Book Review of Private Empire: ExxonMobil and American Power by Steve Coll

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Genre: Management & Leadership
Author: Steve Coll
Title: Private Empire: ExxonMobil and American Power (Buy the Book)


Steve Coll’s Private Empire: ExxonMobil and American Power goes behind the scenes of one of the world’s largest and most powerful corporations and explores the vast degree of influence it has over global finance, politics, and culture. Exxon’s massive size and scope are well known, but its inner workings are largely unknown. Through extensive research and insightful reporting, Coll is able to peel back the curtain on the company to an extent that has never been done before.

Private Empire starts and ends with two of the most notorious environmental catastrophes to ever affect the energy industry – the Exxon Valdez accident in 1989 and the BP Deepwater Horizon spill in 2010. Exxon Valdez sets the tone for the book, the company and, for many, the oil industry as a whole. Called in front of Congress, Exxon CEO Lawrence Rawl was unapologetic, refusing to have his company accept blame for the incident and highlighting the rigid, uncompromising ethic pervasive at Exxon.

Following the spill, the little trust that the American people had in the oil industry was lost. From then on, the entire industry would be measured by the company with the worst reputation; that company was – until Deepwater Horizon turned the tables – Exxon.

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Between the bookends of these two disasters, Coll investigates several aspects of Exxon’s unique culture and other important events in the company’s recent history. These include the Operations Integrity Management System – a standardized set of procedures set up to ensure that employees follow the “Exxon Way” and have no excuse for failure.

The company’s organizational structure is similarly ordered and regimented – employees are compared to their peers in a strictly objective fashion to ensure the smartest and most capable rise to the top. Rawl’s successor as CEO, Lee Raymond, embodied these cultural ideals. He was a tireless worker with a relentless focus on efficiency and the maximization of his favorite business metric, “return on capital employed.”

Exxon’s reach transcends that of most private corporations as well as that of many sovereign states. Private Empire explores several episodes of the company working alongside (or in conflict with) global entities ranging from foreign dictatorships, environmental regulators, K Street lobbying firms, the Securities Exchange Commission, and the World Bank. Often, the company worked in conjunction with high-level members of the US government, including Vice President Dick Cheney and various cabinet secretaries.

The titular “Empire” of the book is Exxon’s vast operating network, which spans the globe and essentially compels the company to have its own foreign policy. Under strong shareholder pressure to continually expand its reserves, the company has made ventures into some of the poorest and most unstable regions of the world – often in places where Exxon would become a considerably larger presence than the United States government itself.

Coll gives detailed accounts of these expansions into places such as Indonesia, Chad, Equatorial Guinea, and Venezuela – along with much of the Middle East, including Qatar, Iraq, and Saudi Arabia. Each of these opportunities brought its own hurdles, from human rights concerns, to negotiations with hostile governments, to geological and infrastructure difficulties.

Other topics covered in the book include Exxon’s purchase of Mobil as part of a wave of major energy mergers in the late 1990’s, Rex Tillerson’s ascension to CEO as Lee Raymond’s successor, and the arrival and still-growing concern the company must face over climate change. With its extensive reporting and wealth of information, Private Empire is an incredibly enlightening look at one of the primary forces shaping the global economy now and for the foreseeable future.


“It’s the first time I have ever been embarrassed that we work for Exxon.”

At 11:50 p.m., March 23, 1989, Joseph Hazelwood, Captain of the Exxon Valdez, decided to head down to his bedroom. It had been a long day, and he was still recovering from the many drinks that he had consumed while inland at the Pipeline Club in the port town of Valdez.

The Valdez was heading towards the Gulf of Alaska after its stay at port. He instructed his third mate to head south toward Busby Island to avoid the ice before heading back to sea. The two ships in front of the Valdez had taken this route, and the understaffed Coast Guard had made no objection.

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Twenty minutes later, after technical mistakes by the third mate and helmsman, Hazelwood was called to the bridge. Shortly after, a series of sharp jolts occurred and the sound of scraping metal was heard.

The ship had run aground on Bligh Reef and oil pools soon appeared on the sea

Hazelwood had broken two rules during the incident; being intoxicated on the job, and leaving the bridge unsupervised. He would serve as the scapegoat. Lee Raymond, the number-two executive at the time was quick to assess that Alaska’s politicians and environmentalists restricted Exxon from being able to spray chemicals that would reduce the effects of the oil slick. At a hearing before Congress that spring, a senator from Washington State told Exxon CEO Lawrence Rawl that executives in Japan would accept responsibility and resign when their companies failed.

Rawl replied, “A lot of Japanese kill themselves as well, and I refuse to do that.” Raymond and Rawl’s reactions following the Valdez spill showed the rigid nature that could be found at Exxon. Exxon would maintain that they were right in every situation and come up with research and evidence as proof. Compromise was not in the Exxon vocabulary.

Following the spill, the little trust that people had in the oil industry was lost. From then on, the entire industry would be measured by the company with the worst reputation; that company was Exxon.

