Exxon Mobil Corporation (NYSE:XOM) JPMorgan 2019 Energy Conference Call June 13, 2019 8:35 AM ET
Liam Mallon - President, ExxonMobil Upstream Oil and Gas
- Liam Mallon - 埃克森美孚上游石油和天然气公司总裁
Phil Gresh - JPMorgan
- Phil Gresh - 摩根大通
Good morning. I'm Phil Gresh, the North American Integrated Oils and Refining Analyst here at JPMorgan. Next up for today, we have Exxon Mobil. We're thrilled to have Liam Mallon, who's the President of Exxon Mobil Upstream Oil and Gas as of earlier this year. Prior to this role, Liam was the President of Exxon Mobil Development Company since January 2017. And I noted that, Liam, you've been with Heritage, I guess, Mobil since 1990. So almost 30 years at the company and 35 years in the industry.
So we're looking forward to your presentation here today with the spotlight on Guyana for about 35 minutes, I believe. And then we're going to take some questions at the end, and the audience can feel free to ask questions as well. So with that, turn it over to you. Thank you.
早上好。 我是摩根大通的北美综合油和炼油分析师Phil Gresh。 接下来的今天，我们有埃克森美孚。 我们很高兴有Liam Mallon，他是今年早些时候埃克森美孚上游石油和天然气的总裁。 在担任此职位之前，Liam自2017年1月起担任埃克森美孚开发公司总裁。我注意到，Liam，你自1990年以来一直在Heritage，我想，Mobil。在公司工作了近30年，在公司工作了35年。 行业。
所以我们期待你今天在这里的演讲，我相信圭亚那大约35分钟的聚光灯。 然后我们将在最后提出一些问题，观众也可以随意提问。 所以，把它交给你。 谢谢。
Good morning, everyone. Great pleasure to be here and thanks, Phil, for that kind introduction. Special thanks to all of you in the room and for everybody listening in. We appreciate the opportunity. And we know that there is a significant level of interest in Exxon Mobil's upstream strategy. I'm very excited to share my perspectives on our upstream business, which for me, has the richest set of opportunities that I've seen in my 35 year career. That's the five plus that Phil mentioned that I started out with a couple of other companies. But it is the richest set I've seen, and is very, very exciting to be part of it.
It's also an honor to be here. I've had the chance over my 35 year career to live and work all over the world in some of the best countries in the world. And in some of the toughest countries in the world. Never had the chance to work in New York. So I'm not quite sure which bucket to put that in.
So today as Phil said, I’ll spend a little time up front and in the closing with some general upstream remarks. But most of the discussion and -- will be on Guyana. First of all, I know all of you are very interested in Guyana, but also we are very close to bringing the first of those FPSOs to first oil likely early next year. So it's getting very close. And I wanted to give you a sense for the real excitement that's building, both in the country and beyond as we get towards that point.
I've been personally involved on this particular effort for the last five years, very intensely. So, I know it well, and it's a story frankly that for me, I'm thrilled to be given the opportunity to tell you about today.
I'm quite sure there will be interest in other areas such as the Permian. We did do a spotlight on the Permian last year. And in addition, we have a detailed review on the Permian planned actually for Midland, in October. So I will cover the Permian and of course, we can take questions, but it's not the intention of the spotlight for today. So with that, let's begin and let me just say a few words about our standard cautionary statement.
We can't predict the future. It's particularly difficult in our industry given the number of variables that we deal with. And that's really why we don't try. We focus on building a business that's robust to a range of future outcomes. So the future may look materially different than anything discussed today, depending on how these various variables affecting our industry evolve. Additional details are in the material that was this morning posted publicly on the website.
So let me start with just a general comment on our upstream investment strategy. And I would like to just start by thinking through with you how we think about investments. First and foremost, our investments are underpinned by an intent to grow upstream value. They're grounded in a view of long-term demand and supply fundamentals that are shared annually with all of you in our energy outlook.
We know we can create industry leading value through unique, competitive advantages applied to high value opportunities that are resilient across the price cycle. So let me start with the first of these components and that's the fundamentals and why the fundamentals strongly support our strategy.
所以今天菲尔说，我将花一点时间在前面，并在结束时提出一些一般性的上游言论。但大多数讨论和 - 将在圭亚那。首先，我知道你们所有人对圭亚那都非常感兴趣，但我们也非常接近于明年年初将第一批FPSO带到第一批石油。所以它变得非常接近。而且我想让你感受到正在建立的真正的兴奋感，无论是在国内还是在我们这一点上。
It all begins with people. Standards of living, economic activity that supports those increased standards of living. In the next two decades, we expect global population to grow by 30%. Middle class will double from what it is today. There's a billion people in the world today without access to electricity. All of this in our view is expected to result in a 25% increase in demand for energy. In this scenario, oil demand is expected to grow 0.7% per year, driven by commercial transportation and chemical feedstock.
Gas demand is expected to grow by 1.3% per year to meet electricity and industrial demand. This outlook for demand led some to see our industry as relatively low growth. However, and a really fundamental point, this view discuss the impact of depletion. When you factor in depletion rates, the need for new oil grows at close to 8% per year, and new gas at close to 6% per year.
If you look at this chart behind me on the left you can see this interaction of supply, demand and depletion. The dark blue area on the chart shows existing supplies that decline overtime. The top of the both the oil side and the gas side are our demand outlooks. And then the 2 degrees scenario is plotted in the diamond below just so you ground in the chart. So the dark blue is existing supplies declining overtime.
The light blue area on both the oil and the gas shut side shows the additional supplies needed to meet the expected demand. And again, you can see regardless of whether our demand outlook is correct, or if we're in this 2 degree scenario demand outlook, the need for new supply and associated investments in our industry is significant. This suggests actually that perhaps the biggest risk facing our industry today is under investment. The IEA estimates $21 trillion of investments needed through 2040.
