Exxon Mobil Corp. is forming a business unit that will focus exclusively on technologies to lower carbon emissions, as the oil giant faces increasing pressure to step up its sustainability investments.
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Exxon said Monday that the new business, dubbed “low carbon solutions,” would invest $3 billion through 2025 on lower emission energy technologies, primarily on carbon capture and storage projects, which gather carbon emissions from industrial processes or directly from the air and deposit them underground. Those investments would represent roughly 3% to 4% of Exxon’s planned annual capital expenditures.
Exxon has a large research-and-development division that has invested in carbon capture for years, and Exxon says it has captured more carbon than any other company. Currently, the only large-scale use for captured carbon is to help produce more fossil fuels by pumping in the gas to squeeze more oil and gas out of the ground.
“With our demonstrated leadership in carbon capture and emissions reduction technologies, Exxon Mobil is committed to meeting the demand for affordable energy while reducing emissions,” Exxon Chief Executive Darren Woods said.
Exxon is expected to report a fourth consecutive quarterly loss for the first time in modern history on Tuesday after previously disclosing that it would write down as much as $20 billion in assets. It endured one of its worst financial performances ever in 2020 and has already posted more than $2 billion in losses through the first three quarters of 2020.
Following the outbreak of the new coronavirus last year, Exxon discussed a merger with its top U.S. rival, Chevron Corp., The Wall Street Journal reported Sunday. The talks were described as preliminary and aren’t currently ongoing.
The company’s woes have helped draw the attention of activist investors. One of them, Engine No. 1 LLC, has argued that the company should focus more on investments in clean energy while cutting costs elsewhere to preserve its dividend. The firm nominated four directors to Exxon’s board last week and called for it to make strategic changes to its business plan.
As the Journal previously reported, Exxon also has been in talks with another activist, D.E. Shaw Group, and has been planning to announce one or more new board members, additional spending cuts and investments in new technologies to help it reduce its carbon emissions.
Rivals such as BP PLC and Royal Dutch Shell PLC have embarked on bold strategies to remake their business as regulatory and investor pressure to reduce carbon emissions mounts. Both have said they would invest heavily in renewable energy—a strategy that their investors so far haven’t rewarded.
Exxon hasn’t invested substantially in renewables, instead choosing to double down on oil and gas, arguing the world will need vast amounts of fossil fuels for decades to come.
Some in the industry see carbon capture as a way to lower the carbon footprint of fossil fuels, potentially allowing producers to continue pumping oil and gas as some countries tighten regulations on carbon emissions.
The only current, large-scale commercial use for captured carbon is for a process called enhanced oil recovery, in which carbon is pumped into older oil and gas reservoirs to increase pressure and produce more fossil fuels. Exxon’s largest carbon capture project, in Wyoming, sells the gathered carbon to oil and gas companies.
Exxon said Monday that carbon capture projects could become more commercially attractive with government support. It has supported an existing tax credit in the U.S. for companies that capture and store carbon.