Chevron continues to take steps to capture this $4 trillion opportunity (but lags far behind rival ExxonMobil)

Carbon dioxide emissions are a big problem for the environment. The burning of oil and gas is a key the source of this climate-changing gas. Because of this, many energy companies are looking for ways to be part of the solution instead of just contributing to the problem.

That means the big oil giants Chevron (CVX -1.79%) and ExxonMobil (XOM -1.22%) to explore the potential carbon capture and storage (CCS). They believe that CCS will not only be a major part of the solution (according to the International Energy Agency, it is almost impossible for the world to reach net zero without it), but also a very profitable business opportunity. Exxon believes CCS could grow into a $4 trillion global market by 2050.

Slowly building their CCS portfolio

Chevron has been working to develop its CCS capabilities. The oil giant recently won an assessment permit in offshore Western Australia to assess the potential of building a third-party and self-operated carbon storage hub. liquefied natural gas (LNG) assets in the region. The permit involves a joint venture between Chevron (70% interest) and Woodside Energy (30%).

Chevron agreed to reduce 5% of its equity in the license awarded to Korean company GS Caltex. The partners have unique assets, capabilities and customer relationships to support a potential CCS development at this site.

This project could expand Chevron’s CCS operations in Australia, which includes the currently operating Gorgon CCS project. The platform has the potential to enable the oil company to reduce the carbon intensity of its existing operations. It can also provide customers with opportunities to help reduce or offset some of their emissions.

Chevron has an audacious goal of sequestering 25 million metric tons of carbon dioxide annually by the end of the decade. That’s the equivalent of taking 5 million cars off the road every year. It is working on several projects worldwide to achieve this goal, including the Bayou Bend CCS Hub in the US (one of the largest in the country with the potential capacity to store more than 1 billion metric tons of carbon dioxide). However, apart from the Gorgon CCS, most of Chevron’s projects are very early stage development.

A slightly different game plan

Chevron’s initial CCS focus is on reducing emissions from its operations by building projects to capture those produced at its sites for storage in its sequestration hubs. Exxon takes a slightly different approach. While it is working on developing CCS to reduce its emissions, it is also focusing on capturing and storing volumes of emissions from third parties.

For example, the company recently signed an agreement with CF Industries to permanently transport and store up to 500,000 metric tons of carbon dioxide per year from its complex in Yazoo City, Mississippi. This project will halve emissions from this site when it starts in 2028.

It is Exxon’s second commercial contract with CF Industries. It now has contracts to store up to 5.5 million tons of carbon dioxide annually for multiple customers. This is equivalent to replacing 2 million petrol cars with electric vehicles (EVs), more than the total number of electric vehicles sold in the country last year.

No other company has come close to the scale of commercial CCS contracts signed by Exxon. A big factor was the nearly $5 billion acquisition of Denbury Resources last year, which bolstered its carbon transportation infrastructure capabilities.

Exxon believes its CCS business could generate billions of dollars in annual revenue over the next five years, with the potential for much more in the coming decades. Additionally, this income would be more stable than oil and gas income, which fluctuates with commodity prices. Because of this, it could put a firm and rising level below its earnings.

Working to take advantage of a potentially profitable opportunity

CCS will be crucial to helping the world reduce carbon emissions. Oil giants Chevron and Exxon want to be at the forefront of this technology, leading both to invest heavily in its development.

While Exxon is further along, particularly in trading third-party volumes, Chevron continues to develop its global CCS portfolio hoping to capture part of this potentially massive opportunity. Their success in developing commercial CCS projects could allow these oil giants to create a lot of value for their investors in the coming decades.