The Exxon Way

“We don’t run this company on emotions; we run it on science and principles”

In 1993, at the age of 65, Lawrence Rawl retired. In two and a half years, Lee Raymond and his team had developed the Operations Integrity Management System, or O.I.M.S. This system standardized the procedures for how all Exxon decisions would be made. Safety systems would be expected to operate with zero defects, and there was no reason for employees to make any excuses. This system was motivated by the Prince William Sound disaster.

Prior to the accident, Fortune had ranked Exxon as America’s sixth most trusted company

After the disaster, it ranked one hundred and tenth. Exxon operated under a “1950’s religious culture” with employees believing in the One Right Answer, that once an equation was solved, that answer was not up to debate. Exxon’s employees were rated based on a historic employee ranking system that lumped employees with similar pay into a sample.

Those employees were then ranked from best to worst, with the best performers moved into a new pool of high achievers. Eventually the best employee would emerge. Executives noted that there seemed to be a four to seven year cycle, where employees tracking towards management would either commit to Exxon or quit. With the help of O.I.M.S. and the cutthroat ranking system, Exxon employees soon became known as the “smartest guys in the room.”


Lee and Charlene Raymond grew up in humble circumstances in the American heartland. They met at the University of Wisconsin and married when Lee was twenty-three. They raised their children in a similar manner to the way they grew up. They had frugal tendencies from growing up during the Depression Era. As an example, once Lee had become an executive, he refused to allow his sons to ride on the corporate jet to make sure that none of his co-workers misused Exxon property. He was respected, sharp tongued, and feared.

He developed the nickname “Iron Ass” for the manner in which he berated colleagues to ensure that nobody got too close.

Running Exxon consumed most of his time. When he left the office, he took a large amount of work with him. He and Charlene had separate bedrooms in their home because Lee often stayed up late to read all of his files. The traits that he hated most were dishonesty and stupidity, and he had no problem labeling people as “stupid sh-ts.” Growing up, Raymond had a cleft palate, and many observers noted that his childhood was likely laden with persecution from his peers.

Raymond was the king of efficiency and put great effort into improving the areas of Exxon that generated the lowest yields. The metric that Raymond cared for most was ‘return on capital employed’ or R.O.C.E. In the 1970s, countries began nationalizing their resources. In the 1990s, oil companies became legally inclined to report their reserves in Securities and Exchange Commission filings, rather than on corporate balance sheets. This began a chess match between Raymond and the S.E.C. The S.E.C. did not include the extraction of hydrocarbons from coal, tar sands, or shale in their formula.

Exxon had long used these reserves in their reports and they allowed Exxon to report consistent year-to-year reserve replacement. If Exxon followed S.E.C. reporting methods in 1997, they would have to report a decline of nearly 2 percent. Instead, Raymond issued at press release that under Exxon’s definition of “proved reserves,” they had replaced 121 percent of 1997 production. Exxon’s reserve replacement numbers were not illegal, as they filed their oil sand data in a separate section.

From that point on, the numbers that Exxon published were based on their own definition of proved reserves. This drive to continue to book the same amount of reserves as the previous year would drive Exxon to explore areas that they previously would have never considered.


In 1996, Lord John Browne, CEO of British Petroleum met with Lou Noto, CEO of Mobil in Berlin, Germany. Browne proposed the idea that the two companies should merge and create the world’s largest privately owned oil company. As more meetings progressed, Noto made the decision that Mobil was better alone.

In 1997, Saudi Arabia and Venezuela began producing massive quantities of oil, in hopes of adversely affecting the other.

As a result, in 1998, oil prices dropped to ten dollars per barrel, which was a cost that had not been seen since the 1960s. BP proceeded to merge with Amoco. Chevron and Texaco followed suit, as would Conoco and Phillip. The ball was now in Exxon’s court to make a move.

Exxon had been buying back shares from 1983 until 1991, which totaled $15.5 billion. With those shares, Exxon was able to purchase Mobil tax free. On December 1, 1998, Raymond and Noto announced their deal, worth $81 billion. If Exxon was not able to discover new areas with oil, then they would just buy companies with proven reserves.


On February 8, 2001, nearly two and a half weeks after the inauguration of George W. Bush, Lee Raymond met with vice president Dick Cheney in Washington. Raymond and Cheney had known each other for nearly two decades. Both grew up in the upper Midwest and received their education at the University of Wisconsin. In 1995, when Cheney was Chief Executive at Halliburton, both men lived in North Dallas, just a few miles apart.

Cheney and Raymond had similar views surrounding energy deregulation and increased oil exploration in the United States.

As Bush took office, a new issue surfaced: climate change. Two men rose to the forefront of skepticism in opposition to this potential regulation of greenhouse gas emissions: Dick Cheney and Lee Raymond. In 1997, the Clinton administration had finalized the negotiations of the Kyoto Protocol, which forced wealthy nations to reduce green house emissions.

