Shortly after ExxonMobil Chairman and CEO Darren Woods took the stage at CERAWeek by IHS Markit in Houston, the White House sent out a statement congratulating Woods and his company on a $20 billion plan to expand refining and chemical-manufacturing along the Gulf Coast.
“This is exactly the kind of investment, economic development and job creation that will help put Americans back to work,” President Donald Trump said in a statement.
The plan, which will include 10 years of investments at 11 chemical, refining, lubricant and liquefied natural gas projects at proposed and existing facilities, typifies the type of fossil fuel industry endeavor analysts expected to see a boost following Trump’s ascension to the presidency.
While Trump appeared to take at least partial credit for ExxonMobil’s $20 billion plan, calling it a result of “our policies,” the bulk of the investments had been made while President Barack Obama was in office.
And, if the first day of CERAWeek was any indication, the industry appears to be at a point where a US government-enabled boost to domestic producers may be unnecessary.
In his speech Monday, for example, Woods highlighted the “supportive role” that the government can play, but he largely focused on the good government can do by simply staying out of the way.
Policies such as subsidies, mandates and trade barriers will “only hinder progress,” Woods said.
“Real progress comes from the free market,” he said.
The mood at CERAWeek appeared to markedly different from a year ago, when global crude oil prices were about 40% lower and bankruptcy announcements from exploration and production companies were becoming commonplace.
A year later, bolstered by a supply cut agreement between most OPEC nations and 11 non-OPEC countries, advancements in drilling technology and months of cost cutting, US producers seemed to be in more of a mood to celebrate.
“The shale business is back in business and starting to grow again,” John Hess, CEO of Hess Corporation, said during a panel discussion.
“We are witnessing the start of a second wave of US shale oil growth,” Fatih Birol, executive director of the International Energy Agency, told reporters Monday morning.
But US shale growth, which IEA projects will be about 1.6 million b/d through 2022, the largest supply growth of any nation over that time, will likely take place independent of White House action, Birol said.
Trump’s efforts to bolster domestic supply by rolling back federal regulation and opening additional federal lands to drilling may have little impact on market fundamentals.
This week, for example, the Trump administration is expected this week to roll back fuel efficiency targets of 54.5 mpg for model year 2022-25 cars and light trucks.
Some analysts expect the change could impact future demand, but Birol indicated that any changes to fuel economy standards for lighter vehicles would have relatively little impact on global oil demand.
“The growth in global oil demand comes from trucks, jets and petrochemicals where it is difficult to find alternatives to oil right now,” Birol said.
Birol said that one-third of oil demand growth comes from Asian trucks alone.
Trump and Republicans in Congress have already successfully overturned Obama administration regulations on coal mining and production transparency, with more on methane limits and offshore drilling restrictions expected.
But even with the looser regulatory environment and more potential plays available, those at CERAWeek said that if the economics do not add up, supply will likely stagnate or decline, no matter who is in the White House.
It’s important to remember that when Obama announced in June 2013 his ambitious plan to combat climate change through a host of federal rules and regulations, the industry and Republicans in Congress claimed that it would stifle US supply growth, which was then averaging 7.26 million b/d. Less than two years into that plan, US production was averaging 9.62 million b/d.