Exxon Mobil's Political Risks

In an era of global change and market volatility, when ExxonMobil’s operates facilities in nearly all of the world’s countries and explores for oil and gas on six continents, political risk is unavoidable. ExxonMobil's results can be adversely affected by political or regulatory developments affecting their operations. Numerous issues may arise from this, including sudden nationalization or shifting political winds that change the regulatory environment. Some countries in which they do business lack well-developed legal systems, or have not yet adopted clear regulatory frameworks for oil and gas development. Depending on what country the oil is being extracted from, the deal a company starts with is not always the deal it ends up with, as the government may change its mind after the capital is invested in order to take more profit for itself. In dealing with developing countries with an unstable dictatorship Exxon has found themselves navigating the political framework, or lack thereof, in nations that adjust foreign ownership rules to guarantee that domestic corporations gain an interest. A number of countries limit access to their oil and gas resources, or may place resources off-limits from development altogether. Many countries also restrict the import or export of certain products based on point of origin. Lack of legal certainty exposes our operations to increased risk of adverse or unpredictable actions by government officials, and also makes it more difficult for us to enforce our contracts. Even in countries with well-developed legal systems where ExxonMobil does business, they remain exposed to changes in law that could adversely affect their results, such as: increases in taxes or government royalty rates, price controls, changes in environmental regulations or other laws, government actions to cancel contracts, re-denominate the official currency, renounce or default on obligations, renegotiate terms unilaterally, or expropriate assets.

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