Exxon Mobil is sniffing out potential value in the low-carbon space utilizing its existing expertise from downstream to upstream.
Projects seeking capital, however, must generate returns high enough to satisfy shareholders while meeting energy needs, even if the project is part of a new market in the making. That was the gist of remarks from Exxon Mobil CEO Darren Woods on the company’s latest quarterly earnings call.
“Any investment will have to generate competitive returns, possess clear competitive advantages, and be resilient to the bottom of any commodity cycle,” Woods said. “As we’ve demonstrated, our capital allocation decisions have generated robust earnings, cash flow and shareholder returns.”
The company has been active in the low-carbon products and services, recently signing agreements related to carbon capture and storage (CCS), hydrogen and lithium. And the supermajor is bringing the full weight of its technological prowess to bear on unlocking value in low carbon, even in markets that don’t yet exist.
Still, as Woods alluded to, the company is looking returns. It found them in the second quarter, as Exxon reported earnings of $9.2 billion, its second highest second-quarter earnings in the past decade, on high product sales and oil production. Earnings were about $7.9 billion about a year ago.
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Since restructuring in 2022, when its refining and chemicals businesses merged to create product solutions, Exxon has sought more ways to capitalize on its core capabilities.
The company's other two business units are upstream and low carbon solutions.
“Some of it includes our existing footprint, but a lot of it includes our ability to upsell and to identify value and use applications and combine that with a technology organization that’s very focused on applying core technology capabilities to business challenges and business opportunities,” Woods said.
Applications that would not have been identified previously because of the organization’s structure are being unlocked, he added.
The Texas-based company sees opportunities in carbon materials, polyolefin thermosets, hydrogen, lithium and carbon capture and storage, with projects and new ventures underway. These include a new resin system called Proxxima, entry to the lithium supplier market with direct lithium extraction (DLE) technology and moves to become a major hydrogen and carbon capture player.
However, low-carbon businesses have unique challenges, particularly in areas where markets don’t yet exist, Woods said, using carbon capture as an example.
“There’s not an existing market today that pays for carbon removal that’s being incentivized with government policy,” he said. “Government policy is forming while at the same time you’re trying to build the infrastructure to support that market, the logistics, the supply and then at the same time develop a customer base.”
Piecing together multiple moving parts while establishing a business and business model with long-term sustainability and competitive returns makes the low-carbon space complex, according to Woods. “But I have to say, we’re geared to do that kind of work. Our experience lends itself to that,” he said.
Exxon is pursuing more than $20 billion in lower emissions opportunities through 2027. These include biofuels, CCS, hydrogen and lithium. Together, they are expected to generate aggregate returns of about 15%.
Exxon projects global energy demand will be 15% higher in 2050 than it is today and oil demand will remain steady at about 100 MMbbl/d as renewables and natural gas demand grows.
“The world will come to rely more on technologies where we have an advantage, including hydrogen, biofuels and carbon capture and storage,” Woods said. “A serious approach to the transition should focus on moving the world from high carbon to low carbon energy, not simply from oil and gas to wind and solar.
“The data, science and economics all support this as fundamentally necessary.”
Hydrogen
Exxon’s planned hydrogen facility at its Baytown, Texas, facility is expected to be the world’s largest. The site plans to produce 1 Bcf of hydrogen daily and more than 1 million tons of ammonia annually, capturing more than 98% of associated CO2 emissions.
The company is working through engineering for the project as it awaits federal action.
“A critical element of that is getting the IRA [Inflation Reduction Act] legislation translated into final regulations… We’re optimistic that the regulations will reflect the intent of the legislation,” Woods said. “And if it does, I think we’ll have a very attractive project that we can then FID once those regulations are finalized.”
In late July, Exxon signed its fourth CCS agreement with a major industrial customer, agreeing to transport and permanently store up to 500,000 metric tons per year of captured CO2 from CF Industries’ complex in Yazoo City, Mississippi.
“We see continued opportunity and growth with good returns in the carbon capture side of the equation,” he said.
Lithium
Exxon is also combining its subsurface exploration, drilling and chemical processing expertise to advance a new production method for lithium, a key energy storage system ingredient. Exxon has produced lithium carbonate from the Smackover Formation in Arkansas using DLE technology.
“We’re not looking to rush this through and get something, get money spent. We’re looking to make sure that we build a very strong long-term foundation. ... It’s all about establishing successful long-term foundations.”
Proxima, Carbon Ventures
Proxxima, as Woods tells it, transforms lower value gasoline molecules into high-performance thermoset resin used in coatings, lightweight construction materials, advanced composites for cars and trucks, including battery boxes for electric vehicles.
The systems also have less than half of the greenhouse-gas emissions than most traditional thermoset resins on a cradle-to-gate basis, the company said.
“We see the total addressable market potential for Proxxima at 5 million tons and $30 billion by 2030, with demand growing faster than GDP and returns above 15%,” Exxon Mobil CFO Kathy Mikells said in her prepared remarks. “Based on this, we’re progressing projects in Texas, with startups planned in 2025, that will significantly expand our production of Proxxima.”
In carbon materials, transforming carbon into products, Exxon is targeting segments with margins of several thousand dollars per ton with growth rates outpacing GDP, she said. “Carbon Ventures is still early in the technology cycle, but I think we’ve gone far enough along to see some real opportunity there.”