Exxon Mobil Corp.’s XOM 0.55% remade board of directors is debating whether to continue with several major oil and gas projects as the company reconsiders its investment strategy in a fast-changing energy landscape, according to people familiar with the matter.
Members of the board—which includes three directors successfully nominated by an activist investor in May and two other new members—have expressed concerns about certain projects, including a $30 billion liquefied natural gas development in Mozambique and another multibillion-dollar gas project in Vietnam, the people said.
Oil and gas prices are at multiyear highs, and the world is experiencing a shortage of fossil fuels as economies emerge from the pandemic. But it takes years for such energy megaprojects to produce additional supplies, and more years after that for the investments to pay off.
Exxon board members are weighing the fate of future projects as the company is facing pressure from investors to restrain fossil-fuel investment to limit carbon emissions and return more cash to shareholders. Environmentalists and some government officials are also pressuring the company to produce less oil and gas.
Both projects face potential political obstacles, and some Exxon board members have expressed concerns about whether they would return the billions in upfront investment they would require, some of the people said. The board meetings have been cordial, the people said.
Exxon said it doesn’t discuss internal board deliberations. “Any depiction of the board’s discussions as being less than constructive in tone or substance is wrong,” said Exxon spokesman Casey Norton.
As part of the review, Exxon is analyzing the expected carbon emissions from each project and how they would affect the company’s ability to meet pledges to reduce emissions, people familiar with the matter said. The annual projected emissions from the Mozambique and Vietnam projects were among the highest in Exxon’s planned pipeline of oil and gas projects, according to a pre-pandemic internal analysis by Exxon, which was viewed by The Wall Street Journal.
Mr. Norton said the analysis of projected carbon emissions the Journal viewed was several years old and didn’t include the impact of Exxon’s most recent emission reduction plans and other post-Covid-19 changes.
The discussions over the projects represent a new dynamic for Exxon’s board, said people familiar with the matter.
Engine No. 1, the hedge fund that led a campaign that replaced three Exxon board members earlier this year, argued Exxon was investing in low-return projects and lacked a coherent strategy to chart a transition to lower-carbon fuels amid growing concerns about climate change.
The activist was successful in part because it was able to win support from some of the company’s largest investors, including BlackRock Inc. and Vanguard Group. The asset managers said one of the reasons they supported the Engine candidates was that Exxon’s board lacked energy expertise and independence.