For Exxon Mobil, based on our relative production and our relative size, this would suggest we should be investing roughly $33 billion per year. So, based on the fundamentals, we believe there is a compelling case for industry investment, even more so for Exxon Mobil, when taken together with our competitive advantages, and our industry leading portfolio. So let me start by sharing the second component of our strategy, leveraging our competitive advantages.
There are five of these shown on this page, I will cover them pretty quickly, I think you've seen them in some of the forums. And I'll bring some of these to life later as we talk and Guyana, in particular on the deep dive, and you'll see more precisely, how we see these competitive advantages playing out.
Starting with the first one, technology; fundamental competitive advantage that we believe results in not only industry advantaged assets, but also processes, products and applications. On top of that, dramatically improving existing applications and processes and plays a significant role that you'll see clearly in what we're doing in opening up new play areas and new discoveries around the world.
A great example for Guyana is this is the whole subsurface capability, how we integrate our reservoir, geoscience, et cetera, et cetera, through this full wave field inversion technology. That's a processing technique for seismic, that really has been an exceptional way to look at multiple scenarios, real time and really get much more comfortable with what we're doing the pace we can do at and the confidence that we have in what we see in the subsurface.
Scale, scale covers just about everything we do. But for us being able to leverage our scale, whether that's in terms of accelerating learnings, looking at improvements, managing risks, our financial capability, it allows us to stay committed through the cycles that's fundamentally important, particularly when we look at businesses like the Permian, et cetera, and capture structural advantages with our global portfolio based approach, a key, key, key competitive advantage.
The third one is integration, basically, this is all about optimizing and capturing benefits along the whole value chain regardless of where the value chain starts and stops. And maybe later we'll talk about our new upstream reorganization, if we have time in the Q&A, and you'll see where that is integrated, well ahead to sales point, a very different approach than we've had before.
So this whole concept of being integrated, and being able to capture the benefits along the value chain, regardless of where they are, or where they move to overtime is a significant competitive advantage that applies in all of our facilities, in our organization, and throughout our skills and capabilities.
Functional excellence, the fourth competitive advantage, we were organized functionally for many years. So we were -- we have built a very deep functional capability throughout our company. And we certainly don't intent to lose that in any way with the reorganization. But this concept of being able to bring deep expertise across disciplines quickly and effectively to the toughest issues we have around the world, including on large scale complex resource developments is a key competitive advantage and we’ll demonstrate where we see that most acutely in Guyana.
And lastly, our people, all of this is made possible by our people, our people with world class capabilities, we’ve gained those capabilities through a broad set of challenging assignments and global experiences. And today are connected digitally through platforms to share and capture learnings from one place to another.
So they are the five key ones, each of them in their own right are significant. But when taken together, they provide unparalleled strength and have taken generations for us to establish.
So, now that we've talked about our investment case underpinned by the fundamentals, we've talked about the unique competitive advantages that we believe Exxon Mobil have to make sure those investments are successful. Let me talk about the outstanding portfolio of opportunities, to which we're applying that fundamental view, and those five competitive advantages.
This is all aimed at growing value. Fundamentally, our strategy is about growing value, cash, making sure we're on the left side of the supply curve, and making sure everything we do is resilient across a series of prices. Fundamentally, that's what it's about. And in my opinion, as I said at the very start, it's the best set of opportunities I have seen in my 35 year career.
Let me just quickly hit the five what we call growth areas. And there are many more than this to be clear, and I'll talk about some of those here in a minute. But these are -- these five contribute up to 50% of the earnings potential that we shared with you all back in the recent March Investor Day. All of these are outstanding developments.
功能卓越，第四个竞争优势，我们在功能上组织了多年。所以我们 - 我们在整个公司内部建立了非常深厚的功能。我们当然不打算以重组方式以任何方式失去这一点。但是，能够快速有效地将跨学科的深厚专业知识带到世界各地最棘手的问题上，包括大规模的复杂资源开发，这是一个关键的竞争优势，我们将展示我们在圭亚那最敏锐的地方。 。
让我快速点击我们称之为增长领域的五个。还有很多东西要清楚，我会在一分钟内谈谈其中的一些。但这些是 - 这五个因素贡献了我们在最近的3月投资者日期间与您分享的盈利潜力的50％。所有这些都是杰出的发展。
Starting with the Permian, we are on track to deliver on the million barrels a day by 2024. We believe our innovative development plan is key to that. And we continue to see and achieve the milestones that we set out for ourselves.
In Mozambique, area for potential is up to eight trains, 40 million tons. And the first two trains that 15 you see, we said that we would start up by 2025. What I will say about Mozambique is it continues to be in a challenging environment from a security perspective, you all saw that.
But what I will also tell you is that we received our development plan here recently. Frankly, in just over a year, a staggering achievement when you consider the complexity of getting that development plan, technically, commercially, and otherwise approved with quite a complex partnership and through the government.
So really good news, from the perspective of the development plan approved. Some uncertainties with security and uncertainties and frankly with the recent Anadarko announcement in terms of just what does that really mean in terms of common facilities, remember this area is a shared area where two facilities are being constructed jointly. So we remain on track for the investment decision this year that we communicated externally, but we need to work through some of those uncertainties in the coming months.
In PNG, high performing base, you've all seen it continues to exceed expectations 20% to 30%, higher than the original design basis. And you know, we have plans to double the capacity in PNG by the mid-2020s, again, progress per the milestones.
The message I want to leave you with continuously today is we are executing on the commitments that we said we would execute on. This gas agreement led by Total was signed back here in early April to enable the Papua feed to start. We're waiting on the P’nyang piece of that, which is the third train in the Papua development. And we're hoping to engage the new government here on that in the next few weeks.
So again, great progress getting the gas agreement in place. We have some uncertainty to deal with from the political dimension. But at the same time, the P’nyang resource, which underpins the third train continues to get better, as does the other exploration activity that we have progressing in PNG. So I'm very excited about the potential of PNG. And I'm confident that we will deliver on the milestones that we've committed externally.
