ExxonMobil is meeting investor and policy maker demands for a more robust response to climate change not by cutting emissions but by managing them.
Where other large oil companies are pivoting towards renewables, ExxonMobil says it will build on existing strengths — from carbon capture and storage (CCS) and advanced biofuels to a history of driving capital and operational efficiencies — to build multi-billion dollar businesses that will trap and tame emissions. And while its peers envision lofty emissions reduction plans through to 2050, ExxonMobil is keeping a shorter horizon in focus — spelling out specific goals just to 2025, while noting that the tools and technology required for larger plans are yet to be built.
"It is difficult to schedule innovation and breakthroughs," chief executive Darren Woods says in describing ExxonMobil's new carbon business. The firm claims an edge in carbon management, having used it for years in enhanced oil recovery. And it argues that carbon capture with underground sequestration is a more cost-effective emissions reduction strategy than electric vehicles, carbon pricing and low-carbon fuel credits, based on the US' 45Q tax credit.
ExxonMobil estimates that the global market for carbon capture could grow by 35pc/yr to hit $2 trillion by 2040 — covering sequestration and the use of carbon to make building materials such as steel and cement. The firm also has a leading position in hydrogen, producing 1.3mn t/yr of the fuel, for which it says the global market could grow by 30pc/yr to hit $1 trillion in 20 years. Hydrogen-powered fuel cells can help reduce emissions in hard-to-decarbonise industries such as transportation and manufacturing, Woods says.
"In the not too recent past, the litmus test around participation in this space or commitment to climate change really went into wind and solar and talking about power generation," Woods said during the company's investor day on 3 March. "I think the conversation has evolved substantially in the last year."
ExxonMobil is not even leaning on the old saw of natural gas as a "bridge fuel" to the energy transition as part of its script. Reiterating a recently reduced capital expenditure (capex) plan of $20bn-25bn/yr for 2022-25, the firm makes clear that it is willing to slow the pace of its investments in major LNG projects in Mozambique and Papua New Guinea as it tries to drive costs down further.
The firm expects its oil and natural gas production through to 2025 to stay in line with 2020 levels of 3.7mn b/d of oil equivalent (boe/d) — ditching a previous plan to reach 5mn boe/d — as it focuses on offshore Guyana, Brazil and the US Permian basin. It argues that growing Permian output is a lower-carbon move, as existing developments in the region and its well-known properties make it a low-cost oil source with a much smaller carbon footprint than most areas.
Cure for carbon
Investor reactions to ExxonMobil's chosen path are mixed. Activist firm Engine No 1 — which has been agitating for more capital discipline and a board more in tune with green energy innovation — is not impressed with the plans unveiled, saying they are still a half measure. It is joined by a new group of investors, Coalition United for a Responsible Exxon (CURE), which represents about $2.5 trillion in assets and is calling on the major to commit more capital to net zero emissions.
But ExxonMobil's share price has recovered by around 75pc since the company announced its reduced capex plans in late October, and rose by nearly 4pc after its investor day. "We see the path forward as striking a good balance on capital investment between transition and traditional," US bank Tudor Pickering Holt says. "We'll look forward to incremental details for transition spending, particularly CCS, and on the returns potential from the business as investments progress."
