Exxon faces $2 billion loss in California oil property sale

Exxon Mobil Corp. is expected, according to reports, to lose about $2 billion when it sells an oil field off the coast of California, where an oil spill halted operations in 2015.

The oil giant is set to sell the offshore oil and gas field to Sable Offshore, founded and operated by James Flores, for $643 million.

FILE – Cleaners monitor the source of an oil pipeline outage near Refugio State Beach, North Giulietta, California. The owner of an oil pipeline that spewed thousands of barrels of crude off the shores of Southern California in 2015 agreed to pre-approval ((AP Photo/ Michael A. Mariant, File)/ AP Newsroom)

Reuters reported that Flores will borrow 97% of the funds to purchase from Exxon under a five-year loan.

Sable Offshore is a blank check company, or a company that raises money in order to get business.

US crude oil exports to Asia halted to record high

Reuters reported that the agreement between Flores and Exxon is that it must resume operations at the Santa Ynez field by 2026 or face Exxon to restore operations.

Exxon is selling the oil and gas field after failing to resume operations due to a 2015 pipeline leak that spilled more than 120,000 gallons of oil into the Pacific Ocean.

In its plans to resume operations, Exxon proposed using dozens of trucks to ship oil to refineries, but Santa Barbara officials rejected the plan again in March.

California Oil Spill Amplification Settlement

FILE – Workers in protective suits continue to clean up a polluted beach in Huntington Beach, California, on October 11, 2021. A pipeline operator has agreed to pay $50 million to Southern California fishermen, tour operators and landlords who (AP newsroom)

Sable noted in a presentation that with Flores and his team taking over operations, they will seek the necessary permits to pump 28,100 barrels of oil and gas per day from 112 existing wells, and possibly another 100 by 2024.

As part of the sale, Sable will acquire three oil and gas rigs in the Santa Ynez oil field, approximately nine miles offshore, along with oil and gas processing facilities and a pipeline.

Pipeline operator agrees to $50 million California oil spill settlement

According to Reuters, the field was first exploited in the 1970s and oil production began in 1981.

The spill in 2015 forced California to close popular beaches due to an oil sheen that spread for miles.

California oil spill

FILE – An oiled bird flaps its wings in the middle of Refugio State Beach, north of Goleta, California. The owner of the oil pipeline that dumped thousands of barrels of crude off the shores of Southern California in 2015 agreed to pay $230 million to settle ((AP Photo/Jae C. Hong, File)/AP Newsroom)

The spill was blamed for the deaths of more than 300 animals, including sea lions and pelicans, and sent tarballs that drifted 10 miles to beaches in Los Angeles.

In the end, Plains All American Pipeline was fined $3.35 million for causing California’s worst coastal spill in 25 years. Prosecutors sought $1 billion in penalties.

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Plains All American Pipeline apologized for the leak and paid for the cleaning. The company’s 2017 annual report estimated the costs from the leak at $335 million, not including lost revenue.

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