Brazil, high quality acreage position 2.3 million acres, our plans are to start exploring that with wells next year and then aggressively thereafter. Many of you know in addition to the exploration potential, we are in partnership with Equinor who are leading the development of the Carcará field. That is also on schedule and I will tell you we have been able to leverage a significant amount of the learnings from Guyana bring those into the Carcará development to reduce cycle time, change the design of the FPSO with a very, very cooperative partner and government to do that.
And then finally, on Guyana, we're going to spend a lot of time on that today. So I won't dwell on it on this slide.
I did say that this was 50%. The other 50% of this earnings potential that you see over on the left side, frankly, comes from many things. First and foremost, I always wanted to remind myself and everybody else that we have a significant base business excluding those growth opportunities that generates tremendous value every single day and to extract maximum value and maximum earnings in cash is clearly important that we make that the most efficient we can, the most reliable we can and the safest we can. And I feel good about where we're at on managing the base. There are a whole list of other opportunities that are not on that top five, smaller projects, smaller developments, that equally will contribute.
And then finally, and as discussed extensively, I think with all of you, in the recent Investor Day, we have ramped up our upstream divestment plans and executing on those divestment plans, which so far are exactly on the track we said we would be on are important to delivering that earnings outlook.
So the chart on the left is simply there for reference. As a reminder, it is not a target, it's an outcome of executing to what we said we would do, it was built using a 2017 Brent, $60 flat real basis, and obviously, will vary as prices vary. But as I said before, our plans are robust across the cycles. This is a view of the $60 case, and a view of what it will look like when we execute on those major growth opportunities I mentioned.
So with that, let me start a little bit of a transition into Guyana and give you a deep dive. First thing I'd like to say, the way I characterize Guyana, it really is a result of technology driven exploration, and frankly, great integrated capabilities across multiple disciplines. It's a remarkable and unprecedented success story.
So what I'd like to do is start with a summary of where we're at today, just so you have the full picture, then take you through a little bit of the history, up to today's status and provide some perspective on what we think lies ahead.
So, summary of where we are today to get started, the little chart down on the bottom shows you the resource growth that we've seen in the Stabroek Block. I mean staggering by any accounts. Just look at the numbers, the current resource base is estimated at 5.5 billion barrels. That does not include some recent discoveries that we just made. We've had an 87% exploration success rate, 87%. 13 of the 15 wells were discoveries.
For calibration, the average success rate in a frontier area is 10%. This well is a frontier area. I'll show you why in a minute, arguably, as it grows, it's the longer frontier, the 10% versus 87%, phenomenal. The other thing is it's not just one play; we've unlocked many different plays outside of the original lives of play. So it's very exciting.
And the other very exciting thing is, we're not just exploring, in parallel with exploring, we are developing. What was phenomenal is on the lies of discovery well, one well, we started the development. And that is what you're going to see and is what enabled us to bring this thing on so fast. But let me take a little bit of a step back in history and I'll flip through these next set pretty quickly. Just to give you a feel for how did we get to where we are today, how do you get to an 87% success rate and this type of opportunity so quickly?
Well, the reality is it wasn't quick. It was quick in the Exxon Mobil history, but in the oil and gas timeframe, just for perspective, as you think about these type of plays, it's really all about frankly staying power patience and having the capacity to stay the course over a long time with hypotheses that you believe in. And very few companies can stay the course with that belief and stay at it like we can. And not allowing what others couldn't see to deter us and we'll come on to that story a bit later on.
History has always said the best place to look for oil is where there is oil, many of you have heard this, it is an absolute truism. The best place to look for oil is where there is oil. We knew that the Guyana Suriname Basin had an active production system. Many of you probably don't know but there is heavy oil field producing today in Suriname that started back in the 60s.
So that implied even back then, when people were out there drilling, that implied if you had a heavy oilfield, the way the geological depositional environment works in that part of the world, it's likely that that was sourced from somewhere offshore. So this is back in the 60s. So keep that in your mind, so there's a hypothesis out there even back in the 60s, and there is a heavy oilfield after multiple years, by the way of drilling before that point.
Many companies including ours, look to test this hypothesis between the 60s leading up to the late 90s staggering numbers. Before the lies of discovery, 61 wells were drilled in the basin with no discoveries, 61 wells with no discoveries in total, including onshore. So that we're drilling onshore and offshore, 320 wells were drilled in this basin. Some of these had oil shows. You'd be glad to know I didn't show all 320 on the map to show you the dots that is just a sampling. And that timeframe says 2009, but that dot goes way back into the 70s and the 60s. In fact SO drilled a dry hole in 1978 in Suriname.
So, point being, this is a sobering picture back to my point about 10% risk in high risk frontier plays. People had spent a lot of money. It had taken decades, hundreds of wells were drilled hypothesis was those oil, but nobody had yet found exactly where is it at.
Undeterred, and particularly in the 1990s, we did pretty extensive rework on our regional studies. Bringing together our very best geoscientists people with a unique understanding and this is really important of the tectonic history and the basin genetics in Guyana. And our geoscientists didn't lose faith. This business is all about taking risk, being committed, not losing faith. They persisted with this hypothesis and they said two things. The first you heard me say it, this base, based on the regional study based on everything that was done, based on the shows, based on the heavy oil should have world class source rock potential.
The second thing they said is they believe the type of hydrocarbon traps, our stratigraphic traps. And that based on our understanding of these type of depositional environments worldwide those type of stratigraphic traps should exist in this basin.
The thing to be aware of is strat traps are inherently risky, the hard to identify, and they're leaky. So it was still a very risky proposition, even if you found one did the oil stay in it. Hypothesis was accepted, the block was acquired, we then collected 2D and 3D out into the 2013 period. And I want to show you what we saw from this data.
Okay. So we generated this seismic view, 3D seismic view back in the 2012, 2013, 2014 timeframe. And to simplify it, if you just look at the red circle and then the bright green colors inside it. So inside that red circle, the green colors are potential reservoirs. And the black colors are potential seals. What was really intriguing without getting into a science discussion, but what was really intriguing was that the way these green colors stopped at this dashed white line. Meaning that there was a transition going on, if you see above and below this green just goes on.
