With the passing of the Inflation Reduction Act, oil and gas companies are gearing up for a shift in the American energy sector. The act emphasizes emission reduction through electric vehicle purchases and quelling methane emissions from oil refineries.
With more states outlining plans to end sales of gasoline-powered cars, oil companies, large and small, are shifting their business strategy. Rather than continue with oil procurement and refining, they plan to join the good fight and take up significant carbon sequestration projects.
The Inflation Reduction Act has greenlit oil firms like Exxon-Mobil to pursue sequestration. With new tax incentives to quell greenhouse gas emissions, the gas conglomerate is moving swiftly.
Starting in November 2021, ExxonMobil was part of a federal auction to lease land in Texas for a sequestration hub. The plan is to construct an oil drilling project with carbon capture technology to reduce emissions in the Gulf of Mexico. Along with a $100 billion resource hub, Exxon is threading the needle for cleaner oil procurement. How long they will continue to find and cultivate fossil fuels remain to be seen.
At a shareholders meeting in May 2022, Exxon CEO Darren Woods outlined a five-point strategy to make oil more accessible globally. He noted this would be done with lowering greenhouse gas emissions in mind.
“As we move forward, we’ll remain focused on executing our strategy, sustainably growing value across a broad range of scenarios and time horizons, and importantly, leading the industry, now and through the energy transition,” Woods said.
Exxon will have to move forward with its sequestration efforts to take advantage of emission reduction tax breaks. These projects include the $100 billion plans to bury gasses from chemical power and gas refining underneath the Gulf of Mexico started in November 2021.
With tax breaks of $85 per ton of carbon dioxide produced by industrial ventures and a further $180 per ton pulled from the air, the monetary incentive should seem enough for Exxon to begin construction on its capture storage.
Domestically, smaller oil companies like Talos Energy out of Texas hope to become a leader in carbon sequestration projects. While sharing the impact of the Inflation Reduction Act’s tax credits on the company, CEO Tim Duncan said, “There is no doubt the legislation is an important step for offshore energy security and CCS development along the United States Gulf Coast.”
His words echo the business strategy of Talos. While the company plans to continue offshore drilling, they have emphasized furthering domestic offshore wind farms to offset its footprint.
So far, Talos has four major carbon-capture ventures in the works, with strong financial backing from firms like Chevron and Freeport LNG. Smaller firms utilizing the emission capture tax breaks can fund more of these projects en route to reaching neutrality by 2050.
Exxon and Talos seem to be seeking to prove to investors that the companies are serious about tackling climate change. This means appealing to a global audience. So far, substantial steps have been taken to address global carbon sequestration.
Exxon recently revealed plans to pursue capture hubs in Asia, particularly Singapore. The island nation is a massive petrochemical hub, so it makes sense to set up sequestration.
Other potential locations are Malaysia, Indonesia, and Australia, sites where Exxon already has a foothold. In a region where emissions are at all-time highs, these ventures are critical for slowing the pace of climate change.
The Inflation Reduction Act is expediting the process of getting oil and gas companies to identify methods of reducing emissions as much as possible. Carbon sequestration is seen as a necessary step for these companies to prove they care about curbing global warming. With the tax benefits plentiful, we can only speculate that the savings will fund more of these projects.