At the same time, Lee Raymond was in Beijing devoting half his speech on how climate change was an illusion. Raymond and many other influential companies then joined the Global Climate Coalition, which opposed the Kyoto Protocol and promoted free market principals.


One of Mobil’s large projects was in the Aceh province in North Indonesia. This hot bed for violence attracted sabotage, kidnapping and guerilla warfare. In 1974, Marxist Hasan de Tiro entered a bid to build a pipeline in Mobil’s Acehnese gas field. Di Tiro’s company lost the bid to Bechtel Corporation, which infuriated him. De Toro proceeded to found the Gerakan Aceh Merdeka, or G.A.M.

His mission was to shut down foreign oil companies. Mobil, which employed more than 3,000 locals, became an easy target. Two hundred and twenty expatriates lived within Mobil’s main compound. To provide security for fields now owned by ExxonMobil, Indonesian soldiers, known as the TNI, were added to the payroll. These soldiers began violating human rights during their time protecting the Mobil compound and over the years, hundreds of men went missing near the gas fields.

In 2001, many cases of known human rights violations became public around the world.

As a proactive measure, the United States and Great Britain co-sponsored the Voluntary Principals on Security and Human Rights compact. This compact was a non-binding agreement that encouraged all signees to participate in a human rights assessment. Nearly all mining and oil companies signed the compact. Lee Raymond, however, refused. Raymond believed the ExxonMobil policies were sufficient to cover all risks associated with potential human right violations.

On March 12, 2001, Indonesia’s foreign minister, Alwi Shehab met with Colin Powell in Washington, DC. Shehab mentioned the human rights problems in Aceh, citing ExxonMobil as a problem and a solution. He requested that the United States negotiate with the TNI and G.A.M. leaders to resolve the conflict.

That spring, ExxonMobil decided to shut down production. In April 2001, separate meetings were scheduled with TNI and G.A.M. in an effort to reopen facilities in the near future. The Bush administration proceeded to threaten the G.A.M to quit attacking the Mobil camp, or they would add them to the global terrorist list. An agreement was reached, and in July of 2001, ExxonMobil reopened the gas field. Concurrently, a new President was inaugurated in Indonesia: Megwati Sukarnotutri.

One of her first actions was to declare martial law and send thousands of soldiers to Aceh to defeat G.A.M. In the case of Aceh, ExxonMobil chose to accept help from the United States. This tactic would not be the case in many of the following developments. In addition, Aceh was not the end of high-risk partnerships with hostile rulers.

Spirit of Glacier Bay

During the summer of 2001, Mandy Lindeberg and her crew on the Kittywake II were stationed in the Prince William Sound. Her project was to drill more than seven thousand holes to determine if the area was still being adversely affected by the oil spill, now twelve years later.

Her team was not the only group in the area, however, as a 178-foot cruise ship named the Spirit of Glacier Bay followed her every move. The Spirit was comprised of ExxonMobil scientists who were doing their own investigation. They closely watched Lindeberg and seemed to want samples from the exact same locations.

Lindeberg, a government official, was doing a study to determine if Alaska could seek an additional $100 million in excess of the original $1 billion settlement.

If she could prove that there was unforeseeable damage that was not known at the time of the previous deal, then more money would come from ExxonMobil. The corporation’s cruise ship followed her trail to ensure that they had their own evidence that could be provided in case it was needed. ExxonMobil was doing everything in its power to show that the area had been cleaned properly.

Even if a piece of evidence surfaced, an ExxonMobil employed scientist would produce an alternate finding. ExxonMobil operated on the principle that they were always right, and they had no problem employing scientists that would provide justification.


If Equatorial Guinea seemed extremely unstable and hostile, Chad took poverty to another level. The country contained less than 80 miles of paved road, and 5 of 6 neighboring counties were politically unstable. Life expectancy was 46 years, and the most recent leader came into power via a coup and then murdered thousands of his countrymen.

In 1977, Exxon began exploration efforts in southern Chad.

Not only was it challenging to pump Chad’s thick oil to the surface, but uncertainty existed in transporting the crude to the Atlantic Ocean. A 660-mile pipeline through Cameroon was required to reach the Atlantic Ocean. To ensure that the dictator of Chad, Idriss Déby, did not cheat his countrymen, Exxon collaborated with the World Bank to assist in the distribution of profits.

The World Bank ensured that profits were directed toward economic development in the country. By working with the World Bank, Exxon mitigated much of the risk of the project. By 2000, ExxonMobil had invested $4.2 billion in the country while aid from the United States totaled $3 million per year. ExxonMobil carried more weight than the United States government in Chad.

The Power of ExxonMobil

In 2003, Royal Dutch Shell surprised investors by declaring that they overstated reserves by 4.35 billion barrels. This quantity was equal to one-fifth of ExxonMobil’s proven reserves. As a result, the Securities and Exchange Commission narrowed the definition of qualified reserves. As mentioned above, ExxonMobil had not adopted the S.E.C. reporting philosophy in their public reports.