This inferred to us that there was oil in those green colors. And it was transitioning down through an oil water contact. So it confirmed our hypothesis that we thought that this was an oil bearing structure and this was a strat trap. I will say this exact same image, exact same image is the image that Shell our partner walked away from Shell left in 2014, thought this was too risky. We then at 100%, we wanted to take on some partners to manage risk, as well. We sent this exact image out to a data room and had over 20 people the names you would expect. Come look at this. Only two companies put a proposal on the table, only two.
So it's back to this point of patience, persistence, unique understanding. So 2 out of 22, saw something that looked like what we thought was there and thought it was worth taking the risk. And of course, shortly thereafter, we welcomed Hess and we welcomed CNOOC into the partnership.
So we had a geological model, we had an idea of how it could work, but we still undrilled it. And we start take the risk. And even at that point, the geologic risk was 22% going in. But we drilled a well, we made a major discovery, and it gave us a taste of what this block could hold. So we had proven this hypothesis after all these years, and found where we thought at least one part of this source rock was located.
We quickly moved after that and acquired this massive seismic survey, the biggest at the time in industry. And we did that really for two reasons. First of all, we wanted to see how much running room there was way beyond just that initial lines of discovery. And secondly, we wanted to make sure that the data we had was properly calibrated, and we could make rapid development decisions, without too much risk. It was a really important operation. I won't go through the details suffice to say, this was the most complex survey ever shot in the industry by anybody. And the data that it's provided us has frankly been key to unlocking the rest of the Guyana story.
So now we had the challenge of a new survey confirming essentially that we could expand and there were more prospects beyond Liza. But we also wanted to get going and make some money and get Liza on stream as fast as we could. So the key challenge as you looked at it was balancing exploration and development at the same time.
How do you manage that risk? How do you manage your execution capacity? How do you manage your partnership? How do you manage your government? How do you manage all those things so that we can quickly move on and establish the full extent of this opportunity, but at the same time get some oil on and create some value.
And again, remember only companies with our scale back to that competitive advantage of scale and technology. Only companies like Exxon Mobil could have done this at this scale and this pace.
So I want to spend just a minute flipping through what's happened between 2016, which was the year after we discovered Liza and now from an exploration side. And then I want to come back it’s a little awkward and talk about what's happened on a development side.
So in 2016, we discovered Liza deep so that was the first step out, you see it there on the chart. In 2017 we discovered Payara, Snook and Turbot. And we had essentially developed a new core area around that Turbot area that you can see south and east of Liza in 2017.
In 2018, we further tested different plays, tested more outlying areas and discovered Pacora, Longtail, Pluma, Ranger and Hammerhead. These are all significant, multi-hundred million type discoveries in their own right. All growing this whole concept, but again, not necessarily the same play, not necessarily the same characteristics of what we saw in Liza. And then this year alone, you've seen the announcements, we discovered Haimara and Tilapia and Yellowtail and truly validated that area that you can see all those dots, as for sure, a fourth or fifth hub beyond the first three that we have talked about before.
So we've had a wonderful run of success in a very short time, opening up opportunities in multiple plays, and giving us huge optionality for future developments. So with this confidence in exploration, success, which basically means we understood the subsurface very deeply, and our data was extremely well calibrated, it provided us the confidence to start pursuing developments in parallel.
So let me start by talking about the most mature of those developments, which is Liza Phase 1. A simple message on this slide, if you just glance at the slide, we will bring on Liza Phase 1 in less than five years from discovery to first oil. It's a long time in our industry, since that's been done, I won't say it's never been done. But it's a long, long time, since anything like that has been achieved.
So it is a staggering achievement, you can see that the industry average, and this is today is nine years, nine years between discovery and bringing it on stream for deepwater, FPSO, floating production and storage type development. So we are half the industry average. And I'm very confident we will achieve that.
If I take it from where do we made the investment decision, it's less than three years, we have never done that. And I'll talk about why here in a minute. But this is from a value creation perspective, decreasing the cycle time between when you discover something, and you bring it on, is ultimately the key to value creation. And this is a textbook example of that. So what do we believe are the things that have enabled this rapid pace of development.
Very quickly, first and foremost, the relationships with our partners, and the relationship with the regulator and the government is key. Everybody has to be aligned to the same goal, and you have to do things that enable this pace in a way that satisfies standards of good oilfield practice around the world that is a wonderful partnership. It's a partnership with the country of Guyana and it's enabled us to move at a very, very rapid pace.
The second thing is our global development capability. And that covers the whole gambit from drilling through our contracting strategy, through our supply chain integration, I will tell you, because many of my peers have asked me about this, this contracting strategy, the way that we sourced the boat, the way that we pre-invested in the hole, the way that we moved rapidly to industry standard specs, the industry has talked about using standard specs for years, find it very hard to do it, we did it on this boat makes a big, big difference.
So with that as a backdrop, let me just brief you update on the other two. So this one I've mentioned, it's almost ready to go, I'll show you a picture in closing, just to give you the current state. The second boat Liza Phase 2. That was FID, May of this year, it's a 220 kbd boat. So it's much bigger than the first one you see there, which is the 120. Obviously, we're leveraging all the learnings, we're using the exact same set of contractors.
So this is the ultimate, once you've done it once you replicate, you just scale up and you replicate. And the cost advantages, the time advantages, the efficiency advantages are absolutely enormous. And that's what we're seeing. We're on schedule to start this up in middle of 2022.
And then the third what I would call project in that same general play, that's probably not precisely accurate, but in that same general play area, Payara, is what we're calling it, it'll be the same size as Liza Phase 2, you're seeing a range there, early engineering is progressing and our plans are to get that development plan into the government here in the coming months with a view to make a final investment decision on that boat by the end of this year, and start it up in 2023. And even more so the one to two, two to three is basically exactly the same. So we don't have to redo feed and redo many of the things that take time. So very excited.
And just before I shift, the chart on the left simply reminds us of what we showed at the Investor Day in 2018, which was the red diamonds, and where we are today. And simply that shows the goal to get to 750 by 2025, the three boats that I've talked about the lead up to the diamond, and then I'm going to quickly talk about future developments here, on the next slide.
