ExxonMobil made a splash in the Carbon Capture and Underground Storage-CCUS business last week with news of its $4.9 bn acquisition of Denbury Resources had $32 bn kicking around on its balance sheet, and it was itching to put some of this cash to work. The much-rumored tie-up between XOM and Pioneer Natural Resources  had not materialized (discussed in an

OilPrice article here), so XOM moved to their next priority. Denbury will be folded into XOM’s existing Low Carbon Solutions business and provide some of the first real assets to be deployed by the company in this effort. Darren Woods, CEO of XOM, commented in the release . 

“Acquiring Denbury reflects our determination to profitably grow our Low Carbon Solutions business by serving a range of hard-to-decarbonize industries with a comprehensive carbon capture and sequestration offering.”

For the first time, the word “profits” appears in official commentary regarding the CCUS business, signifying to me that it is moving out of its nascent conceptual phase toward execution. In this article, we will have a look at what this means for XOM as they further these ambitions.

 Carbon Capture and Underground Storage

Let’s be sure we understand exactly what’s transpiring with the CCUS business before diving into the specifics of the XOM/DEN deal. Pipelining CO2 from emitters to injection sites is one of the more ambitious because of its scaling potential but practical forms of sequestering atmospheric carbon deep in the ground. I say practical because the core technology has been largely perfected over many decades in a form of oil extraction known as Enhanced Oil Recovery-EOR. At a high level in the CCUS scenario, the CO2 is injected into porous rock strata, where minerals in the connate water react with the gas forming a calcium carbonate scale or precipitate. This permanently fixes the carbon in situ, subject only to geologic forces. Recent legislation promotes this technology and provides tax credits to incentivize its widespread adoption. XOM will not only be able to take advantage of federal tax credits for supplying this service but will be able to charge emitters up-front fees. Burying carbon in this manner is set to be wildly profitable, and the market is huge in the area they propose to serve.

 Source:Oilprice.com