ExxonMobil, a major player in the oil-refining industry, is adapting to changing consumer preferences in the face of the energy transition. It is considering a shift towards chemicals production, potentially reducing petrol output. Historically focused on upgrading refineries to increase production and derive higher-value products from crude oil, Exxon now sees these projects as a way to pivot away from traditional fuels.

The strategy, discussed during a recent presentation to investors and the media, underscores the challenges even fossil fuel giants like Exxon face in a future where electric vehicles (EVs) threaten to disrupt the demand for petrol. Exxon has already scaled back fuel oil and high-sulphur petroleum production in certain refineries and is open to reducing petrol output while increasing the production of chemicals used in various applications, where low-carbon alternatives are limited.

Exxon's corporate history has deep roots in refining, dating back to its origins as part of John D. Rockefeller's Standard Oil in the 19th century. Refining has been a significant revenue source along the fossil fuel supply chain, from extraction to the gas tank. However, with EVs posing a challenge to traditional fuels like petrol, refineries worldwide must adapt rapidly. Some European facilities closed during the pandemic, while others in the US shifted to biodiesel. Exxon aims for a more flexible approach by upgrading its facilities to adjust production based on demand. For example, an upgraded Exxon refinery in Singapore shifted from producing low-value fuel oil to high-value lubricant base stocks.

Exxon has invested in upgrading refineries in Britain and Texas to produce more diesel, which is less susceptible to competition from EVs and used in heavy-duty transportation. The energy transition has introduced more variables, and having adaptable, high-quality refining assets is considered crucial for success.

Exxon's refining and chemicals operations are substantially larger than those of its competitors in the Big Oil sector, potentially making it more susceptible to a rapid energy transition and EV growth. However, Exxon believes it has greater reconfiguration potential than its peers, offering opportunities for profitability in a low-carbon future.

Exxon's eight-year plan to revamp its fuels and chemicals division includes cost reduction, improved operational performance, and divestment of underperforming assets. By the end of 2023, Exxon will operate only 13 refineries worldwide, focusing on the largest and most cost-effective operations.

Exxon anticipates robust demand growth for its high-performance chemicals, in contrast to the peaking demand for petrol expected globally by the end of the decade. To meet this growing demand, Exxon plans to construct a dedicated chemical plant every four to seven years.

While Exxon's refineries will continue to play a role in chemical production, they will be guided by consumer preferences rather than betting heavily on a specific product. This flexibility allows Exxon to adapt as consumer demands evolve in the midst of the energy transition.