WSJ #2
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School
Georgia Institute Of Technology *
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Course
OPERATIONS
Subject
Geography
Date
Dec 6, 2023
Type
docx
Pages
2
Uploaded by bearla96
Article Summary:
The Wall Street Journal recently reported that Exxon Mobil has abandoned its multi-billion
dollar search for oil in Brazil's deep waters after several disappointing wells left it with nothing
to show after more than five years of work. The company has moved its geologists and
engineers to other countries, such as Guyana, Angola, and Canada, according to people familiar
with the matter.
Exxon's initial plan to find commercially viable amounts of crude in Brazil was to replicate other
drillers' success in Brazil's offshore geological formations, with hopes of establishing it as a key
source of growth. However, the company's attempts failed to produce the expected results,
with executives internally overestimating their chances of drilling successful wells in unproven
areas, according to people familiar with the matter.
The company's failure to find viable oil off Brazil's coasts marks a significant setback in the
country that it had promoted for years as a key source of growth, and also contradicts the
earlier statement by Exxon's CEO Darren Woods that Brazil was one of its significant growth
opportunities. Despite the failure, Exxon has not ruled out future projects in Brazil, saying that it
is still engaged in Brazil and continues to pursue exploration activities in the country.
Several companies have struggled to interpret seismic images used in exploration off Brazil,
which is difficult because of thick salt layers atop oil and natural gas reserves, and
environmental regulations that have limited companies to using substandard equipment, said
analysts. Exxon executives, however, overestimated the chances of drilling successful wells in
unproven areas, further contributing to its failure.
Exxon’s failure to find commercial quantities of oil in Brazil stands in contrast to its peers Shell,
BP and TotalEnergies, which are continuing to drill in the country. Other Western oil companies
have also struggled to make commercial discoveries in recent years, with most having bad
results in exploration. Deepwater wells off Brazil typically cost between an estimated $100m
and $150m, and Exxon’s peers Shell, BP and TotalEnergies are continuing to drill in Brazil.
However not all is lost, Exxon still has an ongoing business engagement in Brazil through a
minority ownership in Bacalhau, a separate offshore venture led by Equinor. The project's initial
phase was authorized in 2021, and it is projected to commence operations in 2025, producing
around 220,000 barrels daily. This demonstrates that Exxon is still considering future business
prospects in Brazil, and the firm has explicitly expressed that it is not dismissing the possibility
of pursuing additional projects in the country.
In conclusion, Exxon's failure to find viable oil off Brazil's coasts is a setback that has led the
company to abandon its multi-billion dollar search for oil in the country. However, the
company's statement that it is still engaged in Brazil and continues to pursue exploration
activities suggests that it has not entirely given up on the country.
Conclusion/Relation to Class Material:
This week we learned about the importance of international strategy and in which a firm sells
its goods or services outside its domestic market. While this article isn’t a one-to-one
comparison of how Exxon mobile has entered a new market to specially market its products to
an international audience, it does incorporate some key topics we studied this week.
One of the key topics that this article illustrates is how Exxon used aspects of the “strategic
alliance” and “acquisition” mode of entry to establish a drilling presence in the country of Brazil.
A strategic alliance is a mode of entry into a new market in which two or more companies
collaborate to achieve a common goal or objective. Strategic alliances can take different forms,
including joint ventures, research and development partnerships, distribution agreements, and
licensing arrangements. Initially Exxon used aspects of the strategic alliance mode of entry by
tasking their geologists to work with the Brazilian government and local drilling contractors to
acquire offshore area of high drilling value. However this strategic didn’t yield the oil reserves
that Exxon was looking for and after several years of continued, the ultimately abandoned this
project.
While Exxon ultimately was not successful, it has utilized the acquisition mode of entry to
salvage their long-term plan of establish a significant long term oil-drilling presence in Brazil.
Acquisition is a mode of entry into a new market in which a company buys another company or
into another company that operates in the target market. In 2021, Exxon spent $8 billion dollars
to acquire a a minority stake in a separate offshore project
in Brazil called Bacalhau. Technically
this projects also has aspects of the strategic alliance mode of entry as Exxon is working with
corporations such as Equinor and Petrogal Brazil on this project. The Bacalhau Drilling project is
looking successful as it is expected to come online in 2025, and pump some 220,000 barrels a
day.
Article Link:
https://www.wsj.com/articles/exxon-quits-drilling-in-brazil-after-failing-to-find-oil-
3d43c8dc
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