ExxonMobil’s CCS push [NGW Magazine]
Oil and gas giant ExxonMobil has taken a step forward with regard to the energy transition, announcing on February 1 that it was launching a new low-carbon business. The business, ExxonMobil Low Carbon Solutions, will initially focus on carbon capture and storage (CCS).
The news marks a shift in the US generally where companies have been slower to adapt their businesses to the new pressures. Indeed, French major Total quit the American Petroleum Institute owing to the rift in policy objectives.
The National Gas Company of Trinidad and Tobago Limited (NGC) NGC’s HSSE strategy is reflective and supportive of the organisational vision to become a leader in the global energy business.
The arrival of the new US president Joe Biden – who is taking a tougher line than his predecessor, Donald Trump, on decarbonisation – might have encouraged the biggest US major. Indeed, one of Biden’s first moves upon taking office was to announce that he would bring the US back into the Paris Agreement, which seeks to limit global warming. The launch of ExxonMobil’s new business also follows mounting pressure from shareholders.
While it has lagged its European rivals on embracing the energy transition, ExxonMobil is keen to emphasise its existing CCS credentials. The super-major said that it already has more than 30 years’ experience in CCS technology and owns about 20% of global carbon capture capacity. It added that it accounts for around 40% of all the anthropogenic carbon dioxide (CO2) captured globally to date.
“They've been quietly conducting a great deal of [research and development] within a number of partnerships in this over probably the past decade,” Rich Powell, the executive director of the think-tank ClearPath, told NGW. He cited ExxonMobil’s collaborations with FuelCell Energy and more recently, Global Thermostat. Recent years have seen ExxonMobil pick up the pace on its CCS efforts, with this now set to accelerate further still.
“In 2018 we formed a carbon capture venture to identify and develop potential CCS opportunities using both established and emerging technologies,” an ExxonMobil spokesperson told NGW. “The activities involved work with governments, industry, academia and technology companies to advance projects. Today we have more than 20 opportunities under evaluation.”
The company has provided some details of some of its projects globally, including opportunities in two regions of the US. In Wyoming, it is applying for permits to expand its La Barge CCS facilities, which capture around 7mn metric tons (mt)/year. ExxonMobil said this was the largest amount of CO2 captured by any industrial facility in the world. The expansion would enable an additional 1mn mt/yr of CO2 to be captured.
And on the US Gulf Coast, ExxonMobil said it was assessing a number of projects to collect CO2 from industrial sources for storage in both onshore and offshore geologic formations. Included in these projects is a CCS hub in southeast Texas.
ExxonMobil’s low-carbon push comes at a time when more and more countries are turning to CCS as a critical component of their energy transitions. In the US, the company’s plans will benefit from an evolving regulatory framework that has become increasingly supportive of CCS in recent years.
“The good news for CCS in the US is we hit sort of a policy trifecta in December to further scale up the technology,” Powell said. He went on to list the Energy Act of 2020, in which CCS fared “better than any other technology”, the extension of the 45Q tax credit for carbon sequestration and the finalisation of an Internal Revenue Service (IRS) rule on capturing that 45Q tax credit.
A former senior adviser at the Center for Climate and Energy Solutions (C2ES) think-tank, Jeffrey Bobeck, also commented in a personal capacity on the favourable extension of the tax credit.
“One of the big problems with the original legislation is that construction had to begin by 2024, and that's just too soon for what usually is a five-year project,” Bobeck told NGW, referring to new CCS projects that would benefit from the tax credit. “So Congress extended that by two years, and it's expected that there will be consideration of extending that yet further, maybe to 2030.”
But while there have been significant recent steps forward, there are also further obstacles to overcome, with Powell citing the Class VI permitting process for wells that would be used for geologic sequestration as an example.
“There's really only one functioning Class VI well right now in the country that Archer Daniels Midland put in the ground and got permitted four or five years ago and they've basically said they will never do another one, because the first process was so onerous,” he said.
It is possible to give states primacy over the Class VI process, potentially allowing permitting to speed up, but only two – North Dakota and Wyoming – have taken this option thus far, though other states’ applications for primacy are pending.
On a broader regulatory level, there is also some uncertainty over the direction energy policy will take under Biden.
“What I fear at this point is that there is going to be great pressure on the Biden administration to basically jump over the deployment of carbon capture and try to jump directly to deployment of renewables,” Bobeck said. However, the idea that CCS will not be needed if renewables are deployed more widely is a fallacy, he argued. “Every major energy agency in the world has said there needs to be some level of carbon capture deployment by 2050 to ensure the best chance of meeting the targets for the Paris Accord.”
Bobeck further commented that in a very partisan era for the US, there has been “great bipartisan support for carbon capture”. If this can be preserved, this will make the path forward easier for CCS, at least from a regulatory standpoint.
Beyond the regulatory sphere, the economics of CCS technology also need to improve. Both Bobeck and Powell highlighted the importance of deploying CCS at scale as the next big step for the industry.
“Scale is the challenge, and we will only improve economics as quickly as we're able to build repeatable projects,” said Powell. “The problem with carbon capture is that it has been a lot of first-of-a-kind demonstrations, and very rarely do we build the second version of that same facility. All of the designs and all of the estimates indicate the second facility, designed exactly the same would be somewhere between 30-50% the cost of the first one, but we've never built the second one for a variety of reasons,” he added.
However, Powell said he was now “very optimistic” that conditions were right for companies to start replicating their CCS projects now. And the ExxonMobil spokesman said his company’s goal would be to bring CCS projects to commercial scale as the technologies behind them mature.
The participation of large, relatively experienced and well-resourced companies such as ExxonMobil is a positive sign. Powell highlighted the balance sheets, technical know-how and track record in delivering mega-projects that major energy companies bring to the table, saying these are the players to turn to in order to tackle climate change on a global level.
ExxonMobil’s announcement about its new business and $3bn worth of investment into low-carbon initiatives by 2025 came out around the same time as its capital budget for 2021.
“While this level of investment is small relative to the cumulative capex range of $95-120bn over the same period, it is a step in the right direction,” investment bank Morgan Stanley wrote in a note. “As one of the largest global energy companies, and one with a strong history of research and development, [ExxonMobil] is uniquely positioned to implement low-carbon technologies at scale.”