Exxon Keeps Soft Touch With Latest Emissions Goals

The carbon emissions reduction targets Exxon Mobil unveiled on Wednesday make one thing clear — the US’ largest producers remain reticent to embrace sweeping emissions goals.

The Texas-based major has set new targets to reduce the greenhouse gas, methane and flaring intensity of its operations for 2030, having achieved its previous 2025 goals this year. But the devil lies in the details.

Exxon has set the handful of targets only for its operated assets. By contrast, Chevron and ConocoPhillips’ medium-term emissions goals apply to their entire portfolios.

Exxon is also not joining the pair in setting a net-zero emissions goal for its operations, even as Chevron has limited its own ambitions to just the upstream.

Like Conoco, Exxon is also forgoing any targets that incorporate end-use (Scope 3) emissions from its production.

Exxon does say that it will work with its partners to achieve “comparable results” across its nonoperated holdings. But the ring-fencing of operated targets both limits the impact Exxon’s emissions goals will have on its absolute emissions footprint, and makes interpreting that impact a near-impossible task.

That’s because Exxon, unlike Chevron and Conoco, does not break down its emissions figures into operated and net equity buckets.

As such, Exxon’s comment that achieving its 2030 goals will result in a 20% reduction in absolute emissions from its operated assets cannot be translated into hard figures for comparison.

Then again, neither Chevron nor Conoco has even said whether their emissions intensity reduction plans will translate into absolute emissions declines this decade.

Given that both intend to grow oil and natural gas output, absolute emissions could rise, at least in the near term.

Threading the Needle

In all three cases, Exxon, Chevron and Conoco argue that, regardless of the nuances, their emissions reduction plans align with Paris climate agreement-aligned scenarios. What remains to be seen is whether investors will accept them as sufficiently ambitious.

Exxon’s new 2030 plans, for instance, put its absolute emissions reduction trajectory closer in line with a 2°C warming scenario than a 1.5°C one. Yet the recently concluded COP26 talks in Glasgow rallied around a more ambitious 1.5°C scenario as the world’s new climate target.

Many large institutional investors are meanwhile weighing whether and how to align their portfolios with more ambitious net-zero scenarios, which would require the world’s absolute emissions to fall rapidly this decade.

All three US heavyweights are actively engaging with major shareholders to make the case for a more conservative approach to emissions reductions, citing still-robust global demand for oil and gas and a need for lower-carbon intensive barrels and Btus to meet that demand.

But the pressure to deliver ever-stronger targets is unlikely to abate.

"Based on the lesson learned in Europe, pressure from activist shareholders and other stakeholders will remain high until these issues [longer-term targets and Scope 3 targets] are addressed," Jefferies analysts said in a note following Exxon's announcement.

Staying the Course

Exxon separately reaffirmed its medium-term strategic plans on Wednesday.

Capital spending will remain in a $20 billion-$25 billion annual range through 2027, as previously expected. It will spend $15 billion over the period on accelerated low-carbon investment plans.

But two smaller points were noteworthy.

First, Exxon flagged expectations to grow its Permian Basin output to 700,000 barrels of oil equivalent per day by 2025, up from around 500,000 boe/d currently.

The plans imply a robust outlook for oil prices. Exxon previously said that if Brent crude were to hold at around $50 per barrel over the next few years, it would constrain output to around 470,000 boe/d. Exxon must therefore expect higher prices to hold over the period.

Second, the company’s medium-term LNG plans mentioned new volumes from the Coral FLNG project in Mozambique, but made no comment regarding the country’s Rovuma scheme.

Rovuma has been subject to recent reports questioning the project’s viability in Exxon’s portfolio. The company is working to reduce costs to ensure it meets its now-strict break-even threshold for new investments. But the timing of a potential final investment decision remains elusive.

(Note: Conoco’s emissions profile is not provided since it only began providing full-company equity emissions data for 2020.)