Using the S.E.C. guidelines, ExxonMobil would have reduced reserves by 1.2 billion barrels. Strategically, ExxonMobil never wanted to reflect shrinking reserves. If more oil was produced than discovered, the company believed it would be a sign of weakness to the average shareholder. This philosophy led to continued high-risk excursions in unstable, uncertain and at times, uncivilized third world countries.

The Middle East

One of the largest hydrocarbon reserves in the world lies in the Middle East. When Exxon purchased Mobil, one field was dramatically undervalued; Qatar’s North Field. In the 1900’s, Qatar’s population was composed of poor fishermen, pearl divers, and Bedouin Arab herdsmen. In the 1930’s Japan developed a way to synthesize pearls, thereby destroying the price of pearls and plunging the poverty-stricken economy further in disrepair.

Meanwhile, their Persian Gulf neighbors produced oil and enormous profits as Qatar floundered. Unlike their neighbors, their land had large pockets of natural gas. Unfortunately, they lacked leadership and infrastructure to capitalize on their reserves.

Geologists soon determined that Qatar’s North Field held approximately 800 trillion square feet of natural gas; this equates to 130 billion barrels of oil.

By comparison, Mobil’s largest field in Aceh contained only 17 trillion square feet of natural gas or approximately 3 billion barrels of oil. With so much natural gas, the best vehicle for exportation was through liquefied natural gas (LNG). The process converts the gas into a liquid, which is then transported on a special ship, and converted back into gas at the final destination.

Exxon struggled with LNG while Mobil experienced LNG success in their Aceh terminal. Mobil gained a partnership with Qatar in the 1990’s as both Royal Dutch Shell and British Petroleum’s experienced negotiation failures. In 2000, ExxonMobil collaborated with British Petroleum to build gas trains for the delivery of the natural gas to the end terminals in Qatar. This project produced gas for less than $3.00 per thousand cubic feet.

Shortly after, gas prices soared to $15, making the process highly profitable. Going forward, gas would become a major player in ExxonMobil’s quest to replace reserves. In 2003, Lee Raymond then targeted the United States as the ideal location for an LNG receiving terminal as he expected American gas production to decline. This is one rare instance where his prediction was incorrect.

Saudi Arabia

In 1998, the Prince of Saudi Arabia reopened their gas fields for foreign producers. The previous two decades, Saudi produced all their oil without outside assistance and obviously without sharing their huge profits with other nations. The benefits Qatar was enjoying economically, socially and materially were inspiring and captivating.

The Prince wanted foreign oil companies to develop freestanding gas fields.

Such fields were to be used as fuel for water desalination plants, petro manufacturing and electricity generating plants. Exxon soon won the proposal to build two of the three projects. Upon further geological and engineering research, ExxonMobil became skeptical of the ability to find sufficient freestanding gas.

Exxon requested to search for gas in areas set aside for Saudi Aramco, but the Prince was unwilling. After several intense discussions with the Prince, ExxonMobil’s rights to negotiate ceased. Subsequently, various corporations began drilling in the area. Just as Raymond had predicted, the wells turned out to be dry.

ExxonMobil’s Cultural Challenges

While reserves and profits were growing, so was discontent among the workforce. As is common among an industry leader, employees were being poached by the competition. Years of knowledge and expertise exit the building whenever an employee leaves the company to join a competitor. Adding to the exodus was the bad press associated with the Exxon Valdez tanker spill.

Ken Cohen, the Vice President of Public Affairs, took it upon himself to craft a different corporate image.

Advertising dollars were realigned with positive impact rather than putting a “tiger in your tank”. The new culture was required to recruit top national talent. The strategy undertaken was to communicate credibility versus popularity. Cohen also made great strides with human rights efforts.

Partnering with the Human Rights Watch Advocacy Group and securing a signature on the Voluntary Principals on Security and Human Rights Compact, which Exxon previously refused to sign, Cohen lifted the perception of the company in the eyes of American and more importantly among the employees of the company.


“We’re not here for the oil; the oil belongs to the Iraqi people”

On February 11, 2003, Bush’s undersecretary of defense, Douglas Feith went before the Senate Foreign Relations Committee and stated that an Iraq War would not be about oil. He reminded senators that the United States had helped to rebuild Germany and Japan after World War II, not stolen their resources. Although Bush officials argued that the war was not driven by oil, arguments arose that the risks and costs would not be incurred if Iraq did not have large oil reserves.

In 1928, Standard Oil had laid the foundation for what would become the Iraq Petroleum Company. Many outside oil companies had a stake in Iraq Petroleum until it nationalized. Once Saddam took power, the oil industry fell into disarray.

Saddam put his men into high places in the oil ministry and all the professional engineers were fired. By the time the United States moved into Iraq, the maintenance problems were so bad that they would take a decade to fix. With uncertainty in their future in Iraq, ExxonMobil trained their sights on a different country: Russia.


