By Christopher M. Matthews
Exxon Mobil Corp. says the time has come to turn capturing
carbon emissions into a real business, as it faces pressure from
activists to become a greener company.
That represents an about-face for the Texas oil giant, which for
years has held a pessimistic view of investing heavily to
commercialize carbon-capture projects, saying they made little
economic sense without massive government incentives.
Exxon, which is counting on carbon capture and storage as a
primary way to achieve its targets for reducing greenhouse gas
emissions, touted the recent creation of a new business unit to
commercialize the technology during its annual analysts day
Wednesday, saying political changes and other advances were
combining to make it more viable.
"We've made enough progress where we are bringing some of the
technology to the field now," Chief Executive Darren Woods said in
an interview. "Couple that with governments around the world
putting policies in place, investment interest in the space -- all
of this is coming together."
While the Biden administration has expressed support for carbon
capture, a process which captures emissions and deposits them
underground, many believe huge incentives are needed to spur its
deployment, and political hurdles remain. So far, the primary
commercial use for captured carbon has been deploying it to squeeze
more oil and gas out of the ground.
Exxon said Wednesday that carbon capture will be a $2 trillion
market by 2040 and that it is the cheapest way to address
emissions, citing a current U.S. tax credit of as much as $50 per
metric ton of captured carbon as less expensive than incentives to
promote electric vehicles.
Exxon pledged last month to invest $3 billion in its new
low-carbon unit through 2025, saying it has 20 projects in the
pipeline. Some of the projects Exxon highlighted have been under
consideration for years, according to current and former employees,
and weren't previously greenlighted because they were deemed
commercially unviable.
For example, managers raised cost concerns about a project to
capture carbon from Exxon petrochemical plants along the Gulf of
Mexico and inject it into underwater rock formations, the people
said.
An Exxon spokesman said costs are an issue in project
evaluations but financial considerations are changing as demand,
government policies and technologies evolve.
Exxon's new view comes after it posted a loss of $22 billion
last year, its first annual loss in modern history, and is facing
pressure from an activist investor and others to step up its
low-carbon investments.
The activist, Engine No. 1, which is pursuing a proxy fight to
nominate four new members to the company's board, has criticized
Exxon carbon-capture plans as an exercise in corporate window
dressing.
"There is little, if any, chance that carbon capture will enable
Exxon Mobil or any other oil major to avoid transforming its
business over the long-term should the pace of global
decarbonization accelerate," it said in a February letter to
Exxon's board.
Exxon has eschewed diversifying into renewable energy, as its
big European rivals BP PLC and Royal Dutch Shell PLC have begun to
do, and instead invested billions in carbon capture and other
technologies to reduce existing fossil fuel emissions.
But most of the company's carbon capture efforts to date have
involved using the greenhouse gas to produce more oil and gas.
Exxon frequently notes that it has captured more than 120
million metric tons of carbon over the last three decades, which it
says is 40% of all captured emissions world-wide since 1970. Nearly
all of that has come from one project: the Shute Creek Treating
Facility in Wyoming, which was constructed in the early 1980s.
The facility processes natural gas, separating out high levels
of carbon dioxide and other gases from methane. Exxon doesn't
actually store the carbon, but sells most of it to nearby drillers
that use it in a process called enhanced oil recovery, in which
carbon is pumped into older oil and gas reservoirs to increase
pressure and produce more fossil fuels.
Critics of carbon capture say that enhanced oil recovery negates
some of its benefits, since the carbon is used to unlock more
sources of carbon emissions.
Exxon has been a skeptical voice within the industry on the
near-term prospects of carbon capture, according to government
officials, academics and executives from rival companies.
Exxon played a central role in drafting a 2019 Energy
Department-sponsored report on carbon capture that determined
Congress would need to create an incentive of around $90 to $110
per metric ton of captured carbon to incentivize widespread
deployment of the technology.
A current tax credit, known as 45Q, gives companies $35 to $50
per ton, depending on how the carbon is handled. Mr. Woods said
Wednesday that 45Q wasn't sufficient to justify some capture
investments.
Some people involved in drafting the report, including
executives at some of Exxon's peers, felt that significant
investments in carbon capture could be justified at a far lower
priced incentive: less than $70 per ton, according to people
familiar with the process.
They argued among other things that technological improvements
would more dramatically bring down costs over time. Exxon and some
others involved disagreed, these people said, and their view was
ultimately reflected in the final report. John Mingé, a former BP
executive who led the study, said its conclusions were backed by
the steering committee and called it the most comprehensive report
on the topic.
In an online presentation on the findings in January 2020, Guy
Powell, an Exxon executive who was its point person on the report,
said companies would need significant policy changes to confidently
invest in large-scale carbon capture projects.
"We did not want to...overpromise what technology could bring
and somehow mislead what type of policy incentives would be needed
if it doesn't come," Mr. Powell said at the time.
Jeffrey Brown, a research fellow at Stanford University who
worked on the report and published a dissent, said it used
pessimistic assumptions about carbon capture's future costs that
resulted in estimates around 50% higher than past Energy Department
studies.
The report constituted "a call to inaction on carbon capture by
most of U.S. industry, at least until Congress enacts carbon
pricing or capture subsidies far above the hardest greens' fondest
political dreams," Mr. Brown said in an interview.
Write to Christopher M. Matthews at
christopher.matthews@wsj.com
(END) Dow Jones Newswires
March 03, 2021 11:26 ET (16:26 GMT)
Copyright (c) 2021 Dow Jones & Company, Inc.
Exxon Mobil (NYSE:XOM)
Historical Stock Chart
From Feb 2024 to Mar 2024
Exxon Mobil (NYSE:XOM)
Historical Stock Chart
From Mar 2023 to Mar 2024