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Released August 01, 2023 | SUGAR LAND
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Written by Daniel Graeber for Industrial Info Resources (Sugar Land, Texas)--Exxon Mobil Corporation (NYSE:XOM) (Irving, Texas) recently highlighted its gains in carbon capture and storage (CCS) potential in its second-quarter earnings report, an emerging trend that's been met with controversy over whether that effort is truly part of the energy transition.
Oil and gas companies have been putting on a greener face as the energy transition accelerates with support from federal investments and shareholder pressure. To be clear, fossil fuels still dominate the energy sector, with coal and natural gas accounting for 55% of total U.S. electricity generation next year.
But progress is progress. The federal government sees net emissions of carbon dioxide (CO2) falling by around 4% from 2022 levels by next year.
Exxon built out its carbon offtake business with $4.9 billion to acquire Denbury Incorporated (NYSE:DEN) (Plano, Texas), a company with an established portfolio of some 1,300 miles of CO2 pipeline.
"This reflects the significant opportunity to profitably grow our Low Carbon Solutions business by creating a compelling customer decarbonization proposition with the potential to reduce Gulf Coast industrial emissions by 100 million metric tons per year," said Darren Woods, the chairman and chief executive officer at Exxon.
More than 70% of Denbury's midstream network is located in PADD 3, which is heavily polluted due to the dense network of oil and gas installations. A handful of energy companies, however, are already looking at the potential for CCS sites along the Gulf Coast as part of a broader remediation effort.
Denbury, before Exxon's purchase announcement, secured agreements that could see the development of two separate CCS facilities in Louisiana.
The two facilities could combine for 300 million metric tons of CO2 sequestration, with injections expected as soon as 2026. For a project in St. Charles Parish, the company said it would tap into an existing CO2 pipeline network in Louisiana with a 45-mile pipeline connection.
Apart from the pressure from general climate concerns, incentives outlined in the Inflation Reduction Act may be driving some of the revenue stream for CCS in the U.S. market. Producers can get $85 per ton when permanently storing CO2 and $65 per ton when utilizing the captured carbon for enhanced oil recovery (EOR).
The latter, however, is a source of contention. A late-2022 report from the Congressional Research Service (CRS) finds considerable interest in the potential for CCS to address climate change, though there are questions over end uses.
"While some policymakers and other stakeholders support CCS as one option for mitigating CO2 emissions, others raise concerns that CCS may encourage continued fossil fuel use and that CO2 could leak from underground reservoirs into the air or other reservoirs, thereby negating climate benefits of CCS," the report read.
Denbury received most of its revenue from EOR, which is facilitated by injecting CO2 into wells to push out more oil. CRS found that "most" carbon sequestration projects cater to EOR, while only "some" facilities capture and inject that CO2 into underground geological formations.
The International Energy Agency (IEA) said it expects to see 200 new CCS facilities in operation by 2030, drawing in millions of tons of CO2 each year. The U.S. market could see the CO2 capture potential increase by a factor of five from the estimated 80 facilities that are expected to start operations by 2030.
While the pace may seem impressive, the IEA said it's concerned because only a dozen or so commercial projects have reached a final investment decision. Industrial Info, meanwhile, finds there might not be enough midstream capacity to meet various decarbonization goals and the $180 billion or so in planned investments may fall short of what's necessary.
Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking over 200,000 current and future projects worth $17.8 Trillion (USD).
Oil and gas companies have been putting on a greener face as the energy transition accelerates with support from federal investments and shareholder pressure. To be clear, fossil fuels still dominate the energy sector, with coal and natural gas accounting for 55% of total U.S. electricity generation next year.
But progress is progress. The federal government sees net emissions of carbon dioxide (CO2) falling by around 4% from 2022 levels by next year.
Exxon built out its carbon offtake business with $4.9 billion to acquire Denbury Incorporated (NYSE:DEN) (Plano, Texas), a company with an established portfolio of some 1,300 miles of CO2 pipeline.
"This reflects the significant opportunity to profitably grow our Low Carbon Solutions business by creating a compelling customer decarbonization proposition with the potential to reduce Gulf Coast industrial emissions by 100 million metric tons per year," said Darren Woods, the chairman and chief executive officer at Exxon.
More than 70% of Denbury's midstream network is located in PADD 3, which is heavily polluted due to the dense network of oil and gas installations. A handful of energy companies, however, are already looking at the potential for CCS sites along the Gulf Coast as part of a broader remediation effort.
Denbury, before Exxon's purchase announcement, secured agreements that could see the development of two separate CCS facilities in Louisiana.
The two facilities could combine for 300 million metric tons of CO2 sequestration, with injections expected as soon as 2026. For a project in St. Charles Parish, the company said it would tap into an existing CO2 pipeline network in Louisiana with a 45-mile pipeline connection.
Apart from the pressure from general climate concerns, incentives outlined in the Inflation Reduction Act may be driving some of the revenue stream for CCS in the U.S. market. Producers can get $85 per ton when permanently storing CO2 and $65 per ton when utilizing the captured carbon for enhanced oil recovery (EOR).
The latter, however, is a source of contention. A late-2022 report from the Congressional Research Service (CRS) finds considerable interest in the potential for CCS to address climate change, though there are questions over end uses.
"While some policymakers and other stakeholders support CCS as one option for mitigating CO2 emissions, others raise concerns that CCS may encourage continued fossil fuel use and that CO2 could leak from underground reservoirs into the air or other reservoirs, thereby negating climate benefits of CCS," the report read.
Denbury received most of its revenue from EOR, which is facilitated by injecting CO2 into wells to push out more oil. CRS found that "most" carbon sequestration projects cater to EOR, while only "some" facilities capture and inject that CO2 into underground geological formations.
The International Energy Agency (IEA) said it expects to see 200 new CCS facilities in operation by 2030, drawing in millions of tons of CO2 each year. The U.S. market could see the CO2 capture potential increase by a factor of five from the estimated 80 facilities that are expected to start operations by 2030.
While the pace may seem impressive, the IEA said it's concerned because only a dozen or so commercial projects have reached a final investment decision. Industrial Info, meanwhile, finds there might not be enough midstream capacity to meet various decarbonization goals and the $180 billion or so in planned investments may fall short of what's necessary.
Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking over 200,000 current and future projects worth $17.8 Trillion (USD).
