Exxon Makes a Bold $5B Bet on Carbon Capture, Acquiring CO2 Pipeline Operator

"ExxonMobil Expands Carbon Capture and Low-Carbon Energy Strategy with $5 Billion Acquisition of Denbury Resources"

ExxonMobil, one of the world’s largest oil companies, has recently made a significant move to boost its carbon capture, utilization, and storage (CCUS) capacity and ramp up its low-carbon energy strategy. The company has acquired Denbury Resources, an oil and gas producer specializing in running an extensive CO2 pipeline transport network, for approximately $5 billion.

Denbury Resources operates a pipeline network that stretches across the U.S. Gulf Coast, which includes major oil extraction facilities in Texas, Louisiana, and Mississippi. The acquisition of Denbury is primarily driven by Exxon’s interest in its existing CCUS infrastructure. Carbon capture and storage is an industry that is gaining importance in the United States, particularly due to the incentives provided by President Biden’s Inflation Reduction Act, which offers tax credits for companies operating in this sector.

The infrastructure required for large-scale CCUS projects can be expensive, and the construction of new pipelines often faces opposition. Denbury’s existing pipeline network, which spans 1,300 miles, is highly valuable in this context. The company has been using CO2 for enhanced oil recovery (EOR), a process that involves injecting the gas into oilfields to boost oil production. Denbury currently injects 4 million tons of CO2 every year, sourced from industrial sources. With the acquisition of Denbury, Exxon will now own the largest operating carbon pipeline network in the country.

The Gulf Coast region, where Denbury operates, is one of the biggest markets for CCUS in the United States. Denbury also runs 10 onshore carbon sequestration sites, further enhancing its position in this sector. Exxon believes that the acquisition of Denbury will contribute to its low-carbon energy strategy by providing a cost-effective CCUS system that can be integrated with its existing carbon solutions. The combined Exxon-Denbury system has the potential to reduce CO2 emissions in the region by over 100 million metric tons per year.

Exxon sees CCUS as a significant business opportunity and estimates that it will become a $4 trillion global market by 2050. This presents a multibillion-dollar income potential for Exxon and offers a more stable revenue stream compared to oil and gas. The company has already signed commercial deals with various industrial polluters to capture and sequester CO2, forming the basis for sequestration hubs it is building on the Gulf Coast. Recent partnerships with companies such as CF Industries, Nucor, and Linde have allowed Exxon to capture CO2 from their factories and transport and store it. The integration of Denbury’s infrastructure will strengthen Exxon’s ability to seize more CCUS opportunities and carbon credits.

The emerging carbon market has seen a surge in interest from companies looking to invest in carbon capture and carbon credits. Carbon credits allow heavy emitters that cannot easily reduce their carbon pollution to offset their emissions. Each credit represents one tonne of carbon reduced or removed from the atmosphere through CCUS or other means. Exxon’s acquisition of Denbury positions the company to take advantage of the growing carbon credit market as it matures. Other major oil companies, including Occidental, Chevron, and Shell, are also investing in carbon capture and credits.

While there are critics who question the feasibility of CCUS and its ability to reduce dependence on fossil fuels, the upward trend and positive outlook of the market indicate that carbon credits serve a significant purpose in cutting down carbon emissions. The carbon credit market is projected to grow strongly, providing alternatives to fossil fuel reliance and promoting sustainable business practices.

Exxon’s $5 billion acquisition of Denbury is a strategic move that allows the company to expand its low-carbon business. The deal is expected to close in the fourth quarter of this year. Overall, Exxon plans to invest a total of $17 billion in low-carbon projects and reducing its own carbon emissions. This acquisition places Exxon firmly in the carbon market space and positions the company for future growth in the low-carbon energy sector.

Matt Lyons

Matt Lyons

Matt Lyons is the founder of Forestry & Carbon. Matt has over 25 years as a forestry consultant and is invoilved in numerous carbon credit offset projects.

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