ExxonMobil sees post ’27 payoff for customer-focused sustainability projects

HOUSTON (ICIS)–ExxonMobil expects that its pipeline of sustainability projects that targets third parties will start making significant contributions to earnings after 2027, the chief financial officer off the US-based major said on Wednesday.

In all, ExxonMobil is pursuing more than $20bn in lower emission investments in 2022-2027, of which half is focused internally and half is focused on reducing third-party emissions.

“We don’t yet see in 2027 really material earnings come from this third-party spend because it takes a while to actually ramp up the execution,” said Kathy Mikells, senior vice president and chief financial officer. She made her comments during an update about the company’s corporate plan.

“Much more of the earnings and cash flow from the investments that we’re making in this plan period actually start to come in the period beyond 2027.”

By 2030, these investments should generate 15% returns and cut third-party emission by more than 50m tonnes/year, ExxonMobil said.

In prepared remarks, ExxonMobil CEO Darren Woods said the company’s low carbon investments have the most potential for growth, albeit one exposed to uncertainty stemming from government policy and the strength of companies’ commitments to reducing emissions.

CARBON CAPTURE AND BLUE HYDROGEN
For carbon capture, the US Inflation Reduction Act (IRA) has been the primary driver for the market, Woods said. However, ExxonMobil is pushing for market forces to replace government regulations as the main driver for the industry.

The IRA was effective to stimulate and catalyze the market, Woods said. “But long term, we’ve got to move to market forces. That’s what we’re planning on.”

With that in mind, ExxonMobil is striving for its carbon capture business to be the lowest cost in the market, Woods said.

• ExxonMobil now has the largest CO2 pipeline network in the US following its $4.9bn acquisition of Denbury. It now operates a 1,300-mile CO2 pipeline network with access to more than 15 onshore CO2 storage sites. The company has the potential to profitably reduce more than 100m tonnes/year of emissions.
• ExxonMobil signed three commercial agreements to capture and store up to 5m tonnes/year of carbon dioxide (CO2) from the fertilizer, industrial gas and steel industries.
• It awarded a contract for its carbon capture and blue hydrogen project in Baytown, Texas. ExxonMobil could make a final investment decision (FID) on the project in 2024. Operations could start in 2027-2028.

LITHIUM BRINE EXTRACTION
ExxonMobil has started the first phase of a lithium project in the Smackover formation in Arkansas state, with output targeted for 2027.

By 2030, the company could produce enough lithium to supply 1m electric vehicles per year by 2030. The company will use conventional oil and gas drilling methods to access lithium-rich saltwater. ExxonMobil will then rely on its experience in refining and extraction to separate the lithium from the saltwater.

ExxonMobil’s focus on brine extraction distinguishes it from other companies that are relying on ore mining in the US.

Woods said ExxonMobil’s process will place it on the lefthand side of the supply curve, making the company the market’s low-cost producer.

RENEWABLE FUELS

• ExxonMobil’s Canadian affiliate, Imperial Oil, said in January that it would move forward with construction of a 20,000 bbl/day renewable diesel project at its Strathcona refinery near Edmonton, Alberta province. The plant will use a proprietary catalyst to convert blue hydrogen and renewable feedstock into diesel.
• ExxonMobil has 12 biofuel projects under development with an average expected return that exceeds 20%. These projects involve co-processing, bio-blending and asset reconfiguration.
• The company is working to supply 40,000 bbl/day of lower-emission fuels by 2025.

INTERNAL PROJECTS
Out of ExxonMobil’s $20bn in lower emission investments, half are focused on reducing third-party emissions.

• ExxonMobil expects to reach net-zero emissions in its oil and gas operations in the Permian Basin by 2030.
• It should reduce methane emission intensity from its assets by 70-80% by 2030.

EXXONMOBIL’S LOW-CARBON STRATEGY
For all of its low-carbon businesses, ExxonMobil is not pursuing projects that will require the company to develop new capabilities, Woods said. “Instead, we are looking for opportunities where our existing capabilities, our existing competitive advantages can be leveraged into an advantaged business.”

Carbon capture and lithium brine extraction makes the most of the company’s upstream business. Blue hydrogen takes advantage of ExxonMobil’s natural gas and chemical businesses. Once the lithium brine emerges from the ground, ExxonMobil will rely on its refining knowledge to produce a final product that can be used in EV batteries.

The large capital commitments and constrained time frame will make it challenging for small start-up companies to meet society’s demands for lower emissions, Woods said. “The world needs companies like ExxonMobil with our size and capabilities to actually make progress.”

Focus article by Al Greenwood

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