Leading US oil producers Exxon Mobil and Chevron, in their forthcoming Q4 reports, will declare a $5 billion devaluation of their California assets.
The American state of California is ending its more than a century-long relationship with crude oil as part of its initiative to combat climate change. Exxon Mobil and Chevron, the two largest oil producers in the United States, will declare a $5 billion devaluation of their California assets in their forthcoming Q4 reports. Industry experts point out that both corporations stopped investing in California production long ago and are now looking to sell their old wells in the region.
Exxon Mobil ended its 25-year association with Shell PLC by selling their joint-venture properties last year, bringing its onshore production in the state to a halt. In January this year, Exxon announced that it is quitting offshore production in the state, citing regulatory obstacles and that it will complete the transition by funding the purchase of its offshore sites by a Texas company. This asset devaluation of around $2.5 billion marks the end of 50 years of oil production for the United States’ largest oil producer off the Southern California coast.
Chevron is also estimated to incur around $2.5 billion in charges related to its California properties. Although remaining in the state, the corporation vigorously opposes state restrictions governing its oil production and refining activities. A Chevron representative expressed dissatisfaction, claiming that California’s energy rules make investment difficult, especially for renewable energies.
The state’s transition from fossil fuels stems from an environmental awakening sparked by the 1969 oil well catastrophe in Santa Barbara. This occurrence resulted in the National Environmental Policy Act, which requires federal agencies to consider environmental implications when making permitting decisions. Over the next few decades, California enacted regulations on drilling near homes and businesses and air pollution measures, establishing national standards. The state, recognised for its high-tech industry, has overtaken oil as the largest employer. Governor Gavin Newsom has proposed prohibiting new gasoline-powered vehicle sales by 2035.
To draw attention to this transformation, Newsom’s administration filed a lawsuit against the oil sector in September for allegedly deceiving consumers about climate change for more than five decades. Furthermore, a bill enacted into law makes Chevron and other refiners accountable for alleged customer price gouging.
The oil business in California has been declining for nearly four decades. The amount of crude oil produced, notably from the famed Kern County oilfield, has decreased by one-third since its peak in 1985. This loss is due to the lack of new oil development projects and the fact that the existing fields are incapable of producing the superior-quality petrol that the state requires.
By September, over fifty per cent of the state’s oil drilling permits had not been used. This has resulted in greater unemployment, particularly in Kern County, where the oil industry faces a 7.8% jobless rate. This is more than the statewide average of 4.9%.
Soure: EsgTimes
