Private Empire

1. ExxonMobil's Culture: Engineering, Discipline, and Control

From the beginning the Standard Oil Company has studied thoroughly everything connected with the oil business. It has known, not guessed at, conditions. It has had a keen authoritative sight. It has applied itself to its tasks with indefatigable zeal.

Rooted in Standard Oil. ExxonMobil's culture is a direct descendant of John D. Rockefeller's Standard Oil, emphasizing discipline, rigor, technological research, and unsentimental competition. This legacy manifests in a preference for engineers, scientists, and accountants, and a strong emphasis on procedure and orthodoxy.

Operations Integrity Management System (O.I.M.S.). The O.I.M.S. is a universal management regime that emphasizes safety and risk management. It involves "Framework Expectations" about eleven "Elements," including risk assessment, hazard identification, and the elimination of "at-risk behaviors." This system has created a culture of command management emanating from ExxonMobil's headquarters.

The Exxon Way. The "Exxon way" is characterized by a top-down management style, a cult-like emphasis on safety, and a ranking system that promotes competition and conformity. This culture, while contributing to the corporation's financial success, has also been perceived as arrogant, ruthless, and insular by outsiders.

2. Lee Raymond's Leadership: Ruthless Efficiency and Financial Prowess

We don’t run this company on emotions. We run it on science and principles.

Driven by numbers. Lee Raymond, CEO from 1993-2005, instilled a culture of command management, emphasizing performance metrics and universal safety rules. He was known for his bluntness, demanding management style, and unwavering belief in free-market capitalism.

Financial discipline. Raymond focused on "return on capital employed" (R.O.C.E.) as a key performance indicator, driving cost-cutting and efficiency improvements. This focus led to exceptional financial performance, with Exxon reporting more annual profit per employee than any other major American corporation in 1987.

Uncompromising stance. Raymond was known for his confrontational style, particularly with Wall Street analysts and environmentalists. He resisted government intervention and regulation, and defended ExxonMobil's actions with unwavering conviction.

3. The Strategic Challenge: Replacing Oil Reserves in a Nationalistic World

We see governments come and go.

Resource nationalism. A major challenge for ExxonMobil was the rise of "resource nationalism," where governments sought to control their own oil and gas reserves, limiting access for Western corporations. This trend made it difficult for ExxonMobil to replace the vast quantities of oil it pumped each year.

Equity oil. The company's business model depended on owning oil reserves ("equity oil"), which allowed it to display "proved" or "booked" oil to shareholders. However, much of the world's oil was located in countries with nationalistic governments, limiting ExxonMobil's access.

The ExxonMobil strategy. To overcome these challenges, ExxonMobil emphasized its superior project execution, budget management, and cutting-edge technology. It sought to persuade oil-owning governments that its efficiencies could deliver a greater cash windfall over the long term.

4. The ExxonMobil-Mobil Merger: A Quest for Scale and Global Reach

If we haven’t gotten to ‘economy of scale,’ we’re never going to find it.

Responding to a changing landscape. The merger with Mobil in 1999 was driven by the need to compete with state-owned oil companies and improve the geographical diversity of ExxonMobil's oil holdings. The merger created the world's largest privately owned oil company.

Complementary assets. Mobil's far-flung oil reserves in West Africa, Venezuela, Kazakhstan, and Abu Dhabi complemented ExxonMobil's more conservative profile, heavily weighted in North America and Europe. Mobil also held important natural gas positions in Qatar and Indonesia.

A strategic leap. The merger allowed ExxonMobil to scale up and compete with state-owned oil giants, while also providing an opportunity to drive further management reforms and cost reductions. The merger was seen as the "last brick in the wall of remaking Exxon."

5. Climate Change: From Denial to Calculated Engagement

Leaping to radically cut this tiny sliver of the greenhouse pie on the premise that it will affect climate defies common sense and lacks foundation in our current understanding of the climate system.

Initial skepticism. Under Lee Raymond, ExxonMobil initially rejected the scientific consensus on man-made climate change. Raymond questioned the evidence and argued against binding agreements to reduce greenhouse gas emissions.

Hiring scientists. Despite public skepticism, ExxonMobil invested in climate science research, hiring astrophysicists and chemical engineers to study the issue. This research was used to inform the corporation's internal assessments and to participate in the United Nations' Intergovernmental Panel on Climate Change (I.P.C.C.).

A shift in tone. As public concern about climate change grew, ExxonMobil gradually shifted its public stance. While still questioning the certainty of the science, the corporation began to acknowledge the risks and to support research into alternative energy technologies.

6. The Aceh Dilemma: Balancing Profit with Human Rights

We must behave consistently with the will of society.