So let me shift to those future developments. Basically, what we're seeing as we've moved from that Liza area, and you saw all the different successes we've had to the Southeast, to the west, we continue to encounter significant hydrocarbons, significant resource. You saw the numbers, and we didn't even announce the last three. So we're not getting any surprises in terms of finding significant resource as we expand out beyond the Liza area.
然后第三个我称之为同一个普通游戏的项目，可能并不准确，但在同一个普通游戏区域，Payara，就是我们所说的，它与Liza Phase 2的大小相同你在那里看到了一个范围，早期工程正在进行中，我们的计划是在未来几个月将这个发展计划纳入政府，以便在今年年底前对该船做出最终投资决定，并且在2023年启动它。甚至更多，一到二，二到三基本完全相同。因此，我们不必重做Feed并重做许多需要时间的事情。非常兴奋。
What is varying, is some parameters that are normal. Things like pressures, things like precise gas oil ratios, things like the hydrocarbon characteristics, and all of those things require us to do very detailed concept selection planning to make sure that those next two projects are fully optimized for what we expect them to deliver. That work is ongoing and we have not yet defined exactly on which fields those boats will be on, but it will likely be on a combination of the areas that I've highlighted on the chart, i.e. one almost certainly in this Turbot, Longtail, Yellowtail area, and then one in either the Hammerhead area or an area that we are currently testing.
But we remain confident in our goal to get to 750 and we remain confident to FID those next two major developments in the 2021, 2022 time frame and start them up by 2025, as we’ve discussed before. Over on the right, the simple message is, despite all this, it's still early in the exploration phase. It's still early. We have more than 30 leads that we've identified that we have yet to drill. And we will have four rigs operating with the fourth coming in by the end of this year.
Two roughly working on exploration, the other two working on development, recognizing that there are time clocks and other factors that need to be considered. So very exciting, very early, multiple projects, all on track, all delivering to our expectations.
Wrapping it up back on technology and people, I won't go through in the spirit of time, all of the things that are on this slide. Suffice to say that in addition to that fundamental advantage on the subsurface and how we integrate that. Some of the things we're doing digitally are phenomenal. On one of the rigs, you can see it there the noble Bob Douglas, again, when you're in this business. We went slip to slip, which means basically drilling a section of the hole, completely automated, using digital technology here late last year.
First in the industry to do it has the potential to save lots of time, but very importantly, to take people out of harms’ way from that rig floor, so hugely important step. But we are advancing digital in all aspects of this development, all aspects, all of these boats are equipped with fiber optic connectivity. So that all be connected through a digital hub. There'll be digital twins, both in Georgetown and Houston. Our people will be able to work completely differently than they worked before. And we expect to see a significant prize from reliability improvement as a result of all of that.
I won't go through the other ones on there, our high performance computing we've talked about in these audiences before. But it really is what enables us to rapidly create potential scenarios for development and be confident that we can rapidly assimilate new data and new scenarios and do sort of scenario based approaches to our development decisions, and quickly understand what could be no regrets. And we have not found that point yet. But that's the technology that enables that.
The rest of this I think is pretty clear. It isn't just technology, technology in and of itself is not the game. The game is how do you apply that technology and how do you integrate that technology with all the capabilities you've got. And I think this example is the best example that we have today of where we are doing that to an extraordinary degree.
Okay, so that is Guyana. Very exciting, real time. And, as it says here amongst the most valuable plays in the industry, but what I'm doing here is I'm now bringing you back to the upstream. I started with the upstream I’ll bring you back to the upstream.
So we started with talking about the investment case, driven by the fundamentals. We then talked about the five unique competitive advantages that Exxon Mobil are bringing to the best set of opportunities we've had since the Exxon Mobil merger to create industry leading value, industry leading returns, industry leading cash flow.
This chart attempts to graphically show you that. And the simple message on this is, if you think about, a lot of people want to hear us talk about what is your breakeven Brent cost to deliver a 10% return. In essence, that's what I'm showing you here. So if you look at Guyana, that's about $40 a barrel and that's for the whole of Guyana. The individual projects within that are better, Liza-1 was lower than that, et cetera, et cetera. So that's when you take the whole development into account.
So basically, it says $40 is that cost of supply 10 that we all have a keen interest in talking about. The other deepwater opportunities, you can see Brazil on the chart, this is a WoodMac chart over on the left. It's of WoodMac’s FID tracker, which are those projects that we’ll FID between now, essentially now and 2023. And it gives you a sense for where the breakevens are. You really should just look at the left axis, the X-axis. The bubble size is an indication of value.
So it's a little confusing, but look at the X-axis. And it'll give you a sense, just look at the size of the bubble as value and what the breakeven 10 is for those things. You can see our Brazil, Carcará also has a very low breakeven 10 right at $40 a barrel. And remember, that is only Carcará that does not include any success from any of our exploration activity, which is all ahead of us. That's why the bubble is a little smaller than the Guyana bubble.
And then just for completeness, I wanted to put on here the remainder of those large growth opportunities that you saw when we talk about at the start to calibrate with you my point that they're extremely resilient at low prices. And they're also resilient, by the way as price stretches. But the Permian, again, on average, $35. Brazil, I've talked about $40. And then the two LNG projects, we tend to put on MBTU basis, but $5 a barrel, they're roughly the same.
So all of these new opportunities, firstly, deliver extraordinary value. Secondly, are very resilient, have a low cost of supply compete on the left side of our portfolio of opportunities, on just about all the metrics that we care, we care to look at.
The one thing I would say before we close is, we have been very deliberate about these choices. Very, very deliberate, we pick them up at a great time, we took advantage of the low end of the cycle, Darren likes to use the words we leaned in when others were leaning out. And really that lean in and commit to the cycle is what enabled us to pick up these world class opportunities that have these type of returns. And we are very well positioned to execute on this.
