The ExxonMobil carbon capture announcement has stolen some of the thunder from the weekly ESG and Climate piece we have lined up for tomorrow, where we focus on what is ideal versus what is “good enough”. While CCS allows the fossil fuel industry to keep operating for longer, and in pockets possibly permanently, the ideas that we should move straight to renewable power and hydrogen are extremely naïve in their expectations around timing. We fully agree with ExxonMobil that CCS is the most logical and fastest way to make a meaningful dent in carbon emissions, especially in the US, quickly. This has been a consistent message in our work, and you can read more about it tomorrow.
Where we are a little confused is the cost that ExxonMobil is suggesting, as it is much higher than the estimates that we have and even looks high compared to some of the European projects. The proposal is to sequester the CO2 offshore, which would be more expensive than on-shore – we are assuming that ExxonMobil would still be looking at the same deep sub-surface rock that the on-shore projects are looking at, but by going offshore there are no land right issues to deal with, which could otherwise potentially be a deal-breaker in and around Houston. Plus, even if it is more expensive, off-shore is a core competence for ExxonMobil and the company likely has all the seismic data and understands the geology well – it will also not have to deal with drinking water contamination worries that face all on-shore subsurface projects – production and storage. But is it all worth the extra cost? One of the strategic advantages of the Gulf Coast Sequestration (GCS) project(s) in Louisiana is that the pore spaces largely sit beneath wholly-owned land – the GSC project(s) are much less expensive on a per-ton of sequestered CO2 basis. ExxonMobil has several pipeline right-of-ways in and around the Houston ship channel, which would likely be an advantage when trying to aggregate CO2 volumes - see below.
But perhaps the largest challenge that ExxonMobil will face today is credibility with both investors and those that it is asking for help. The oil industry in the US is very much out of favor with the broader investment community and also with an important core within the Administration. ExxonMobil is asking for handouts to get its project moving – it is unclear whether “big oil” will get those handouts, however good the basic idea might be.
