US supermajor ExxonMobil has proposed to establish a carbon capture and storage (CCS) hub for the industrial area along the Houston Ship Channel, requiring a combined investment of $100 billion or more.
Gain valuable insight into the global oil and gas industry's energy transition from ACCELERATE, the free weekly newsletter from Upstream and Recharge. Sign up here today.
The hub, or “Innovation Zone”, would bring together all levels of government, academia, and the private sector to create a multi-user CCS system, aiming to “effectively capture all the carbon dioxide emissions from the petrochemical, manufacturing, and power generation facilities” in the area, said Joe Blommaert, president of ExxonMobil’s new low-carbon business, in a 19 April blog post.
This is the first major CCS project proposal from ExxonMobil Low Carbon Solutions.
While ExxonMobil’s current carbon capture capacity is about 9 million tonnes per annum, the hub project plans to capture and store about 50 million tpa by 2030, and 100 million tpa by 2040.
In comparison, the US reportedly produced 5.1 billion tonnes of energy-related carbon emissions in 2019, according to the US Geological Survey.
“I’d say this announcement by ExxonMobil is massive in the carbon capture space,” said Ken Medlock, the senior director of the Center for Energy Studies at Rice University.
“This is at a massive scale. It’s never been done this big before.”
An ExxonMobil spokesperson told Upstream the project will be made possible through the hub’s use of technology already in place.
The captured CO2 would be stored in geological formations underneath the US Gulf of Mexico.
“The primary storage would be offshore in saline layers, well below the seabed,” the spokesperson said. “The miles of pipeline [needed] would be determined by the permitting process and access to safe storage.”
While the expected 100 million tpa by 2040 shows the project has significant potential, a lack of details leads some to question what results the project will produce.
Mark Brownstein, senior vice president of energy at the Environmental Defense Fund, said companies that take responsibility for their carbon emissions should be working to get projects like ExxonMobil's off the ground.
However, he emphasized the importance of monitoring the sequestered carbon and ensuring it is properly stored.
"In the best case, you're looking at an opportunity to deliver on the promise of [carbon capture, utilisation and storage] to make a material difference in reducing the carbon footprint of industrial facilities along the Gulf Coast," Brownstein said.
"Where it can go wrong is failure to engage local communities at the outset and be responsive to their concerns, failure to develop the project with a high degree of environmental integrity, and frankly, ultimately failure of both companies and government to drive the commitments of the policies necessary to support it over time."
Fewer barriers to entry
A major outcome of the establishment of this hub would be the reduction of barriers to entry for other CCS projects, Medlock said.
Not only does it provide infrastructure for CO2 suppliers, but it in turn provides demand for underground storage space that helps such storage suppliers.
“A hub is an enabler,” Medlock said. “They enable entry and exit to a market for a commodity, and they enable a de-risking of investment, both upstream and downstream of the hub.”
Despite the recent moves toward zero-carbon emissions, some analysts believe the economic difficulties of CCS projects will keep ExxonMobil from allocating capital away from its core upstream projects.
ExxonMobil’s plan calls for direct policy action from the federal government to enable CCS projects to receive direct investment and incentives, “similar to those available to other efforts to reduce emissions.”
'Chicken and egg conversation' on carbon price
In the call to action, Blommaert said establishing a market price on carbon would be vital to drive investment in the project, but it is not clear what carbon price would be necessary for the project to move forward.
“If there is a price on carbon that is established through direct government remit or through active trading of carbon, that will help,” Medlock said.
“But the problem with the latter case is you have to actually have a value proposition for carbon for there to be a demand for it... So we’re kind of in a chicken and egg conversation.”
Andrew McConn, co-head of commercial intelligence for market analysis firm Enverus, said ExxonMobil’s focus on the need for governmental subsidies differentiates from peers that guide to little to no reliance on incremental subsidies to move forward on green energy projects.
Nevertheless, he said the decision helps the company’s public image, as it has had problems in the past with investors criticizing its slow progress in the energy transition.
“This moves the needle for ExxonMobil in combatting the narrative that they’re far behind (European major) peers as it relates to the energy transition,” McConn said.
The next UN Climate Change Conference of the Parties, known as COP26, for the Paris Agreement is scheduled for November 2021 in Glasgow, Scotland. Countries have until then to submit Nationally Determined Contributions, which will evaluate how well nations are doing to follow the agreement.
ExxonMobil hopes the Houston hub will help the US toward the Paris Agreement goals of clean and green energy, and low-carbon emissions.
