Putting the Genie Back in the Bottle: Exxon Pursues Carbon Sequestration

Amid record U.S. oil production, Big Oil has set its sights on offsetting its carbon footprint via sequestration technology. The oil industry has pursued a flurry of mega deals this year as companies have put their large cash stockpiles to use buying up everything from rights to additional untapped reserves to innovative ways of going green.

Exxon is currently working to close its $4.9 billion acquisition of Denbury Inc. The all-stock deal was announced over the summer and is trumpeted in the companies’ joint press release as a crucial step toward decarbonization. “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,” according to Exxon CEO & Chairman Darren Woods.

Source: U.S. Energy Information Administration

U.S. crude and condensate production reached 13.1 million barrels per day in August, beating the previous record of 13 million barrels before the pandemic in November 2019. This record is even more remarkable in light of falling oil prices and a decrease in the number of rigs deployed. Efficiency gains have enabled companies to pull more from each well. According to Reuters, “Inflation-adjusted U.S. crude futures prices averaged $71 per barrel in June 2023 (43rd percentile for all months since 2000) down from a peak of $121 in June 2022 (82nd percentile).”

Despite record output, energy companies report reduced emissions. In fact, Exxon has pledged net zero scope 1 and 2 emissions by 2050 – and as quickly as 2030 within their Permian Basin operations. Scope 1 emissions include direct emissions from company owned sources and scope 2 emissions encompass indirect emissions from creating purchased energy. This does not include the emissions from consumers’ use of their gasoline and other product products.

Net greenhouse gas emissions from ExxonMobil worldwide from 2005 to 2022
(in million metric tons of carbon dioxide equivalents)

Source: Statista

Exxon and other energy companies are accomplishing such reductions via a variety of tactics. They have employed wind, solar, natural gas, and other lower-carbon energy sources to power operations, while mitigating the release of methane, a potent greenhouse gas, from escaping into the atmosphere as rigs hit pockets of the gas. 

Climate scientists report that despite great strides in reducing emissions – reducing estimates of a global temperature increase of 4 degrees Celsius by 2100 to 3 degrees  – this is “not nearly enough.” Besides cutting release of new greenhouse gases, companies have employed carbon sequestration to pull carbon from past emissions out of the air. Natural storage sinks such as forests and wetlands pull carbon from the air into the plants via photosynthesis.

Source: Visual Capitalist

Denbury and other companies have taken sequestration further by using technology to pull large amounts of carbon dioxide gas out of the atmosphere quickly and store it in such areas as saline aquifers, which are large underground expanses of porous, sedimentary rock, filled with salt water. Companies continue to innovate and find additional – and less expensive ways – to effectively remove carbon from the air.

According to Matterhorn’s comprehensive M&A database, which harnesses AI to track current and historical deals, Exxon is advised by Davis Polk & Wardwell LLP, while Denbury is advised by Vinson & Elkins LLP.