Unlikely proponents of US decarbonization efforts are gaining endorsement from the Biden administration as Big Oil begins investing heavily in carbon capture and storage technologies. The industry, already energy experts, appears to be turning to Exxon and other oil majors to help decarbonize in the race to net-zero emissions. ExxonMobil announced last month that it returned positive quarterly earnings of $19.7 billion for the third quarter of 2022. At this point, Exxon had $15.2 billion in investments in 2022, including $5.7 billion in capital and exploration spending. By the end of the year, the energy company wants to have invested 24 billion US dollars. In addition, oil production reached a record 560,000 oil equivalents, 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, Exxon Chairman and CEO specified: “The investments we made ourselves during the pandemic have allowed us to increase production to meet consumer needs. Tight cost controls and growth in 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 by signing the largest customer contract of its kind for carbon capture and permanent storage, demonstrating our ability to offer competitive emissions reduction services to major industrial customers around the world.”
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In addition to announcing record profits and production levels this year, Exxon has attracted the attention of industry leaders and governments worldwide by driving full steam ahead with its decarbonization plans. This year, the US oil and gas company signed the largest-ever commercial carbon capture and storage (CCS) deal with a goal to capture and store up to 2 million tons of carbon dioxide each year — the equivalent of taking 700,000 gasoline-powered cars from the streets.
Exxon has partnered with CF Industries, a manufacturer of hydrogen and nitrogen products, to develop CCS technologies for use in its operations. CF Industries will use the technology to capture up to 2 million tons of CO2 annually from its Louisiana manufacturing facility beginning in 2025. This supports the state of Louisiana’s goal of achieving net-zero carbon emissions by 2050. Exxon will support the project through additional partnerships alongside companies with expertise in CCS technologies. The oil company also signed a deal with EnLink Midstream to transport the CO2 to secure permanent underground geological storage.
And this month Exxon announced another big CCS deal with Indonesian state-owned Pertamina for $2.5 billion. Indonesia hopes to set up a CCS hub aimed at decarbonizing key industrial sectors such as refineries, chemicals, cement and steel. This supports the government’s goal of achieving net-zero carbon emissions by 2060. A joint study by the two companies showed a potential carbon storage capacity of one billion tons in the oil and gas fields operated by Pertamina. Incorporating this technology into oil and gas operations is expected to increase the longevity of Indonesia’s fossil fuel production while supporting decarbonization and creating jobs in the industry.
Due to its recent tilt towards global CCS investments, Exxon appears to have attracted the attention of the Biden administration, which could become a key support for Big Oil’s decarbonization efforts. The Inflation Reduction Act (IRA), introduced in November, offers several financing options for companies looking to combat climate change through renewable energy and decarbonization projects. Tax credits are offered to companies using CCS techniques in their operations to encourage wider adoption of the technology.
As the US gradually transitions from fossil fuels to renewable alternatives, many major oil and gas companies are trying to ensure their profits remain stable by investing in renewable energy and other industries that support their existence in a low-carbon world. The IRA could give Exxon and other oil majors the incentives they need to invest heavily in CCS technologies as multiple industries seek support from CCS experts to decarbonize.
Exxon currently aims to invest at least $15 billion in CCS by 2027. Dan Ammann, President of the Low Carbon Solutions Company explained “We see a big business opportunity here.” He added: “We’re seeing interest from companies across a range of industries, a range of sectors, a range of regions.” Meanwhile, explained Julio Friedmann, senior scientist at Carbon Direct in New York: “We want oil companies to be active participants in CO2 reduction… I expect this can become a flagship project.”
As Exxon continues to invest heavily in carbon capture and storage, it seems that a key player in Big Oil could be just what the U.S. needs to help decarbonize its industries. With the support of the Biden administration through the IRA, it certainly seems possible that oil and gas companies could gain political support for their carbon reduction efforts even if they don’t curb oil and gas production. 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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