Exxon Sells off Local Assets
First came the news in September that Shell and ExxonMobil agreed to sell their joint venture, Aera Energy, with more than 23,000 wells in California, to German asset management group IKAV for an estimated $4 billion. Aera accounts for about a quarter of California’s oil and gas production, largely from pumping in Kern and Ventura counties. Aera had also recently sought to re-start an old Exxon field in Cat Canyon in Santa Barbara County, though that project was pulled after intense opposition. Shell has been shedding its more carbon-intensive assets, and ExxonMobil said they plan to focus on, “low-cost-of-supply oil and natural gas.”
This seems an admission that California heavy oil is not worth pursuing, at least according to the oil majors, and raises questions about who will be left to pay for abandonment and cleanup of oil wells in the future.
Then in November, ExxonMobil announced it was taking a $2 billion loss on a highly leveraged sale of their troubled Santa Barbara offshore oil and gas field that has been idled since the 2015 pipeline spill. The sale comes after an effort to restart production and truck the oil was denied by the county.
ExxonMobil is loaning 97% of the $643 million purchase price to Sable Offshore, a company run by industry veteran James Flores, so he can attempt to restart production in 2024. The only way that could happen is if Sable uses the badly corroded pipeline that caused the previous oil spill. The prior operator, Plains Pipeline, was found criminally negligent of failing to maintain that pipeline, which was judged so unusable that Plains had applied to build a whole new pipeline. Now that effort is on hold.
ExxonMobil’s proposal to loan money to a 3rd party to buy their Santa Barbara operation and try to restart the old, corroded pipeline seems like a desperate bid to get around all these impediments and avoid liability. Sable faces many obstacles to restarting the damaged pipeline, the aging offshore platforms and polluting onshore facilities. The various sales need to be approved by the county, and the pipeline would have to pass rigorous testing and get necessary permits. If Sable is unable to restart production, ownership will revert back to ExxonMobil in 2026.