Fundamentally, we've got them now it's about executing them. And we have the greatest execution company in the world. And I feel very good, recognizing the uncertainties that we talked about earlier to execute on these plans.
So, in summary the key messages from the upstream that I would like to leave you all with. Firstly, long-term fundamentals underpin our growth plans, I think that's pretty clear. Secondly, our unique competitive advantages enable long-term value creation. Thirdly, upstream earnings growth potential is supported not only by those five outstanding new developments, but also by the existing base. And lastly, as we just talked about our portfolio was attractive throughout the commodity price cycles.
It's pleasure to be here with you all today, I will tell you in the picture you can see, that's the Liza Destiny. So that's that first boat I talked about. That was taken a few weeks ago. All that scaffolding and stuff that you can see is now off and in fact, I leave for Singapore this Thursday -- this Saturday, the first lady of Guyana and myself amongst others will launch and cresset [ph] the Liza Destiny with the normal bottle, it should be a very, very special event. And shortly thereafter, the boat will set sail it takes about 60 days to get to Guyana.
And we'll have some work to do when it gets there in the field, it's got to pick up a lot of flow lines, do some infield commissioning, that kind of stuff. And we are on track to start up in early 2020. If everything goes perfectly weather blah, blah, blah, there's a chance that it could be even a little earlier, but we are on track for early 2020.
So again, let me close by saying a very special thanks to JPMorgan, and all of your teams for this extraordinary event. For everyone that's in the room, for the many that are listening, we really appreciate this opportunity and I'd be happy to spend the next however long flow once on the Q&A. Thank you.
很高兴今天能和你们在一起，我会在你能看到的图片中告诉你，这就是Liza Destiny。这就是我谈到的第一艘船。几个星期前就采取了这种做法。所有那些脚手架和你能看到的东西现在已经关闭了，事实上，我本周四前往新加坡 - 本周六，圭亚那的第一夫人和我自己将在正常的瓶子里发射和摧毁Liza Destiny ，这应该是一个非常非常特殊的事件。不久之后，这艘船将起航大约需要60天才能抵达圭亚那。
Thank you very much, Liam. We really appreciate this overview and very interesting, deep dive on Guyana. We will take a few questions from the audience, but I'll just kick it off with a couple myself first, if it's possible to click back two slides.
非常感谢，利亚姆。 我们非常感谢圭亚那的这一概述和非常有趣的深度探索。 我们将从观众那里得到一些问题，但如果可以点击两张幻灯片，我会先与一对夫妇开始。
I think it is.
Yes, so this slide. Just looking at the size of the bubble there for Guyana, and even Brazil, as you've highlighted, really it hasn't been that long that you've been discovering resources in Guyana. So, how should we think about where we are in this life cycle of discoveries, we've talked about future phases four, and five, et cetera. But how do you think about the -- in three years from now what this resource base could look like, what would be the size of that bubble, three to five years from now? And ultimately, like, where do you want to get from a production plateau standpoint? Is it too early to even be talking about that or just generally how are you thinking about it today?
是的，所以这张幻灯片。 只要看看圭亚那，甚至巴西的泡沫大小，正如你所强调的那样，你在圭亚那发现资源的时间并不长。 那么，我们应该如何思考我们在这个发现生命周期中的位置，我们已经讨论了未来的第四阶段和第五阶段等等。 但是你如何看待 - 从现在开始的三年内这个资源基础可能是什么样的，那个泡沫的大小，从现在起三到五年会是什么？ 最终，就像，你想从生产高原的立场获得什么？ 现在谈论这件事还为时尚早，或者一般来说你今天怎么想呢？
Well, I think it is a little early, Phil, to talk about specifically, what those numbers would be, I mean, I think the thing to remember is, it's early. And a good comparison -- I'm not sure if I'm talking at the two mics here at the same time. But a good comparison might be and if you go back, and you think about Angola, and the success we had in Angola, Block 15, which is still producing healthily today was about 2.5 billion barrels. So we're already at 5.5 billion here, without those new discoveries.
So, the potential is even greater and I think, you know, there are several plays that we have not tested yet. We have 30 leads ahead of us. And you can envisage a much brighter even story, then we have today. But honestly, right now, we're focused on getting revenue going, which is very important for the country, delivering on what we’ve said we’d do for the partnership, and continuing to optimize the exploration periods that we've got on the contracts. But, thus far early, encouraging, and the potential remains, I would say greater than what we've even seen thus far.
嗯，我认为现在有点早，菲尔，具体谈谈，这些数字是什么，我的意思是，我认为要记住的是，它是早期的。和一个很好的比较 - 我不确定我是否同时在这两个麦克风说话。但是一个很好的比较可能是，如果你回去，你想到安哥拉，以及我们在安哥拉取得的成功，今天仍然健康生产的15区块约为25亿桶。所以我们这里已经达到了55亿，没有那些新的发现。
Sure. Okay. The second question, just going back, you talked about the big five developments, and you highlighted some potential risk areas for a few of them. Obviously, there has been some changing dynamics in a couple areas in Mozambique, PNG, even in Guyana, maybe you could just elaborate a bit more on what you're seeing on that front? And perhaps if you had to -- if possible, maybe rank order where you see the greater risks or the lesser risks of things have been happening recently.
当然。 好的。 第二个问题，回过头来，你谈到了五大发展，你强调了其中一些潜在的风险领域。 显然，莫桑比克，巴布亚新几内亚的几个地区，即使在圭亚那也有一些变化的动态，也许你可以详细说明你在这方面看到的内容？ 也许如果你必须 - 如果可能的话，也许排名顺序，你看到更大的风险或最近发生的事情的风险较小。
I think the biggest risk is when we're dealing with a personal safety risk. The security risk in Mozambique that’s obviously something that regardless of the opportunity. We won't put our people into an environment that we can't keep them safe.
So that the evolution of what appears to be a very difficult security problem in a very, very localized area, but it happens to be close to our facility that you've all seen publicized. I would say, Phil, I mean, it's not to say it's not manageable, it is manageable. That's our job, and we're working very closely with the government to manage that. But that’s a risk that there's not a workaround unless we can address it.
