ExxonMobil, Chevron affirm large scale carbon capture projects in Q1 calls

ExxonMobil and Chevron confirmed their commitments to building large-scale projects to address climate change April 30, beginning with a focus on carbon capture.

The companies remain among the world's largest producers of oil and gas, but the coming energy transition has loomed large and stirred excitement in the last year or so, which was reflected in separate Q1 earnings calls.

Earlier this year, ExxonMobil launched its Low Carbon Solutions business to commercialize climate-change technologies and accelerate emissions reductions. It will initially focus on carbon capture and storage, or CCS, and is evaluating and in some cases advancing plans for more than 20 such projects globally, company CEO Darren Woods said.

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The major's first project is a Texas hub to capture and store CO2 emissions from heavy industries around the Houston Ship Channel. It would require $100 billion of investment and aims at capturing 50 million metric tons/year of CO2 by 2030 and twice that amount by 2040. ExxonMobil unveiled the project April 19.

"Houston is an ideal location for a major project," ExxonMobil CEO Darren Woods said. "The plants along the heavily industrialized Ship Channel represent some of the hardest sectors to decarbonize. They're also relatively close together, providing project scale and reducing unit costs."

Houston's location near the Gulf of Mexico also provides direct access to suitable storage locations, he said, noting the US Department of Energy estimates that the geology beneath the sea floor is able to safely store all the CO2 that the entire US produces for the next 100 years.

Needs public, private support

But the concept needs support from both private and public entities, he said.

"We think a carbon capture innovation zone, similar to an enterprise zone where incentives and policies are designed to encourage economic growth, is a smart way to advance this idea," said Woods. "We'd help bring together government incentives and private sector investment along with new policies and regulations that would encourage innovation."

Chevron, which in late April announced a memorandum of understanding for a venture with Toyota to jointly develop commercially viable large scale hydrogen businesses, is also in what company Chief Financial Officer Pierre Breber called the "early stages" of a CCS/bioenergy project in Mendota, California.

That project, a partnership with oilfield services provider Schlumberger and Microsoft, would convert agricultural waste biomass such as almond trees following a certain number of productive seasons into a gas that generates electricity and sequesters emissions of 300,000 tons of CO2 per year.

The project is already in front-end engineering and design, Breber said, adding, "we're looking at another carbon capture pilot ... in Bakersfield," California.

"The venture investment is an enabler to growing [our] hydrogen and carbon capture business," he said. "These are nascent businesses that require lots of partnerships, but we're going to be a player in it."

Project economics uneven

But despite showing some success, the technology can be "very expensive," and costs "remain a major hurdle," according to an April 22 S&P Global Platts Analytics' North American Electricity Special Report.

Retrofitting a combined-cycle gas turbine plant with CCUS technology may hold up over its life span against offshore wind or small modular nuclear reactor technology, economically speaking, but "still has a ways to go" to compete against utility-scale solar and onshore wind, the report said.

"Prices range from USD $800,000 per megawatt for a natural gas combined-cycle plant to $1.8 million per megawatt for a coal plant, assuming a 90% capture rate," it said. "Therefore, the cost can range substantially depending on the size of the plant and the technology used."

In Q1, ExxonMobil's total global production was 3.79 million boe/d, down 6% from the same period a year ago. That includes liquids output of 2.258 million b/d, down 9% from the same period in 2020.

ExxonMobil's US liquids totaled 665,000 b/d, down 5% from a year earlier.

And Chevron's Q1 worldwide total production was 3.12 million boe/d, down 4% from a year ago, including 1.075 million boe/d from the US (up 1% year on year) and 2.046 million boe/d from international operations (down 6% year on year).

Chevron's liquids output totaled 1.83 million b/d, down 7% from the same period a year ago, including 802,000 b/d from the US which was flat with the same year-ago quarter.

ExxonMobil's Woods also said that due to its operating efficiencies in the Permian Basin that are pushing down well drilling and completion costs while improving recovery rates, the company has upped its 2021 output estimate from the West Texas/New Mexico basin to 410,000-430,000 boe/d, from 400,000 boe/d.

Woods also said that in 2020, Permian capital spending was reduced by about 35% but the company maintained enough investment to support technology efforts and improve its understanding of the basin. The result was an additional 100,000 boe/d in 2020 compared to the year before and an increase of 60,000 boe/d in Q1 2021 versus Q1 2020.

Chevron earned $1.377 billion of net income (72 cents/share) in Q1, down from $3.6 billion ($1.93/share) in the same period in 2020. While higher oil prices helped earnings, results were down in part due to ongoing downstream margin and volume effects resulting from the pandemic and also impacts from US winter freezes, Chevron CEO Mike Wirth said in a statement.