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Oil Companies’ Great Green Rush Has Begun

The era of greenwashing is ending. Here’s what’s coming next.

Oil and leaves.
Heatmap Illustration/Getty Images

For a while there, oil companies wanted to convince you they were part of the solution to climate change. There was BP rebranding itself as Beyond Petroleum and, as anyone who watched American television in recent years can tell you, ExxonMobil’s investment in algae-based fuels. Dissident shareholders were even able to win board seats at Exxon.

Well, those days are over, sorta.

The profitability of oil majors soared last year as oil prices spiked and Wall Street kept a tight leash on their investments and insisted they send as much money back to their investors as possible. Exxon ditched algae-based fuels and BP is back to being BP — so long, Beyond Petroleum — and is committed to investment in oil and gas. Shareholder resolutions at Chevron and Exxon that would have them limit emissions from their products were defeated at the companies’ shareholder meetings this week by a larger margin than last year.

Exxon’s Chief Executive Darren Woods was dismissive of setting targets for the company’s “Scope 3” emissions, i.e. emissions created from using Exxon’s products, like when drivers burn gas, as opposed to emissions that derive from their extraction or production. “If an energy company discontinues operations to meet Scope 3 targets while the demand for energy remains, consumers can be forced to make do with less energy, pay significantly higher prices, or return to higher-emitting sources,” Woods said.

Two years after the activist fund Engine No. 1 was able to ride a wave of investor discontent with oil majors and win three Exxon board seats, the oil industry has largely wrested control and influence back from activists who want them to reduce their emissions — and are instead under the strict hand of Wall Street investors who are primarily concerned with returns.

But that doesn’t mean oil companies are out of the low carbon investment games. They’re just playing it on their terms.

“Broader conversations between investors and U.S. oil and gas executives have shifted away from Scope 3 considerations over the past year or so, with institutional investors expressing more interest in topics like the potential returns from nascent businesses such as hydrogen and carbon capture as a service, and corporate progress on reducing operational emissions,” according to the energy consulting firm Energy Intelligence.

Just days after Exxon’s management won over its shareholders at its general meeting, it announced a deal with the steel company Nucor to capture and store carbon emitted from a Louisiana site.

In keeping with the profit-minded, investment-skeptical state of the fossil fuel industry these days, oil companies are eager to remind investors they’re doing these deals and investments because they expect to profit from them.

“Our low-carbon projects must be advantaged and deliver competitive returns. The ability of our low-carbon projects to compete successfully for capital is important if the world is going to meet its emissions aspirations,” Woods said in Exxon’s April call with investors.

Besides the recently announced Nucor deal, Exxon’s investments include a carbon capture and storage project with the German chemical company Linde and a planned blue hydrogen facility on the Gulf Coast that would combine hydrogen production from natural gas, carbon capture and storage for both itself and neighboring plants, along with ammonia production.

Exxon “is focusing its efforts in areas that are synergistic with core competencies including carbon capture & storage (CCS), hydrogen, and biofuels,” Morgan Stanley analysts said in a note to clients.

Exxon has projected some $17 billion in “low carbon” investments through 2027. Chevron is planning some $10 billion in investment in similar projects through 2028. While substantial, these companies are still investing in their core business — Exxon said in April it planned to, along with partners, spend an additional $12.7 billion on offshore drilling near Guyana.

Underpinning these investments are not just the belief that they could hedge against reduced oil demand in the future, but also subsidies for carbon capture and storage from the Inflation Reduction Act, which substantially increased tax credits for carbon storage. “Incentives included in the Inflation Reduction Act are a positive step forward, although permitting and other regulatory improvements are still needed. Europe, by contrast, policy approach remains far more prescriptive and punitive,” Woods said in the April call. The IRA and the bipartisan infrastructure law included new subsidies for factories and industrial clusters specializing in climate technologies, such as hydrogen and direct air capture. Most of these subsidies have yet to be awarded.

Chevron and Exxon are not the only American energy companies investing in these technologies. Occidental is perhaps the most aggressive, with massive investments in novel direct air capture technology that it seeks to fund — and profit from — by selling credits to companies like Airbus that can’t easily reduce their own emissions. In its most recent earnings call, Occidental executive Robert Jackson said the company “continue[s] to see the voluntary market strong or growing for our CDR sales.” Occidental is also a major investor in NET Power, which is working on its own form of carbon capture for use in gas power plants.

The technology, should it pan out (one plant in Odessa is scheduled to start operating in 2026), could receive a boost from proposed Environment Protection Agency regulations that will essentially force gas-fired plants to use some form of carbon capture and storage. Occidental plans on using NET Power’s technology for its own oil and gas operations and then to help power its planned massive fleet of direct air capture fans, chief executive Vicki Holub said in its earnings call.

But while these oil company investments are in some sense a desired effect of the Biden administration’s carrot-y approach to climate change policy, one thing they are not intended as is any type of transition to a future without oil companies.

In a report laying out its vision for the future of energy and its low carbon business, Exxon projected “all energy sources are projected to remain important through 2050, with oil and natural gas accounting for 55% of the world’s energy mix in 2050.”


Matthew Zeitlin

Matthew is a correspondent at Heatmap. Previously he was an economics reporter at Grid, where he covered macroeconomics and energy, and a business reporter at BuzzFeed News, where he covered finance. He has written for The New York Times, the Guardian, Barron's, and New York Magazine. Read More

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