The other risks, I would say, a risk we've dealt with in many countries around the world. Over many, many years, none of them are particularly unique. I think the key thing to think about is developing the right partnerships with the country. So, for Guyana, I really don't think about it as necessarily what's the risk with party A or party B, we really do approach it as a partnership with Guyana. And I think if you have that mindset, first of all, your stakeholders are broad enough that it's not any one particular individual or any one particular party. But fundamentally, what you're doing is for the benefit of the country.
So I think thinking about it as a partnership with the country is really the key, and lining up that value proposition. And once you do that, then we find that dealing with the normal things that come up, the normal challenges about different things, whether it's contract awards, or people's opinions, or the procurement processes, or development plan, approval pace, or all those things that we manage, are much easier to manage. So that's generally how I would answer it.
But fundamentally, we believe we can execute on the plans, we communicate it. And there will be bumps along the way. And we will deal with those bumps. And the only one of significance in terms of we have to resolve it simply because there's no other option is the security issue in Mozambique.
Sure, that makes sense. Another area I wanted to touch on, I guess, from a risk perspective, would be around capital spending. Obviously, the upstream business, Exxon Mobil raised the capital spending budget at last year's Analysts Day for new activity. And there are some other areas that you've highlighted even recently, Vaca Muerta some additional new activity that you're progressing. We had dinner last night with, Andy. And we're also talking a bit about contract availability, things like that on especially in the LNG side. So I'm curious if you take all of these pieces of activity based acceleration or inflation risk, and then maybe labor inflation and other factors that could drive a higher spending budget. How comfortable are you from an upstream side around the budget?
当然，这是有道理的。 我想从风险的角度来看，我想谈的另一个领域是资本支出。 显而易见，上游业务埃克森美孚在去年的分析师日筹集了新的活动资本支出预算。 还有一些其他领域，即使是最近你已经突出显示，Vaca Muerta还有一些你正在进行的新活动。 我们昨晚和安迪共进晚餐。 我们还谈到合同可用性，特别是LNG方面的情况。 因此，我很好奇你是否采取了所有这些基于加速或通胀风险的活动，然后是劳动通胀和其他可能推动更高支出预算的因素。 您对预算周围的上游有多舒适？
Well, again, I think it's a milestone driven process. First and foremost, Phil, and sometimes, things change, and we have to adjust those milestones. And there might be some near-term variability. But over the long-term, we're very confident in those budgets X things like new acquisitions and stuff like that. But, I think our whole approach to cast capital discipline, it's not really target driven, as we've talked about. It's really driven by the best opportunities, first and foremost. And are they accretive to our portfolio. And do they increase the value of the portfolio.
And then, once we've answered that question, it's are they competitive against what others are doing against our alternatives. And is that the best use of our capital. So first and foremost for our company, the first use of our capital is investing in accretive opportunities. And we will continue to look at all the accretive opportunities, not by geography, not by play type, but by value.
Once we've done that, as you know, we'll focus on the dividend, and then we’ll focus on the balance sheet. And then lastly, if there's money left, we'll focus on share redistributions, but it really is a discussion around not so much. Obviously, we are trying to manage the long-term value creation with the near-term necessities of the business and that causes us to set CapEx targets and to try and manage those CapEx targets.
But the other piece of it that Andy mentioned is very valid is to many degrees it set by capacity as well. How much work can you do. Whether it's the industry contractors, and what we've seen is a pretty dramatic consolidation of those over the last several years, particularly in the LNG business.
The numbers I think went from 11 or 12, major LNG contractors 10 years ago to six today. And they have lots of work, right? Lots of work in the Gulf lots of work in other parts of the world. So I would tell you as much as anything what limits our ability to do things is actually the capacity that's available in the contracting industry and internally. But we don't let a number limit the opportunity space that's available to us if it's the right thing to do.
Okay. I'm going to ask one more, and then I'll see if the audience has any questions, but I did want to address a comment you made about the reorganization of the business that happened not too long ago and give you an opportunity to maybe elaborate on the objective of that and what you're seeing in terms of early days of the returns of that reorganization?
好的。 我将再问一次，然后我会看看观众是否有任何问题，但我确实想要解决你对不久前发生的业务重组的评论，并给你机会 或许详细阐述了这个目标以及你在重组回归的早期阶段看到了什么？
Good question, Phil. Thank you. On the reorganization, many of you know that we reorganized here effective 1st of April. And this was the first major reorganization since the Exxon Mobil merger. We were designed along in the upstream a very functional structure. We had an exploration company, a development company, a production company. And I would say in simple terms, ownership and accountability for the opportunity moved through the life cycle.
So there was a lot of internal handoffs, there was very deep functional capability, but a lot of handoffs, which in today's world of speed and data and the dynamic nature of the portfolio perhaps wasn't given us exactly the speed and efficiency and agility right across the value chain we wanted. But, it brought great strengths and it was very good at the time for what we wanted it to do.
So we fundamentally reorganized around three things. First and foremost, to help us execute this great portfolio. Secondly, around this whole speed, agility, simplicity. And then thirdly, to really bring a deep focus to three things. One, this whole concept of being the best dynamic portfolio manager and for all the reasons we talked about whether it's bringing new things in, whether it's the divestment story, whether it's managing the base.
Today, we're in a world of abundance that appears and we are seeing more opportunity than we've seen in a long time. So we have to be extremely focused and extremely good. And it has to be a core competence around dynamic portfolio management. So that whole upstream business development company, that's their job working with the rest of the business. The oil and gas company that I run was organized into five global value chains, deepwater, unconventional, conventional, heavy oil and LNG.
And back to what I said, it really leveraging scale and integration to a huge degree. Again, we were not integrated and I think being fully integrated end-to-end those two things. First of all, it changes the capability and competency of your people. Because business acumen becomes a very, very important component of how they think and what they do, in addition to their normal technical and commercial skills.