In 2001, while eating dinner at the Bush ranch in Crawford, Texas, Vladimir Putin discussed oil possibilities with Don Evans, Bush’s secretary of commerce. Russian reserves accounted for nearly 60 billion barrels of oil and 1,680 trillion cubic feet of natural gas.

The discussion that night opened the floor for many future talks and potential partnerships to come. The Bush administration saw future relationships with American and Russian oil companies as an opportunity to build U.S.-Russia relations.

In 1996, ExxonMobil finalized the details of their Sakhalin-1 project that entailed the drilling of a seven-mile horizontal well.

It would stretch from mainland, and then head under icy ocean waters. As negotiations with Russia continued, Putin offered to issue an executive order ensuring that the project would proceed. Rex Tillerson, the executive in charge of the deal, wanted more than just a decree, he wanted a law.

ExxonMobil became convinced that their firmness had been the best way to deal with Putin. With this project, ExxonMobil began forming relationships with Russian oil companies. The company that they had the strongest relationship with at the time was Rosneft, which accounted for 10 percent of the country’s reserves.

Raymond began talks with their leaders about buying Rosneft, but the deal failed because Rosneft executives were unsure about what they legally owned. With the Rosneft deal falling through, ExxonMobil decided to search for other opportunities. By 2002, ExxonMobil had narrowed their search to Mikhail Khodorkovsky. Khodorkovsky had made his money in 1987 when Gorbachev allowed private banking in Russia.

He and a few friends started a bank called Menetap. When the Russian government needed financial assistance in 1995, Menetap provided money to the government in exchange for rock-bottom priced oil and gas positions. The result of the properties was an oil company called Yukos, which was valued at $8 billion.

When Putin became president, he had a problem with the way that Menetap and Yukos had become rich at the expense of the Russian government.

Khodorkovsky hoped to build a security blanket for himself and Yukos by partnering with a foreign oil company. He was in talks with both Chevron and Exxon. Chevron’s potential deal included cross-ownership, while ExxonMobil wanted fifty-one percent ownership.

To ensure the Putin would not oppose the deal, Khodorkovsky began to buy support from officials in the Russian Parliament, the Duma. Lee Raymond met with Putin to discuss a potential deal with Yukos. He used the same approach that Tillerson had used in negotiations previously. He told Putin what he wanted Russia to do in order to satisfy ExxonMobil. Putin left the meeting having perceived Raymond as “totally arrogant and far too aggressive.”

In September of 2003, BP announced a deal to work jointly with a Russian firm. TNK-BP would become Russia’s third ranked oil company. A month later, Khodorkovsky was arrested and charged with personal income tax evasion. He had allegedly cost the Russian government over $1 billion in lost revenue. In 2004, Russia denied licenses to Chevron and ExxonMobil to drill offshore near Sakhalin which the companies had leased in 1993.

Equatorial Guinea

In 2003, a British man by the name of Greg Wales introduced himself to Theresa Whelan, who was Bush’s deputy assistant secretary of defense. He claimed to be a “security consultant” that worked with oil companies near the Gulf of Guinea. He arranged another meeting so they could discuss African intelligence.

Whelan had meetings of the sort on a normal basis, so she saw no problem with the idea. As it turned out Wales was secretly involved in a conspiracy to overthrow the Equatorial Guinea government. He, along with other British and South African military veterans hoped to replace Tedoro Obiang with Severo Moto. Moto was a former political figure in E.G. who had been exiled to Spain.

The Spanish Prime Minister, Jose Maria Aznar, joined the efforts to overthrow Obiang.

Obiang had long begged the United States for a license to allow an American security firm to train his military and police. The Bush administration refused to grant the request until Equatorial Guinea showed progress in the area of human rights. As the launch date for the coup approached, Spain sent their war ships to the Gulf of Guinea. At the same time, an anonymous group in Kansas City purchased a 727 jet.

This plane then flew to South Africa to board nearly 60 mercenaries and headed to Zimbabwe. Before the plane could depart from Zimbabwe, police overtook the plane after insight provided by South African intelligence. The coup was squashed. Moto was so sure that the overthrow would be successful, that he had a victory speech in his pocket. Following the encounter, Obiang was confident that Spain was targeting his life.

He also had suspicions about the United States, as that is where the coup originated. To eliminate such suspicions, Obiang was granted a visit with Colin Powell. Powell encouraged democracy and strides in human rights in order for Equatorial Guinea to develop a strong relationship with the United States. Secretly, Powell encouraged Obiang to work with Israel to obtain such training.

In 2004, the Justice Department began to research the United States relationship with Equatorial Guinea to determine if they had violated the Foreign Corrupt Practices Act. It appeared that ExxonMobil’s investments were only benefiting Obiang and his decedents. ExxonMobil claimed that such investments were commercial in nature, focusing on a low cost solution and therefore not in violation of the Act.


Following the merger, ExxonMobil relocated their Washington D.C. office to K Street, in the heart of the Washington lobbying district. As one of the largest companies in the United States and in an industry shrouded with massive regulation, ExxonMobil invested heavily in their K Street, lobbying department.

