Exxon Sets Net-Zero Targets, Flags Resiliency

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Exxon Mobil is now the latest — and largest — US producer to adopt net-zero goals for its operations, as the US major makes its case for long-term resiliency even under more aggressive energy transition scenarios.

As with its 2030 targets announced last month, Exxon’s net-zero ambitions are focused on its operated assets and the operational (Scope 1+2) emissions associated with them.

The US giant says it will work with its partners to achieve “comparable results” at its nonoperated assets, but no hard targets have been set.

US Majors' Emissions Reduction Plans
Targets (2016 Baseline)
 Exxon (2030) operated-assets onlyChevron (2028) entire portfolioConocoPhillips (2030) entire portfolio
Reduction in company-wide GHG intensity (Scope 1+2)20%-30%NA35%-45%
Reduction in company-wide GHG intensity (Scope 1+2+3)4%†5%NA
Reduction in upstream GHG intensity (Scope 1+2)40%-50%26% for gas, 40% for oil35%-45%
Reduction in methane intensity (Scope 1+2)70%-80%53%67%*
Reduction in flaring intensity (Scope 1+2)60%-70%66%NA
Reduction in refining GHG emissions intensity (Scope 1+2)NA2%-3%NA
Net-zero Scope 1+2 emissions target?YesYes, for upstream onlyYes
Reduction in absolute emissions (Scope 1+2)20%NANA

The upsized targets reflect heightened pressure on leading oil and gas producers to more aggressively reduce emissions in support of global net-zero ambitions.

Most large US producers have adopted net-zero goals over the past 18 months in response, although Exxon and Chevron both have qualified targets.

Absolute Reductions

Stakeholders are increasingly asking companies to deliver absolute emissions reductions as quickly as possible given the need to cap global emissions at a certain threshold to prevent global temperatures from rising too high.

Exxon's latest climate progress report, also released Tuesday, offers a view into how the major’s medium-term emissions intensity targets will impact its absolute emissions.

In all cases, Exxon’s operated emissions will fall by 2030, even when compared to the company’s artificially reduced levels in 2020 as the coronavirus pandemic caused steep curtailments in upstream and refined product production, curbing emissions.

Methane emissions and flaring have already declined at a faster rate than Exxon’s overall greenhouse gas (GHG) emissions since its 2016 baseline and will lead the charge through the rest of the decade.

In fact, Exxon recently announced that its operations in the US Permian Basin should achieve net-zero status by 2030.

The company is currently drafting similarly detailed emissions reduction plans and timelines for all of its major operated assets.

Scope 3 Impact

Exxon and its US rival Chevron have not joined their European peers in setting long-term targets for their end-use (Scope 3) emissions.

But both are starting to quantify the medium-term impact their strategies will have on their full life-cycle emissions footprint.

Exxon’s latest climate report says the GHG intensity of its operated assets could fall by 4% between 2016 and 2030, with absolute Scope 1-3 emissions for its oil and gas, fuel, chemicals and lubricants businesses declining by 12% over that period.

By comparison, Chevron has set a 5% GHG emissions intensity reduction goal for 2028 that encompasses both its operated and nonoperated assets.

Both majors argue that declines in Scope 3 emissions will be the natural consequence of producing and selling lower-carbon fuels, including biofuels and hydrogen.

But the impacts will be modest this decade given the more nascent nature of these businesses as compared with renewable electricity, which the European majors have embraced.

Net-Zero Resiliency?

For the first time, Exxon has outlined how its strategy would evolve should the world adopt a pathway in line with the International Energy Agency’s (IEA) aggressive Net Zero by 2050 scenario.

In this scenario — which plots one of the most significant declines in global oil and gas demand and fastest uptake rates of hydrogen, carbon capture and biofuels — Exxon would pivot to spend about one-quarter of its capital expenditure on low-carbon solutions by 2030 and roughly 80% on these areas by 2040.

That compares to current plans to spent around 11% of its capex on low-carbon ventures through 2027.

The US major would halt oil and gas exploration in new basins and limit steadily declining upstream investments to short-cycle shale and low cost of supply deepwater projects.

Chemicals would meanwhile remain a source of growth, while Exxon would expect to become a comparable market leader in carbon capture, hydrogen and biofuels that it now is in oil and gas.

Exxon is clear that it does not see the world on this path, instead seeing the IEA’s scenario as an "extreme" pathway it can use to stress test the resiliency of its capabilities.

But CEO Darren Woods has emphasized in recent months that his firm is ready to more aggressively pivot toward low-carbon investments should policies and markets evolve more rapidly than their current trajectory.

ESG, CO2 Emissions, Capital Spending, Corporate Strategy , Majors, Carbon Capture (CCS), Hydrogen, Biofuels (incl. SAF)
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