Momentum Builds for US CCS Push

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Exxon Mobil's massive Houston Ship Channel carbon capture and storage (CCS) concept floated this week is the clearest indicator yet that the US may chart a different course on decarbonization. The country’s unique role as both a major oil consumer and producer has Washington looking to balance interests when charting an economic path to net-zero emissions (related). That is translating into mounting bipartisan support for CCS as a way to fit oil, gas, petrochemicals and other emissions-intensive industries into wider climate plans. Energy Intelligence sees CCS facing a leaner future than once envisioned given that significant declines in renewable power costs and improvements in managing intermittency mean that high-cost CCS is no longer critical to decarbonize the global power sector (PIW Mar.12'21). But disparate policy regimes and varying state interests mean CCS will follow different trajectories across jurisdictions. CCS is not expected to play a major role in consumer Europe’s more advanced decarbonization plans. But it is increasingly on the radar of producing nations in the Middle East and Southeast Asia, and has found policy support in the US via so-called “45Q” tax credits and credits under California’s Low-Carbon Fuel Standard (PIW Mar.19'21). Exxon’s early-stage plan is bold: capture carbon emissions from the Ship Channel’s 50 largest emitters and potentially store 50 million tons per year of carbon dioxide by 2030 and 100 million tons/yr by 2040 -- equivalent to 2½ times the world’s current CCS capacity. The US major has made clear the plan is contingent on myriad supportive factors, not least, fiscal and regulatory policies at the state and federal level. Timing its road show to key policymakers and the wider public alongside US President Joe Biden’s climate summit is intentional -- if Washington can deliver needed supports, Exxon is signaling that it will pounce. It remains to be seen just how prominently CCS will factor into the US' climate agenda. But CCS advocates are encouraged by the sheer number of initiatives in play, and their wide array of bipartisan sponsors. One bill, known as the Scale Act, would tick critical boxes in support of state and federal permitting of CO2 storage wells and authorize cost-sharing grants for commercial-scale hub projects that would use large geologic sites, as Exxon envisions. Others propose extending and increasing 45Q credits. Exxon has not said whether such measures would alone be sufficient to get its Houston CCS hub off the ground. But Energy Intelligence understands the US major has separately been vocal in its recent support for an economy-wide price on carbon, which Exxon and other supporters say could help fill in incentive gaps not captured in solution-specific legislation (PIW Apr.2'21). It comes as no surprise that Exxon and smaller cohort Occidental Petroleum have been grabbing the bullhorn to stoke support for CCS since Biden’s November election. Companies ascribing to a Big Oil model favoring oil and gas production are under increasing pressure to decarbonize, even if they eschew diversification into renewable power (PIW Mar.5'21). If Washington comes through, CCS could be a viable answer (PIW Apr.16'21). A successful strategy built around CCS will require government buy-in, cross-industry partnerships and technological breakthroughs given CCS’ high cost barriers. Both Exxon and Oxy see the stars aligning on these fronts in the US, incentivizing both to establish new low-carbon business units to advance still-emerging CCS technologies, accelerate its deployment and lay the groundwork for new partnerships. Exxon is looking to cut CCS costs by one-third this decade, largely through technological advancements like the application of fuel cells in CO2 capture. It also sees revenue potential in advancing and licensing some of the new materials and carbon capture processes it hopes to commercialize. Exxon's Houston CCS hub would partner with numerous refiners, petchem producers and manufacturers, with a growing number adopting their own emissions reduction goals. Oxy sees carbon capture as being so vital to the oil industry's future that it believes it will one day be a trillion-dollar business (PIW Oct.30'20). It favors direct air capture and is bringing in external partners, including United Airlines, to advance an initial commercial-scale plant in the US Permian Basin (PIW Dec.11'20).

Carbon Capture (CCS), Low-Carbon Policy, Corporate Strategy
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