A key oil refinery for U.S. East Coast consumers is halting operations after escalating environmental scrutiny made it impossible for backers to obtain desperately needed financing and Exxon Mobil is launching a massive job cull as the real transition from fossil fuels take root around the world.
The looming era of leaner oil industry will hit countries like Nigeria which depend on crude export for both public revenues and badly needed foreign exchange. In 2021, the contribution of oil to Nigeria’s revenues fell from 70% to a mere 45 per cent.
According to a Bloomberg report, owners of the Limetree Bay refinery in the U.S. Virgin Islands announced plans Monday to shut the 200,000-barrel-a-day facility and dismiss more than 271 workers just weeks after a federal crackdown over a series of pollution incidents.
The demise of Limetree Bay is the most dramatic fallout from the Biden administration’s crusade to wean the world’s biggest economy off fossil fuels since the January cancellation of the Keystone XL pipeline project. It’s also emblematic of the challenges facing an industry struggling with shrinking profitability, excess production capacity and rising competition from mega-refineries in Asia.
“There’s no reason we won’t see further closures in the U.S.,” said Robert Campbell, head of oil products research at Energy Aspects Ltd. Refiners will find it harder and harder to raise money for equipment upgrades and pollution-control gear, he noted.
Limetree Bay has attracted the attention of environmental regulators since its backers that include ArcLight Capital Partners, Freepoint Commodities and EIG Global Energy Partners began efforts to restart the idled refinery in September.
Last month, following a slew of emissions incidents that included contamination of drinking water, the Environmental Protection Agency ordered it to halt operations, reversing a Trump administration approval.
In a similar vein, Exxon Mobil Corp. is preparing to reduce headcount at its U.S. offices by between 5% and 10% annually for the next three to five years by using its performance-evaluation system to suss out low performers, according to people familiar with the matter.
The cuts will target the lowest-rated employees relative to peers, and for that reason will not be characterized aslayoffs, the people said, asking not to be identified because the information isn’t public. While such workers are typically put on a so-called performance improvement plan, many are expected to eventually leave on their own. This year’s evaluation is happening now but affected employees have not yet been notified, the people said.
“Our annual performance assessment process has been occurring over the last several months,” Exxon spokesman Casey Norton said in an email. “Where employees are not contributing to their highest ability, they may need to participate in an improvement plan. This is an annual process which has been in place for many years, and it is meant to improve performance. This process is unrelated to workforce reduction plans.”
The plan is separate from Exxon’s announcement last year that it will cut 14,000 jobs worldwide by 2022, and it would extend reductions well beyond that original time frame. It’s a tumultuous time for Exxon, which is still grappling with the fallout from last month’s annual meeting, when shareholders rebuffed top management and replaced a quarter of the company’s board over climate and financial concerns.
Exxon had 72,000 employees globally at the end of last year, of which 40% worked in the U.S., according to a company filing. Several high-profile traders have also left in the last few weeks.
Exxon’s other cost-cutting initiatives have included suspending bonuses and halting employee-contribution matches to 401k savings plans as the pandemic crushed demand for crude, saddling the company with a record annual loss.
International crude prices have surged 44% this year to almost $75 a barrel, improving Exxon’s financial position markedly. Still, the supermajor has some way to go to pay down debts accumulated during 2020’s market collapse. A smaller and more efficient workforce is key to further improvements.
Exxon achieved $3 billion of annual “structural cost reductions” in 2020 and will continue to make savings through 2023, Chief Executive Officer Darren Woods said at the annual meeting in May.
The transition away from fossil fuels has dimmed the long-term outlook for refiners, prompting companies such as Valero Energy Corp. to expand into biofuels.
