Exxon: Decarbonization Business Is Set For Huge Growth

Last month, Exxon Mobil ( $Exxon Mobil(XOM.US)$ ) pulled the plug on its 14-year-long algae biofuels project, becoming the last oil company to abandon what was once considered the fuel of the future. The whole idea was not without merit, though. Algae do have some clear advantages over other biofuel candidates, mainly because these photosynthetic microorganisms are super-efficient at converting sunlight into biomass, have high lipid content of up to 80% for some varieties and are more versatile than, say, corn, a common biofuel crop.
Unfortunately, Exxon and its Big Oil cohorts discovered that it's too tough to make the economics of algae biofuels competitive with those of much cheaper crude, with algae-based bioproducts firm Cellana estimating that crude would have to hit ~$500/bbl for algae biofuels to compete successfully.
But Exxon is not about to give up on its non-oil ventures. Last week, Exxon CEO Darren Woods told investors that the company’s Low Carbon business has the potential to outperform its legacy oil and natural gas business within a decade and generate hundreds of billions in revenues. Woods outlined projections showing how the business has the potential to hit revenue of billions of dollars within the next five years; tens of billions in 5-10 years, and hundreds of billions after the initial 10-year ramp-up. However, whether Exxon is able to actualize its dream will depend on regulatory and policy support for carbon pricing, as well as the cost to abate greenhouse gas emissions, among other changes, Ammann said.
Exxon believes that this will result in a "much more stable, or less cyclical" that is less prone to commodity price swings through predictable, long-term contracts with customers aiming to lower their own carbon footprint. For instance, Exxon recently signed a long-term contract with  industrial gas company Linde Plc. ( $Linde(LIN.US)$ ) that involves offtake of carbon dioxide associated with Linde’s planned clean hydrogen project in Beaumont, Texas.  Exxon will transport and permanently store as much as 2.2M metric tons/year of carbon dioxide each year from Linde’s plant. Back in February, Linde unveiled plans to build a $1.8B complex which will include autothermal reforming with carbon capture and a large air separation plant to supply clean hydrogen and nitrogen.