Insight: When the Exxon way stops working
By Tom Bergin
London (Reuters) - When Exxon boss Rex Tillerson walked into a meeting with the President of Ghana on the sidelines of the United Nations General Assembly, he thought he was set to strike a deal with an important new oil producing nation.
Instead Tillerson - who had flown into town aboard an executive jet bigger than those used by many heads of state - was rebuffed by an irritated John Atta Mills, who had expected to be wooed rather than given a tough contract to rubber-stamp.
That scene in a New York hotel room in 2009 sums up a corporate attitude which dozens of industry executives, bankers, analysts and government officials say is damaging Exxon's balance sheet. In a world where oil rich nations now call the shots the U.S. giant's imperious approach is increasingly a liability, they say.
Exxon has struggled to access new oil and gas reserves in recent years. In March the company slashed growth plans and by some calculations slipped behind PetroChina as the world's biggest listed producer of oil. Last week it revealed a fall in output and profits that knocked its share price.
A bossy approach worked well as long as oil-rich nations signed purely financial deals, and stuck to them. But when oil prices began to ramp up around a decade ago, a wave of resource nationalism blew through countries like Russia, Venezuela and Libya and changed the game.
These countries set new rules, claiming the right to redraft contracts in the event of changing circumstances - such as huge leaps in the price of crude oil between the date of a contract being signed and the start of production.
Many oil nations also expected help with development, an area where Western companies were initially outmaneuvered by Chinese state oil groups.
That's hit the biggest hardest. Continued...