Unlikely supporters of U.S. decarbonization efforts are gaining increasing approval from the Biden administration as Big Oil begins to invest heavily in carbon capture and storage technology. Already experts in energy, it seems that industries are turning to Exxon and other oil majors to help decarbonize in the race to net-zero emissions. ExxonMobil announced last month that it had once again seen positive quarterly earnings, of $19.7 billion for the third quarter of 2022. By this point, Exxon had made $15.2 billion in investments in 2022, with $5.7 billion going toward capital and exploration expenditures. By the end of the year, the energy firm expects to have invested $24 billion. In addition, its oil output reached record levels, at 560,000 oil-equivalent with total production increasing by 50,000 oil-equivalent bpd, in response to growing demand as the world faced oil shortages due to sanctions on Russian crude.
Darren Woods, chairman and CEO of Exxon stated: “The investments we've made, even through the pandemic, enabled us to increase production to address the needs of consumers. Rigorous cost control and growth of higher-margin petroleum and chemical products also contributed to earnings and cash flow growth in the quarter. At the same time, we are expanding our Low Carbon Solutions business with the signing of the largest-of-its-kind customer contract to capture and permanently store carbon dioxide, demonstrating our ability to offer competitive emission-reduction services to large industrial customers around the world.”
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In addition to announcing record earnings and production levels this year, Exxon has been catching the eyes of industry leaders and governments worldwide by going full steam ahead on its decarbonization plans. This year, the U.S. oil and gas firm signed the largest-of-its-kind commercial carbon capture and storage (CCS) agreement, with aims to sequester and store up to 2 million metric tonnes of carbon dioxide each year – the equivalent of taking 700,000 gasoline-powered cars off the roads.
Exxon has partnered with CF industries, a hydrogen and nitrogen product manufacturer, to develop CCS technologies to use in its operations. CF Industries will use the technology to capture up to 2 million metric tonnes of CO2 annually from its manufacturing plant in Louisiana, commencing in 2025. This supports the State of Louisiana’s target of achieving net-zero carbon emissions by 2050. Exxon will support the project through additional partnerships alongside firms with expertise in CCS technologies. The oil firm also signed a deal with EnLink Midstream to transport the CO2 to secure, permanent, underground geologic storage.
And this month, Exxon announced another major CCS deal with Indonesia’s state-owned Pertamina, for $2.5 billion. Indonesia hopes to establish a CCS hub, aiming to decarbonize key industry sectors, including refining, chemicals, cement, and steel. This supports the government’s target of net-zero carbon emissions by 2060. A joint study from the two companies showed a potential carbon storage capacity of one billion tonnes in the Pertamina-operated oil and gas fields. The incorporation of this technology into oil and gas operations is expected to boost the longevity of Indonesia’s fossil fuel output while supporting decarbonization, as well as boosting jobs in the industry.
Based on its recent inclination to global CCS investments, it appears Exxon has caught the eyes of the Biden administration, which may become a major support of Big Oil’s decarbonisation efforts. The Inflation Reduction Act (IRA), which was launched in November, has several funding opportunities available for companies looking to combat climate change through renewable energy and decarbonisation projects. Tax credits will be offered to companies using CCS techniques in their operations to encourage more widespread adoption of the technology.
As the U.S. gradually transitions away from fossil fuels to renewable alternatives, many major oil and gas companies are looking to ensure their profits remain stable through investments in renewable energy and other industries that will support their existence in a low-carbon world. The IRA may offer Exxon and other oil majors the incentives they need to invest heavily in CCS technologies as several industries seek support from CCS experts to decarbonize.
Exxon is currently aiming to invest at least $15 billion in CCS by 2027. The firm’s Low-Carbon Solutions president Dan Ammann explained “We see a big business opportunity here.” He added, “We’re seeing interest from companies across a whole range of industries, a whole range of sectors, a whole range of geographies.” Meanwhile, Julio Friedmann, chief scientist at Carbon Direct in New York, stated “We want oil companies to be active participants in carbon reduction… It’s my expectation that this can become a flagship project.”
As Exxon continues to invest heavily in carbon capture and storage, it appears that a major player in Big Oil may be just what the U.S. needs to help decarbonize its industries. With support from the Biden Administration, through the IRA, it certainly appears that oil and gas firms will be able to garner political support for their carbon-reducing actions, even if they fail to curb their oil and gas output. Perhaps surprisingly, Exxon could provide the blueprint for other companies investing in CCS technologies to follow.
By Felicity Bradstock for Oilprice.com
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