A legacy of conflict. The acquisition of Mobil brought with it a complex and violent conflict in Aceh, Indonesia, where ExxonMobil operated a lucrative natural gas field. The corporation found itself caught between the Indonesian military and separatist guerrillas.

Extortion and violence. ExxonMobil faced extortion demands from rebel groups and was implicated in human rights abuses committed by Indonesian security forces protecting its facilities. The corporation's operations were fixed in the middle of that dark violence.

A change in strategy. Under pressure from the U.S. government and human rights groups, ExxonMobil eventually shut down operations in Aceh and sought a negotiated settlement to the conflict. The corporation also adopted the Voluntary Principles on Security and Human Rights, committing to greater transparency and accountability.

7. The Bush-Cheney Era: Access, Influence, and Shared Ideologies

We don’t run this company on emotions. We run it on science and principles.

Close ties to power. ExxonMobil enjoyed easy access to high-ranking government officials during the Bush administration, particularly Vice President Dick Cheney, a former oil executive. This access allowed the corporation to influence American foreign policy and energy regulation.

A Washington embassy. ExxonMobil's Washington office functioned as a kind of embassy, deepening the corporation's influence and connections in foreign countries. The office maintained all-weather alliances with sympathetic American politicians.

Prioritizing shareholders. Lee Raymond managed ExxonMobil as a confident sovereign, aligning the corporation with America but not always in sync. He did not manage the corporation as a subordinate instrument of American foreign policy; his was a private empire.

8. The Iraq War: A Missed Opportunity and a Strategic Retreat

We see governments come and go.

A war for oil? While the Bush administration denied that the Iraq War was about oil, the conflict did open up opportunities for Western oil companies to invest in Iraq's vast reserves. However, ExxonMobil remained cautious, wary of the political risks and instability in the country.

The Haifa Pipeline. The Bush administration's interest in the Haifa pipeline, which ran through Jordan to modern Israel’s coastal city of Haifa, raised suspicions about American motives.

A strategic retreat. Ultimately, ExxonMobil decided to limit its involvement in Iraq, focusing on securing existing contracts and avoiding the political turmoil and security risks associated with large-scale investment.

9. The Allure of Russia: A Cold War Legacy and a New Oil Frontier

We should be trying to encourage, as a matter of foreign policy, having countries develop their natural resources.

A post-Soviet opportunity. The collapse of the Soviet Union opened up vast new oil and gas reserves in Russia, attracting the interest of Western corporations. However, Russia's political and economic landscape remained challenging, with corruption, instability, and resource nationalism posing significant risks.

The Sakhalin-1 project. ExxonMobil invested in the Sakhalin-1 project, a complex and technologically challenging undertaking in Russia's far east. The project tested the corporation's engineering prowess and its ability to navigate the Russian political system.

Khodorkovsky's downfall. ExxonMobil's pursuit of a deal with Yukos, led by Mikhail Khodorkovsky, was thwarted by the Russian government's crackdown on the oil tycoon. The episode highlighted the political risks of investing in Russia and the limits of American influence.

10. The Lure of Africa: Navigating Corruption and Instability

We don’t run this company on emotions. We run it on science and principles.

A new frontier. As resource nationalism limited access to oil in the Middle East and elsewhere, Africa became an increasingly important region for ExxonMobil. However, operating in Africa presented its own challenges, including corruption, political instability, and violence.

Equatorial Guinea and Chad. ExxonMobil invested heavily in Equatorial Guinea and Chad, forming partnerships with authoritarian regimes. These investments raised ethical questions about the corporation's role in perpetuating corruption and human rights abuses.

The Voluntary Principles. In response to criticism, ExxonMobil eventually adopted the Voluntary Principles on Security and Human Rights, committing to greater transparency and accountability in its operations. However, the corporation's commitment to these principles remained limited, and it continued to prioritize profit over social responsibility.

11. The Obama Years: Adaptation and a New World Order

It’s not my money to tithe.

A changing political landscape. The election of Barack Obama as president signaled a shift in American politics and a new emphasis on climate change and alternative energy. ExxonMobil adapted to this changing landscape by endorsing a carbon tax and investing in renewable energy research.

The Deepwater Horizon blowout. The Deepwater Horizon disaster in the Gulf of Mexico exposed the risks of deep-water drilling and raised questions about the safety culture of the entire oil industry. The disaster forced ExxonMobil to reexamine its own safety practices and to prepare for greater regulation.

A private empire. Despite the changing political landscape, ExxonMobil remained a powerful force in the global energy economy. The corporation continued to prioritize profit and shareholder value, navigating the complexities of international politics and resource nationalism with a blend of pragmatism and ruthlessness.

Last updated: March 28, 2025