It amounted to nearly 20 former Congressmen, Senators and other D.C. specialists. This team focused on global warming, domestic drilling and taxation. Additionally, they would provide large research packets to government officials with statistics and facts supporting their views. They worked to educate the most influential decision makers on ExxonMobil’s projections of what the world would look like with the energy projections.

In 1980, Exxon’s researchers created a forecast of the year 2000.

They accurately predicted total energy consumption to one percent while completely missing the future price points. ExxonMobil began disbursing their forecasts for the year 2030 to help show where they saw volume and consumption heading. In the data, it showed investment in solar, wind and other alternative energy sources increasing while remaining insignificant to meet total energy needs.

These documents were meant to show that oil would remain in high demand for the years to come. More importantly, it demonstrated to the government that critical decisions surrounding exploration were needed now.

The Next Chairman

In 2005, Lee Raymond turned 76 years old. He had served as CEO for the past 12 years. Members of the Board of Directors had been asking the CEO to choose his successor before his eminent retirement. Two candidates had arisen, Ed Galante and Rex Tillerson.

Galante was from New York and was well educated in downstream refining operations.

Those around him described him as comfortable and outgoing. Tillerson, by contrast, was a Texan by birth. He had spent all of his time at ExxonMobil in the upstream company and could be described as relaxed and less defensive than Raymond. When speaking with the Board, Raymond stated that the most important quality required of his successor was toughness.

Lee eventually chose Tillerson. In Raymond’s last year, ExxonMobil had a net profit of $36.1 billion, the highest profit ever recorded by any company in history. ExxonMobil’s market cap went from $80 billion to $360 billion in his twelve years. Raymond’s parting gift was a $400 million retirement package. With such successes, this would be a tough act for Tillerson to follow.


Rex Tillerson’s father was a Boy Scouts of America leader and his mother was a God-fearing stay-at-home mom. He was an Eagle Scout and later received a Civil Engineering degree from the University of Texas.

When he assumed the role of CEO in 2006, he sought to change the way that the public perceived ExxonMobil.

He felt that they were “misunderstood” and that it was his job to ease the tension that the company had generated. Within the first few months of his new role, Tillerson asked Ken Cohen and the K Street office to develop a special task force that would analyze ExxonMobil’s public affairs policy.

The top issue discussed was that of global warming. In 2006, a documentary of Al Gore’s lectures on climate change debuted at the Sundance Film Festival in An Inconvenient Truth. The K Street office watched the film backwards and forwards to create talking points to refute the information. As time went on, Tillerson began to feel that ExxonMobil should change its stance on climate change.

This however, would undermine everything that Raymond had ever said about the issue. Once Raymond’s year as a consultant ended, ExxonMobil began to release a new stance. They admitted that the average earth temperature was rising and that greenhouse gas emissions were increasing.

This claim was further than Raymond had ever gone, yet they refused to claim that the two were absolutely linked. ExxonMobil pulled funding from a few of their more controversial groups, and vowed to work towards reducing emissions. This path was not something that ExxonMobil would have ever done previously, but Tillerson felt that it was essential for the way that the political climate was heading.


By 2006, 368 wells had been drilled in Southern Chad over an expanse of twelve thousand square miles. There were more than one thousand expatriate workers housed in nine camps in the area. When Idriss Déby gained power, he had done so with the help of the President of Sudan, Omar Al-Bashir.

In 2003, Bashir led a campaign that killed nearly 300,000 people and displaced more than 2.5 million people from Darfur.

Two hundred and forty thousand of the displaced arrived in Chad as international refugees. For a while, Déby tried to balance his loyalty to Bashir with his new friends in Washington, but eventually Déby severed ties with Bashir. In reply, Bashir began to support Mahamat Mouri, who was head of a Chadian rebel group.

Intelligence began to show signs of coup attempts. Déby went to the World Bank and demanded that they release funds so that Chad could invest in a military, but the World Bank refused.

ExxonMobil’s experiment with the World Bank had proved to be unfruitful.

Chad’s population was still drowning in poverty. A few schools and hospitals had been constructed. These facilities remained empty, however, until Chad eventually hired professionals to staff them. In 2005, $300 million was put into Chad’s bank account with the World Bank, but they were unable to spend that money on anything not included in the original agreement.

With a rebel group rising, Déby threatened to introduce an amendment into Chadian law that would break the government’s ties to the World Bank. The World Bank’s new leader, Paul Wolfowitz decided to make an example of Idriss Déby and chess match soon unfolded. Wolfowitz threatened to freeze Chad’s account. Déby then threatened to shut down the oil pipeline.

At this point, ExxonMobil was on the verge of profitability. ExxonMobil and its partners would soon have a large payout for Déby. They explained that Déby could use this money to pay off World Bank loans, which would free them from the deal. At this point, ExxonMobil had made the choice that they were more interested in oil production than the social experiment in Chad.

