In a presentation to investors earlier this week, Exxon CEO Darren Woods and the company’s president of Low Carbon Solutions Dan Ammann, said the company’s decarbonization arm has the potential to surpass oil and gas revenue.
“The world’s climate challenge is immense, and the opportunity it creates is equally immense,” said Darren Woods, during the presentation, which contained projections that the addressable market can be $6 trillion by 2050.
“(This business)… is going to have a much more stable, or less cyclical, profile,” added Dan Ammann.
The investor presentation provided details about the five energy-related sectors Exxon will focus its efforts – electricity generation (which generates 40% of CO2 emissions as of 2021), industrial (28%), commercial transport (14%), light-duty transport (10%) and residential/commercial (10%).
The $6 trillion figure for the potential size of low-carbon markets (called “Molecules” by the company) consists of carbon capture, hydrogen and biofuels and is part of a broader $14 trillion market that also includes wind, solar, geo/hydro and nuclear.
Growth phases for ExxonMobil’s Low Carbon Solutions unit. Source: ExxonMobil investor presentation.
Unlike some other oil majors, Exxon has not invested in this second group of renewables, with a clear focus on the Molecules segment.
The company has already started working in this direction, higlighting three clusters with high emissions – Baytown, Beaumont and Baton Rouge. For each of them the Low Carbon Business Solutions unit already has projects under way or in the planning phase.
Key clusters for low-carbon projects. Source: ExxonMobil investor presentation
Earlier this week Exxon announced a partnership with Linde for transportation and permanent storage of CO2 in Beaumont.
There have also been rumors about acquiring Denbury, an independent oil and gas company, that has leveraged its experience in enhanced oil recovery and recently focused on building an extensive CO2 transportation and storage network in the Gulf of Mexico and Rocky Mountain regions.
One of the key points made in the presentation was about policy and pricing. CEO Woods has repeatedly asked for a price on carbon to be established and signaled that he sees $100 per ton as the minimum level that will make business viable.
The Inflation Reduction Act from 2022 (through the 45Q tax credit) has established an $85 credit for point source carbon capture and up to $180 for technologies that use carbon removal from the atmosphere.
A bipartisan proposal called the Captured Carbon Utilization Parity Act is making its way to the Senate floor to reduce the difference between the two forms of capture.
Investing in decarbonization opportunities seems to be high on the Exxon list of priorities, even though 2022 saw record profits from its traditional oil and gas source. Coming in at $56 billion, profits jumped after high oil prices persisted throughout the year following the recovery after the Covid-related slowdown and the war in Ukraine.