Ebola outbreak in West Africa is casting its shadows economically, Exxon Mobil’s (XOM) activities in the region, including plans to drill for oil there is in doubt now.
Talking at the industry conference in Houston, Exxon CEO Rex Tillerson said that the company is having second thoughts about continuing its drilling activities in West Africa due to concerns.
The company spokesperson has however confirmed the news in an e- mail. “Safety, health and logistical issues related to Ebola will delay the planned late 2014 start of ExxonMobil’s first exploration well offshore Liberia.”
Exxon Mobil’s operation in Nigeria has not been affected and the company does not have operations in the area which is reeling under an Ebola Pandemic. Company has also restricted ‘non-essential business travel’ by employees to areas of the world which has been affected by the epidemic.
Meanwhile shares of Exxon are down by 7 cents or 0.08% to $92.80. 20% of Exxon’s crude oil developed proved reserves and 3% of natural gas lie in Africa. 20% of Exxon undeveloped proved oil reserves are in Africa.
The industry’s overcapacity and a sluggish demand have put Exxon under considerable pressure in the past few quarters. However there are flashes of brilliance e.g. refineries in the Midwest U.S. have been profiting from lower crude oil prices due to the fast-growing supply from unconventional players in the U.S. and lack of midstream infrastructure. However a steep decline in international crack spreads over the past few quarters has nullified this advantage for Exxon. The first half of the year saw Exxon’s international downstream revenues declining by more than 44% due to slimmer margins.
Not many US companies have operations in the sub Saharan Africa, a portion of the continent which is reeling under the Ebola epidemic. Out of 30 countries in the Sub Saharan Region only 5 has been affected by the Ebola Epidemic. Most of the companies have operations based in South Africa which is not affected by the latest epidemic.
Seven companies in the Standard & Poor’s 500 have revealed an undefined commercial presence in the Sub Saharan region.