Big Oil's $1.2 Trillion Bet? WoodMac Predicts CCUS Market Surge

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Global research and consultancy group Wood Mackenzie has predicted that the global Carbon Capture, Utilisation and Storage (CCUS) market will surge 28-fold by 2050 to 2,061 million tonnes per annum, surpassing trillions of dollars in value. According to WoodMac, countries across the globe led by U.S., Canada and Europe have committed $80 billion for CCUS so far, with just 50 CCUS projects with a capacity to store 51 million tonnes of CO2 per year currently operational. WoodMac has also predicted that the gap between capture capacity and storage capacity will narrow from nearly 50% in 2030 to 20% in 2050.
However, the analysts are less optimistic about near-term growth prospects for CCUS, and have revised their 10-year forecast down by 22% due to policy uncertainty in the U.S. coupled with slow policy evolution in Asia. Further, WoodMac has predicted that most countries that have set carbon capture targets will only be able to achieve 50-70% of their goals by 2050. Even more alarming: WoodMac says point-source capture will only be capable of abating 4% of total emissions by 2050, short of the 6% required to restrict global warming to 2.5C by 2050.
Nevertheless, the explosive growth will offer fresh opportunities for oil and gas companies. Previously, we reported that Trump's 'Big, Beautiful Bill' will handicap the nascent hydrogen sector bill but still provides tax credits for carbon capture and sequestration under Section 45Q.
'We expect our investment into the Donaldsonville CCS project will increase our free cash flow in the range of $100 million per year due to the United States' 45Q tax credit for permanently sequestering CO2,' CF Industries (NYSE:CF) said in its latest annual report.
Big Oil has invested billions of dollars in CCUS projects, including Exxon Mobil's (NYSE:XOM) latest project targeting power-hungry U.S. data centers. Exxon recently unveiled a groundbreaking plan wherein the company will provide low-carbon power to the U.S. data centers powering the AI boom. Exxon's proposal outlines a first-of-its-kind facility that will use natural gas to produce electricity while capturing more than 90% of the CO2 emissions. The captured emissions will then be stored deep underground. ExxonMobil's current CCS technology supports industries involved in steel, hydrogen and ammonia production, with the company having secured agreements to store up to 6.7 million tons of CO2 annually for these sectors.
Last year, Exxon acquired CCUS specialist Denbury Inc. in an all-stock transaction valued at $4.9B, or $89.45/share. Denbury recycles CO2 through its Enhanced Oil Recovery (EOR) operations and uses it to produce environmentally-friendly, carbon-negative Blue Oil. The company owns the largest CO2 pipeline network in the U.S. at 1,300 miles, including nearly 925 miles of CO2 pipelines in Louisiana, Texas and Mississippi, as well as 10 onshore sequestration sites. According to Exxon CEO Darren Woods, the company's Low Carbon business has the potential to outperform its legacy oil and gas business within a decade and generate hundreds of billions in revenues.
Meanwhile, last month, Shell (NYSE:SHEL), Equinor (NYSE:EQNR), and TotalEnergies (NYSE:TTE) expanded their Northern Lights CCS project with $714 million in total investments. The decision comes after a deal with Swedish energy company, Stockholm Exergi, which has pledged to send up to 900,000 tonnes of CO? each year over a 15-year span. Northern Lights is now capable of storing at least 5 million tonnes of CO? per year, more than triple the original target of 1.5 million tonnes.
Canada's CCUS outlook is, however, less rosy. According to the experts, Canada's proposed $16.5B CCUS project by the Pathways Alliance hangs in the balance after the resignation of former Prime Minister Justin Trudeau. The giant project would capture harmful carbon dioxide emissions from the Canadian oilsands, the country's heaviest-emitting sector.
'I can't imagine a huge project like that could really move forward in a time like right now,' Michael Bernstein, executive director of the non-profit group Clean Prosperity, told Bloomberg. 'When you're looking at a project that has at least a 15-year time horizon, you want as much certainty as possible. And there's just more uncertainty than I can remember in my whole time doing this work right now,' he added.
A lack of pipelines and heavy emissions has been weighing heavily on the Canadian heavy crude sector for years, with several companies exiting the country after coming under pressure to invest in 'cleaner' projects. According to research firm Rystad Energy, oil sands production in Alberta generates ~160 pounds of carbon per barrel of crude pumped, the highest of any oilfield in the world.
By Alex Kimani for Oilprice.com
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