ExxonMobil sees first mover advantage, exponential growth opportunity in Low Carbon Solutions

NEW YORK (ICIS)–ExxonMobil sees a huge growth opportunity in its Low Carbon Solutions business and aims to be a first mover in this space with foundational projects in hydrogen/carbon capture and storage (CCS) and biofuels, primarily starting in the US, executives said on Tuesday.

“The world’s climate challenge is immense, and the opportunity it creates is equally immense,” said Darren Woods, CEO of ExxonMobil, at a webcast with investors, noting the market for emissions reduction could reach $14tr by 2050.

“We’re working to establish a competitively advantaged foundation that secures a leading position in this new market focused on the hard-to-decarbonise sectors where cost effective solutions are lacking and where we can make a unique and significant contribution,” he added.

Within the overall $14tr potential market, ExxonMobil’s initial focus will be on the $6tr portion in CCS, hydrogen and biofuels. In terms of end markets, the focus will be on abating emissions in power generation, industrial and commercial transport.

The sectors ExxonMobil is focusing on represent around 8x the emissions of light vehicle transport, according to the company.

“The challenge is enormous. To tackle it, the world needs large, world-scale solutions. We need them deployed globally and at much lower cost than today,” said Woods.

“The world needs to establish a new industry – a carbon reduction industry with new value chains and products, and we need it sooner rather than later,” he added.

ExxonMobil sees itself uniquely positioned to create these new low carbon value chains with its ability to execute massive projects as its done in upstream oil and gas, refining, chemicals and liquefied natural gas (LNG).

The company plans to spend $17bn in its Low Carbon Solutions business from 2022-2027 – 60% of which will be focused on reducing its own emissions, and 40% focused on reducing the emissions of others. For itself, ExxonMobil is targeting a 20-30% reduction in greenhouse gas intensity by 2030 versus a 2016 base, and net zero Scope 1 and 2 emissions by 2050.

“At our core, we’re a technology company that manages and transforms molecules at scale,” said Woods.

Clear and consistent government policies supporting decarbonisation, such as those in the US Inflation Reduction Act (IRA) are critical to lowering emissions as they can significantly bring down the cost of abatement, he pointed out.

While the world has a long way to go to decarbonise, “a journey of a thousand miles begins with a single step”, said Woods, quoting a Chinese proverb.

ExxonMobil views its Low Carbon Solutions strategy in three phases. In its first phase, called 0-1, it will build foundational projects in hydrogen/CCS and biofuels, and sees revenue potential in the billions of dollars. Ultimately, in 10 years and beyond in phase 3, it sees revenue potential in the hundreds of billions of dollars.

This could potentially be larger than ExxonMobil’s base businesses today, said Dan Ammann, president of ExxonMobil Low Carbon Solutions.

“One of the things that’s been surprising to me coming into this space is how few definitive projects have been announced in the industry so far. There’s been lots of press releases on collaborations and MoUs, but very few definitive project agreements,” said Ammann.

ExxonMobil will initially focus on projects that make sense with today’s policies, technologies and infrastructure.

BAYTOWN BLUE HYDROGEN AND CCS
The company plans to build the world’s largest blue hydrogen project in Baytown, Texas, with up to 1bn cubic feet/day of capacity for start-up in 2027-2028 leveraging existing infrastructure at the site, including the port to export blue ammonia (produced from blue hydrogen).

“We’re seeing very significant demand in the market for Baytown offtake, both for the local hydrogen and fuel switching markets as well as ammonia for export,” said Ammann who also noted strong interest from other new and existing customers, especially in its LNG value chain.

In February, South Korea’s SK Inc Materials signed a heads of agreement (HOA) with ExxonMobil to offtake blue ammonia from ExxonMobil’s planned blue hydrogen project in Baytown.

Supporting this blue hydrogen facility will be a large-scale CCS network which will also offer CCS capacity to 3rd party emitters in the Houston area. The CCS network would be able to capture up to 7m tonnes/year of CO2 from the blue hydrogen facility, with another 3m tonnes/day available to 3rd party emitters, said Ammann.

ExxonMobil in January awarded a FEED (front end engineering and design) contract for this project to Technip Energies, and a final investment decision (FID) is expected by 2024.

BEAUMONT CO2 OFFTAKE WITH LINDE
ExxonMobil and Linde on 4 April announced a CO2 offtake agreement associated with Linde’s planned new hydrogen project in Beaumont, Texas. The Linde project is expected to start up in 2025 and would supply OCI Global’s new world-scale blue ammonia plant. ExxonMobil will transport and store up to 2.2m tonnes/year of CO2 from Linde’s hydrogen plant.

“It’s not hard to imagine us leveraging this for future potential activity at our nearby Beaumont site, and obviously we’ll be welcoming other 3rd party emitters to join as well,” said Ammann.

BATON ROUGE CCS WITH CF INDUSTRIES
In Louisiana, ExxonMobil is progressing on its CCS project to capture and store up to 2m tonnes/year of CO2 from CF Industries’ fertilizer plant in Donaldson. Start-up is scheduled for early 2025.

ExxonMobil is developing its CCS site at Pecan Island and working jointly with EnLink Midstream on the midstream transport infrastructure.

“We expect other emitters joining this network before too long… This is adjacent to our existing operations in Baton Rouge and we’ll be looking at future integration opportunities here, just as we’re doing at Baytown today,” said Ammann.

“Looking ahead, we expect to leverage the value chains we’re building here for new carbon negative opportunities in the biofuels and direct air capture areas,” he added.

The nearby Mississippi River Corridor has some of the highest concentration of industrial emitters and ExxonMobil expects opportunities in adjacent value chains, including integrating them into its complex in Baton Rouge, Louisiana, the executive said.

Two key areas that are underestimated in the path to net zero are the role of infrastructure and particularly the need to reuse existing assets, and the need for “truly negative carbon solutions” such as direct air capture technology to offset the hardest to abate sources of emissions, said Ammann.

BIOFUELS IN CANADA
On the biofuels front, ExxonMobil in January announced a FID for its subsidiary Imperial Oil to invest $560m to build the largest renewable diesel plant in Canada at Strathcona with 20,000 bbl/day of capacity using local canola-based feedstock.

The project will use blue hydrogen with CCS with start-up targeted for 2025. It would reduce CO2 emissions by 3m tonnes/year versus using conventional fuels, according to the company.

ExxonMobil plans to supply up to 200,000 bbl/day of lower emissions fuels by 2030.

FULL PIPELINE OF PROJECTS
The company also has a “full pipeline of projects” beyond these foundational projects, Ammann said.

Investment in foundational projects for its 3rd party business in the 2022-2027 timeline is around $7bn with the first revenue from CCS potentially coming in by 2025. The backlog of next phase projects is around 4x the size of its current projects, he noted.

“As we look at the global opportunities, we’re seeing the most activity here in the US, driven by the IRA, and in Asia-Pacific we’re seeing energy customer activity ramping up, and Europe’s still evolving as policy there is more proscriptive focusing on how emissions should be reduced, versus on what we’re trying to get done,” said Ammann.

“The IRA has increased the momentum and the velocity of projects that we’re seeing – both in terms of what we have announced while in execution and in the pipeline before this. We’re also focused on leading the way and being first to market, and helping define how these value chains work,” he pointed out.

ExxonMobil’s Low Carbon Solutions business is ultimately expected to be less cyclical than its base businesses as it will be based on long-term contracts, and high growth, generating double-digit returns on investment, he noted.

Focus article by Joseph Chang

Article thumbnail: ExxonMobil’s Baytown, Texas site. Source: ExxonMobil

(recasts with correct spelling of executive Ammann throughout)