2014 Climate Risk Disclosure Analysis

Industry Group: Oil & Gas

Standard Industrial Classification: Petroleum Refining

Index Membership: FT Global 500, S&P 500, Russell 3000

Financial Year End: Dec 2013

Exxon Mobil Corporation was incorporated in the State of New Jersey in 1882. Divisions and affiliated companies of Exxon Mobil operate or market products in the United States and most other countries of the world. Their principal business is energy, involving exploration for, and production of, crude oil and natural gas, manufacture of petroleum products and transportation and sale of crude oil, natural gas and petroleum products. Exxon Mobil is a major manufacturer and marketer of commodity petrochemicals, including olefins, aromatics, polyethylene and polypropylene plastics and a wide variety of specialty products. Exxon Mobil also has interests in electric power generation facilities. Affiliates of Exxon Mobil conduct extensive research programs in support of these businesses. Exxon Mobil Corporation has several divisions and hundreds of affiliates, many with names that include Exxon Mobil, Exxon, Esso, Mobil or XTO. For convenience and simplicity, in this report the terms Exxon Mobil, Exxon, Esso, Mobil and XTO, as well as terms like Corporation, Company, our, we and its, are sometimes used as abbreviated references to specific affiliates or groups of affiliates. The precise meaning depends on the context in question. Throughout Exxon Mobil's businesses, new and ongoing measures are taken to prevent and minimize the impact of our operations on air, water and ground... 10-K Filing (2014-02-26)

Disclosure Breakdown

Disclosure Rank

78th percentile in Russell 3000

Disclosure Abstract

item 1. Business
These include a significant investment in refining infrastructure and technology to manufacture clean fuels as well as projects to monitor and reduce nitrogen oxide, sulfur oxide, and greenhouse gas emissions and expenditures for asset retirement obligations.
item 1a. Risk Factors
2 Relevance:
Other factors that may affect the demand for oil, gas and petrochemicals, and therefore impact our results, include technological improvements in energy efficiency; seasonal weather patterns, which affect the demand for energy associated with heating and cooling; increased competitiveness of alternative energy sources that have so far generally not been competitive with oil and gas without the benefit of government subsidies or mandates; and changes in technology or consumer preferences that alter fuel choices, such as toward alternative fueled vehicles.
3 Relevance:
Climate change and greenhouse gas restrictions. Due to concern over the risk of climate change, a number of countries have adopted, or are considering the adoption of, regulatory frameworks to reduce greenhouse gas emissions. These include adoption of cap and trade regimes, carbon taxes, restrictive permitting, increased efficiency standards, and incentives or mandates for renewable energy. These requirements could make our products more expensive, lengthen project implementation times, and reduce demand for hydrocarbons, as well as shift hydrocarbon demand toward relatively lower-carbon sources such as natural gas. Current and pending greenhouse gas regulations may also increase our compliance costs, such as for monitoring or sequestering emissions.
Government sponsorship of alternative energy. Many governments are providing tax advantages and other subsidies to support alternative energy sources or are mandating the use of specific fuels or technologies. Governments are also promoting research into new technologies to reduce the cost and increase the scalability of alternative energy sources. We are conducting our own research efforts into alternative energy, such as through sponsorship of the Global Climate and Energy Project at Stanford University and research into liquid products from algae and biomass that can be further converted to transportation fuels.
item 3. Legal Proceedings
26 Relevance:
Legal Proceedings In November 2013, the Texas Commission on Environmental Quality (TCEQ) contacted Exxon Mobil Corporation (the 'Corporation') concerning alleged violations of the Texas Clean Air Act, implementing regulations and the applicable new source review permit in connection with exceedances of volatile organic compound emissions from Tank 22 at the Corporation's King Ranch Gas Plant.
item 14. Principal Accounting Fees and Services
41 Relevance:
Today, coal has the largest fuel share in the power sector, but its share is likely to decline significantly by 2040 as policies are gradually adopted to reduce environmental impacts including those related to local air quality and greenhouse gas emissions. Nuclear power and renewables, led by hydropower and wind, are also expected to grow significantly over the period.
42 Relevance:
Total renewable energy is likely to reach close to 15 percent of total energy by 2040, with biomass, hydro and geothermal contributing a combined share of about 11 percent. Total energy supplied from wind, solar and biofuels is expected to increase close to 450 percent from 2010 to 2040, reaching a combined share of about 4 percent of world energy.
The Corporation anticipates that the world's available oil and gas resource base will grow not only from new discoveries, but also from reserve increases in previously discovered fields. Technology will underpin these increases. The cost to develop and supply these resources will be significant. According to the International Energy Agency, the investment required to meet total oil and gas energy needs worldwide over the period 2012 2035 will be close to $19 trillion (measured in 2011 dollars) or close to $800 billion per year on average.
International accords and underlying regional and national regulations covering greenhouse gas emissions are evolving with uncertain timing and outcome, making it difficult to predict their business impact. Exxon Mobil includes estimates of potential costs related to possible public policies covering energy-related greenhouse gas emissions in its long-term Outlook for Energy, which is used for assessing the business environment and in its investment evaluations.
43 Relevance:
Prices for these commodities are determined by the global marketplace and are influenced by many factors, including global and regional supply/demand balances, inventory levels, industry refinery operations, import/export balances, currency fluctuations, seasonal demand, weather and political climate.
Exxon Mobil's long term outlook is that industry refining margins will remain weak as competition remains intense and, in the near term, new capacity additions outpace the growth in global demand. Additionally, as described in more detail in Item 1A. Risk Factors, proposed carbon policy and other climate-related regulations in many countries, as well as the continued growth in biofuels mandates, could have negative impacts on the refining business.
54 Relevance:
These include a significant investment in refining infrastructure and technology to manufacture clean fuels as well as projects to monitor and reduce nitrogen oxide, sulfur oxide and greenhouse gas emissions and expenditures for asset retirement obligations. Using definitions and guidelines established by the American Petroleum Institute, Exxon Mobil's 2013 worldwide environmental expenditures for all such preventative and remediation steps, including Exxon Mobil's share of equity company expenditures, were about $6.0 billion. The total cost for such activities is expected to remain in this range in 2014 and 2015 (with capital expenditures approximately 45 percent of the total).
Environmental Liabilities The Corporation accrues environmental liabilities when it is probable that obligations have been incurred and the amounts can be reasonably estimated. This policy applies to assets or businesses currently owned or previously disposed. Exxon Mobil has accrued liabilities for probable environmental remediation obligations at various sites, including multiparty sites where the U.S. Environmental Protection Agency has identified Exxon Mobil as one of the potentially responsible parties.

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