Join +750K new investors every month who copy stock picks from billionaire's portfoliosSign Up Free

Exxon says its decarbonization business could outgrow oil, in multi-trillion market

Published 04/04/2023, 10:02 AM
Updated 04/04/2023, 12:32 PM
© Reuters. FILE PHOTO: A logo of the Exxon Mobil Corp is seen at the Rio Oil and Gas Expo and Conference in Rio de Janeiro, Brazil September 24, 2018. REUTERS/Sergio Moraes
XOM
-
LIN
-

By Sabrina Valle

HOUSTON (Reuters) -Exxon Mobil Corp's Low Carbon business has the potential to generate hundreds of billions of dollars in revenue and outperform the company's traditional oil and gas as soon as a decade from now, CEO Darren Woods said.

The largest U.S. oil producer on Tuesday laid out to investors the aims of its emerging energy transition strategy in a meeting with Wall Street. Exxon is tackling what should be a multi-trillion market in 10 years or more, Woods said.

The result will be an Exxon less prone to commodity price swings through predictable, long-term contracts with customers striving to reduce their own carbon footprint.

"This business is going to look quite a bit different than the base business of Exxon Mobil (NYSE:XOM)," vowed Dan Ammann, president of Exxon's two-year-old Low Carbon Business Solutions unit. "It is going to have a much more stable, or less cyclical, profile."

How quickly that vision becomes a reality will depend on regulatory and policy support for carbon pricing - something the U.S. has not broadly accepted - and the cost to abate greenhouse gas emissions, among other changes, he said.

Ammann declined to comment on whether expectations for rising oil prices underpin the strategy.

The company on Tuesday put out parameters for how it sees that growth unfolding, with carbon priced as much as three times current levels.

Exxon is one of the most oil- and gas-focused companies among Western oil producers, a strategy that delivered record profits for its investors last year as fossil fuel prices soared.

Unlike its peers, Exxon has stayed away from renewable energy like solar and wind. Its energy transition plans lean heavily on reducing carbon emissions from its own operations, which Exxon is spending $10 billion by 2027 to implement.

Exxon is tackling carbon capture, hydrogen, biofuels, which it estimates have a combined potential of $6.5 trillion by 2050, equivalent to the traditional oil and gas business.

The company on Tuesday disclosed that it signed a long-term agreement with Linde (NYSE:LIN) Plc, adding a new client to its portfolio of companies willing to pay to decarbonize their operations.

© Reuters. FILE PHOTO: A logo of the Exxon Mobil Corp is seen at the Rio Oil and Gas Expo and Conference in Rio de Janeiro, Brazil September 24, 2018. REUTERS/Sergio Moraes

It expects to sign contracts that should generate multi-billion dollars in revenue annually in the next five years, under current conditions. The business can achieve "robust double-digit returns" off these long-term contracts, Ammann said.

In five years or more, depending on carbon pricing and regulatory conditions, the market could be worth tens of billions of dollars in annual revenues, the company said in a presentation.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.