On April 13, 2005, rebels in pickup trucks and SUVs converged on the capital. Déby’s small force of defenders was able to chase them back to Sudan, but only temporarily. Déby proceeded to make his final move. He threatened to kick out the Darfur refugees if the World Bank would not release his money.

He then wrote to President Bush, encouraging the White House to get involved in the situation. A week later, a letter from Secretary of State Condoleezza Rice came stating that Chad had “the full attention of the United States.”

On April 26th, an agreement with the World Bank was signed that gave Chad more freedom in how that could distribute their money.

The World Bank experiment had failed. When the deal was first signed, Chad was ranked 167th out of 174 nations in the Human Development Index for the United Nations. Six years later, they were 171st out of 177 nations. The only success had been for Déby, ExxonMobil and their partners. Once the agreement was signed, Déby received a big payday from ExxonMobil, as the project had begun to generate a net profit.

The two other partners, Chevron and PETRONAS, believed that they had no reason to pay Déby. Déby became upset and announced that he was throwing those two minority partners out of Chad. A few days later, Barack Obama, a young senator from Illinois made a stop in Chad. He left Déby with two points: 1) profits from Chad’s natural resources should go to the people of Chad and 2) Déby needed to stay loyal to his contracts. After meeting with Chevron and PETRONAS in Paris, Déby decided to allow them to remain in his country. A few days later, Chevron paid Déby $281 million to make amends.

Aceh Abuses

In 2001, a student activist from Aceh walked into the office of Terry Collingsworth, a human rights lawyer for the International Labor Rights Forum. The student told Collingsworth of the offenses taking place in Aceh. Collingsworth then flew to Aceh and covertly entered villages near the ExxonMobil camp.

He interviewed locals and came back to the United States with enough information for file John Doe I et al. v. ExxonMobil Corporation et al. ExxonMobil’s strategy was to ensure that the case was thrown out before any factual evidence could be brought to trial. The case was given to Judge Louis F. Oberdorfer in the Washington District Court. Oberdorfer was eighty- two years old and a former clerk for Supreme Court Justice Hugo Black.

ExxonMobil asked Oberdorfer to receive a comment from the State Department as to whether this case should be tried.

The State had just begun to partnership with the Indonesian government. ExxonMobil hoped that this case would be thrown out so the State could continue that smooth relationship. William H. Taft IV replied with a letter that stated that the case should not be tried “at this time.” ExxonMobil was told to preserve all evidence. This was a small victory, but one that would only hold for a few years.

On December 26, 2004, a tsunami destroyed northern Sumatra. In its path were both sides of the Aceh civil war. An excess of one hundred thousand people died in less than twenty minutes. On May 24, 2005, Judge Oberdorfer reopened the tort case. ExxonMobil appealed the decision to reopen the case.

They again asked the Bush administration for an opinion. The administration’s solicitor general ruled against ExxonMobil and allowed the case to continue. Shortly after, Judge Oberdorfer suffered a stroke and resigned. As his last piece of work, he formulated an opinion for the case. He stated that the “plaintiffs have provided sufficient evidence, at this stage, for their allegations of serious abuse.” ExxonMobil again appealed.

This case is still stuck in the political circuits in Washington D.C. Nearly all of the Aceh John Does have died, leaving the lawsuit to their widows and family. In August of 2011, ExxonMobil announced that they were selling their Aceh gas fields. They denied that the sale had any relation to the human rights violations that had allegedly occurred.


In 1975, Venezuela followed the lead of other countries and nationalized their assets, kicking Exxon and other companies out of the country. With corrupt leaders and a lack of engineers, their oil output fell from 3.7 million barrels in the 1970s to 1.8 million barrels in the 1990s.

Venezuela’s recoverable oil was estimated to contain between 380 billion and 650 billion barrels.

With that much black gold in their arsenal, only their lack of technical capabilities were restricting them. In 1997, they opened the country to outside oil producers to help them drill heavy oil from their Orinoco field.

In the 2000s, ExxonMobil had many ventures taking place in Venezuela. They had a few gas stations, oil production locations, and supply being sent to a refinery in Louisiana. In 2004, they neared a deal that was nine years in the making that would provide plastics to most of Latin America.

At the same time, Huge Chavez was up for reelection. In an effort to gain support from the people of his country, he scheduled the multi-billion dollar deal to be signed on national television just three days before the election. In the midst of a great deal of fraud, Chavez won the vote. The deal did not last past the summer as Chavez took measures to take more control of the country’s oil.

By this time, ExxonMobil had invested nearly $1.5 billion in the Orinoco field, with at least $700 million to be spent in the next 30 years. In 2007, Chavez addressed the Venezuelan congress and stated that he would enforce a law that allowed P.D.V.S.A., the Venezuelan national oil company, to take majority control of all projects in the Orinoco River basin.

Oil companies could remain as minority owners, but they would not be able to operate the projects. In a culture where reserve replacement was essential, Rex Tillerson decided to fight back. Estimates showed that ExxonMobil would lose $11.9 billion by losing ownership of their projects, and they were determined to ensure they received all of that money.