But secondly, it allows you to see opportunities, the whole way through that value chain. And to the extent you were leaving money on the table because you weren't participating. It gives you a much better view of that and a choice as to whether you want to or not. So that's really important. So -- and the profit and loss of the entire upstream is in that business. And then, the final piece and back to competitive advantages is, we want to maintain functional excellence.
Our previous organization was structured around functional excellence. This puts the responsibility and accountability for functional excellence in the third company, which is called our integrated solutions company. So the role of the integrated solutions company is to ensure that we have the right capabilities, that they're deployed to the right problems, and that our processes and systems are constantly being updated to be the best in the industry. That's what that company does. And all those three come together to create more value than they could individually.
但其次，它允许您在整个价值链中看到机会。而且你在桌子上留下钱是因为你没有参加。它为您提供了更好的视图，并可以选择是否要。所以这非常重要。所以 - 整个上游的盈利和亏损就在那个行业。然后，最后一块并回到竞争优势，我们希望保持功能卓越。
So it's two months in, two and half. What I'm seeing is very exciting; all of the elements of why we did it are very evident. There's lots going on, on the portfolio side, the ability for me to see my LNG business cradle the grave, not just the upstream piece, the upstream, the shipping, the trading, the marketing, the financing, and have someone accountable for all of that is very different than we had before. So I'm pretty excited about it.
所以这是两个月，两个半月。 我所看到的是非常令人兴奋的; 我们为什么这么做的所有要素都非常明显。 在投资组合方面，有很多事情可以让我看到我的液化天然气业务摇篮坟墓，而不仅仅是上游部分，上游，航运，交易，营销，融资，还有人对所有人负责 这与我们以前非常不同。 所以我很兴奋。
Great. So we have maybe five minutes if we have a question or two, go ahead.
You mentioned that some uncertainty when you talked about Papua New Guinea, can you elaborate it?
The question was about uncertainty around Papua New Guinea.
The only uncertainty and nothing to suggest there's any issue, is we have the gas agreement approved, here on Papua and we’re moving forward, we're in the process of trying to get the P’nyang piece. So that's important to landing on the final concept as to the number of trains. And just with the government change, the pace at which we've been able to get the P’nyang agreement signed has been impacted by that change. That's all.
So we have planned to go into feed, here shortly, and it may take us a little longer to get that agreement. And it's really just a question of the new players. And, getting them in place and getting them up to speed.
唯一的不确定性并没有任何迹象表明存在任何问题，我们已经批准了天然气协议，在巴布亚，我们正在向前推进，我们正在努力获得P'nyang的一块。 因此，关于列车数量的最终概念是非常重要的。 而且随着政府的变化，我们能够获得签署P'nyang协议的速度受到了这一变化的影响。 就这样。
所以我们很快就计划进入饲料阶段，我们可能需要更长时间才能达成协议。 这真的只是新玩家的问题。 而且，让他们到位并让他们加快速度。
We have no other questions from the audience. So I'll ask one more, it's going to be a shorter term one, but Neil told me it was okay. So in the interest of increased disclosure around shorter term dynamics is a public opportunity to talk about how things are looking in trends in the second quarter. Is there anything you'd be able to share with us about the upstream side of the business, based on what you're seeing right now?
我们没有其他观众提问。 所以我会问一个，这将是一个短期的，但尼尔告诉我它没关系。 因此，为了增加对短期动态的披露，公众有机会讨论第二季度的趋势。 根据您现在所看到的情况，您是否可以与我们分享有关业务上游方面的信息？
Yes, I think a few things I would say, I mean, first and foremost, I would Phil, take us back to the fundamentals, we plan on a long-term basis, you saw those charts that we talked about today, our plans over the long-term are very healthy, they generate strong returns, and they generate strong returns over those price cycles. So I think it's really important, when we talk quarter-to-quarter that we put it in the context of it is a long-term business. And the growth plans that we've talked about are multi-year growth plans. That said, we also recognize that, we are in a cyclical commodity business. And that requires us to have a long-term view just by its definition.
But as we said before, and we've seen these cycles, when you're in a cyclical commodity business, with that long-term view you still need to be cognizant of the business cycle in the short-term. So that's how I would characterize it. So as an example of that, if we look at market conditions and what we're seeing in the first half of the year, there are several factors that could impact the second quarter. These are not I would say things that happen routinely occur, but I think it's worth mentioning them in this call.
During our first quarter earnings call, we discussed that we expected lower gas demand in Europe. That's normal in the second quarter, as the weather gets warmer, this is not new and we've seen that every year for the last four years. And we've seen a consistent pattern of around 200 kbd type impact. I don't know what the precise number will be this year. But as you would expect with seasonal demand, it impacts prices.
We also see seasonal demand in the U.S. to different degrees, also impacting gas prices with lower relative demand in the second quarter relative to the first quarter. So as a consequence of that, Europe and U.S. prices are creating a downward pressure on our gas realizations. And the exact magnitude of that it's early in the quarter to tell, but I think you would see that.
Additionally, I think when people think about our LNG business, most of it being liquid linked. And you would expect to see pretty much that moving in line with liquids, but most of our LNG contracts are lagging contracts. They’re pricing out three, four or five months ago. So it's just a timing effect, but you might not see the full effect of what you saw happening on the Brent price directly on the LNG sales. But that's something that quarter-to-quarter normalizes, but in a particular quarter you're seeing prices that were agreed back probably in the fourth quarter of 2018.
And then the last thing to mention and again it's normal, I would say, but we are in maintenance season. So you should expect without getting in into specific assets. You should expect that a number of our major assets have been going under planned maintenance during the second quarter and into the third quarter and that will have an impact on volumes.
Great. And just to clarify, these are all upstream comments.
Yes, these are all upstream comments. Thank you.
Okay. I think we'll stop it there if there are no other questions. So thank you again so much for taking the time today. Great presentation on deep dive in Guyana and we really appreciate you being here.
好的。 如果没有其他问题，我想我们会停在那里。 非常感谢你今天抽出时间。 关于圭亚那深潜的精彩演讲，我们非常感谢你来到这里。
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