains intense and, in the near term, new capacity additions outpace the growth
in global demand. Furthermore, proposed carbon policy and other climate-related regulations in many
countries, as well as the continued growth in biofuels mandates, could have negative impact on the
refining business. Moreover, in the recent years, in the company's retail fuels marketing business,
competition has caused inflation-adjusted margins to decline.
Thus, challenging downstream industry environment characterized by weak demand and overcapacity
would pressurize the company's earnings and margins.
Environmental regulations Exxon Mobil's businesses are subject to numerous laws and regulations
relating to the protection of the environment. With rising awareness of the damage to the environment
caused by industry, especially regarding global warming, regulatory standards have been continuously
tightened in recent years. For instance, according to the Clean Air Interstate Rule (CAIR), the states
have to reduce the allowable sulphur dioxide emissions by 70% and reduce nitrogen oxide emissions
by 60%, by 2015 compared with the 2003levels.
As a result of various regulations, throughout Exxon Mobil's businesses, new and ongoing measures
are taken to prevent and minimize the impact of its operations on air, water, and ground. These
include significant investment in refining infrastructure and technology to manufacture clean fuels as
well as projects to monitor and reduce nitrogen oxide, sulphur oxide, and greenhouse gas emissions
and expenditures for asset retirement obligations. Exxon Mobil's FY2015 worldwide environmental
expenditures for all such preventative and remediation steps, including the company's share of equity
company expenditures, were $5.6 billion. The total cost for such activities is expected to decrease to
approximately $5 billion in FY2016 and FY2017, mainly reflecting lower project activity in Canada.
Therefore, stringent regulations may require additional expenses and may restrict Exxon Mobils
commercial flexibility and planned business strategies.
Economic conditions
Economic conditions like the demand for energy and petrochemicals correlates closely with general
economic growth rates. The occurrence of recessions or other periods of low or negative economic
growth will have a direct adverse impact on the company's results. Other factors that affect general
economic conditions in the world or in a major region, such as changes in population growth rates,
periods of civil unrest, government austerity programs, or currency exchange rate fluctuations, can
also impact the demand for energy and petrochemicals. Sovereign debt downgrades, defaults, inability
to access debt markets due to credit or legal constraints, liquidity crises, the breakup or restructuring
of fiscal, monetary, or political systems such as the European Union, and other events or conditions
that impair the functioning of financial markets and institutions also pose risks to Exxon Mobil,
including risks to the safety of the company's financial assets and to the ability of the partners and
customers to fulfil their commitments to Exxon Mobil.
Supply-related risks
Commodity prices and margins also vary depending on a number of factors affecting supply. For
example, increased supply from the development of new oil and gas supply sources and technologies
to enhance recovery from existing sources tend to reduce commodity prices to the extent such supply
increases are not offset by commensurate growth in demand. Similarly, increases in industry refining
or petrochemical manufacturing capacity tend to reduce margins on the affected products.
Moreover, world oil, gas, and petrochemical supply levels can also be affected by factors that reduce
available supplies, such as adherence by member countries to the Organization of the Petroleum
Exporting Countries (OPEC) production quotas and the occurrence of wars, hostile actions, natural
disasters, disruptions in competitors' operations, or unexpected unavailability of distribution channels
that may disrupt supplies. Technological change can also alter the relative costs for competitors to
find, produce, and refine oil and gas and to manufacture petrochemicals.
Such factors negatively impact the company's overall operations and thus influence its results and
margins.

References

1 http://www.rigzone.com/news/oil_gas/a/136449/Oil_Gas_Technology_Trends_to_Lo
ok_For_in_2015
2 http://marketrealist.com/2015/01/must-know-geopolitical-tensions-impact-oil-prices/
3 http://www.lawteacher.net/free-law-essays/international-law/legal-aspects-of-oil-and-
gas-contracts-international-law-essay.php
4 http://www.offshore-mag.com/articles/print/volume-61/issue-8/news/manpower-
shortage-age-demographics-of-petroleum-industry-leading-to-problems.html