When the Orinoco deal was planned, ExxonMobil and P.V.D.S.A sold bonds to cover the originating fees.

In 2007, $538 million worth of bonds still existed. The companies used Lazard, an investment bank, to complete the deal. P.V.D.S.A agreed to pay for ExxonMobil’s stake of bonds. While this process was occurring, money from oil sales was filling a bank account. Once the deal cleared, that money would be released to the oil companies.

ExxonMobil secretly met with a corporate repo man, Steven K. Davidson. On December 27, Davidson’s lawyers met with a judge to place a seize on Venezuela’s funds as security for ExxonMobil’s future arbitration awards. The judge signed off on the request and agreed to keep the repo a secret. On December 28, a wire went out to each bond owner with money from Venezuela. $242 million dollars then entered ExxonMobil’s bank account. $300 million was transferred to the Chavez government, along with an “Order of Attachment,” freezing their funds. If Venezuela ever wanted to see their money, they would have to meet ExxonMobil in court.


On June 29, 2009, ExxonMobil officials converged on Baghdad, Iraq. The Iraqi government was finally opening its reserves to bids by international oil companies. ExxonMobil was hungry to get back into oil-rich Iraq. Prior to being kicked out in 1972, they had great reserves near the Persian Gulf. In 2009, six years and $4 billion later, Iraq was producing just 2.5 million barrels per day.

It was estimated that production could rise to 6 million barrels per day with an investment of $25 to $75 billion.

ExxonMobil and nearly thirty other international oil companies were taking place in a public bidding contest. Each oil company put their “offer” in a manila folder and submitted it into a fish bowl. The Iraqi moderator then read each proposal to the public. The proposal that best matched the demands of the Iraqis would be chosen.

When ExxonMobil’s proposal was read, there was buzz around the entire room. They asked for $4.80 per barrel of oil, which would allow for a 9 percent rate of return. This was lower than almost every other deal that ExxonMobil was willing to endure. After all of the oil companies offers were read, a representative of the Ministry of Oil read aloud the target conditions that Iraq wanted.

They were only allowing $2 per barrel. No companies had submitted similar figures, and the deal failed. At the end of 2009, ExxonMobil and the Iraq Ministry of Oil finally reached terms for a deal. The West Qurna field had 8.7 billion barrels in reserves, and ExxonMobil anticipated increasing production from 300,000 barrels per day to well over 2.3 million.

The terms would give ExxonMobil $1.90 per barrel, which was below the $2 figure which was originally given. In total, ExxonMobil might receive a 19 percent return, a number which was within global targets. When the United States went to war with Iraq, Lee Raymond predicted that it would take seven years for big oil to enter. Raymond was right, and seven years later his company was able to book Iraqi reserves.


In 2007, Rex Tillerson and Bob Simpson, the CEO of XTO, began having secret talks about a “strategic combination.” XTO was a leader when it came to shale and unconventional gas. ExxonMobil had gas assets, but they were late to the game in the United States. They had the option of buying a large amount of properties in the United States and developing their own shale and unconventionals technology, or they could purchase XTO, which had both.

ExxonMobil had not made a large acquisition since the $81 billion Mobil deal.

ExxonMobil had more than $30 billion in cash and nearly 3.2 billion shares of their own stock. On December 14, 2009, Rex Tillerson announced an all-stock transaction of $41 billion for XTO Energy. ExxonMobil’s reserves were now composed of 45 percent gas. Investors were not fond of the transaction and it was evident on Wall Street.

ExxonMobil soon saw its market price decrease by nearly $41 billion, a number that was quite similar to the amount paid for XTO. This deal would forever be iconic of Rex Tillerson’s time as CEO. Lee Raymond’s time as CEO was marked by a successful Mobil purchase, and higher profits than ever before. With only three years under his belt, Rex Tillerson still had time to choose what his legacy would look like at Exxon.

No Longer the Worst

On April 19, 2010, Rex Tillerson delivered a speech in front of an audience in Houston. He was receiving the Jesse H. and Mary Gibbs Jones Award for promoting internationalism in Houston. He answered some questions from students in a small roundtable setting and then spoke about capitalist private enterprise and the role of ExxonMobil worldwide.

A theme of his speech was the role of trust. The next morning, a cement job was completed on an offshore rig called the Deepwater Horizon. That night a blowout killed 11 crewmembers. Twenty-three years earlier, Lord Browne, BP’s CEO, reflected that the oil industry would be “measured by its weakest member, the one with the worst reputation.” In 1989, that member was Exxon, but in 2010, the tables turned. BP was now the company with the worst reputation. would like to thank the Titans of Investing for allowing us to publish this content. Titans is a student organization founded by Britt Harris. Learn more about the organization and the man behind it by clicking either of these links.

Britt always taught us Titans that Wisdom is Cheap, and principal can find treasure troves of the good stuff in books. We hope only will also express their thanks to the Titans if the book review brought wisdom into their lives.

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