Oil Companies Work to Store and Capture Carbon

ExxonMobil and Shell Seek New Revenue Stream

Energy companies including ExxonMobil (XOM) and Royal Dutch Shell (RDSA) are exploring ways to reduce their carbon emissions and help other companies do the same.

Oil companies’ fortunes have long been tied to extracting carbon from the ground and using it to produce oil. They now want to capture carbon and put it back in the ground. Oil companies may do this to reduce their own emissions and sell this service to other high-pollution industries.

Consumers are becoming more inclined to support green companies, and oil giants have growing concerns about the future of their core business. Capturing and storing carbon could provide a helpful new revenue stream for oil companies.

Is Carbon Burying a $2 Trillion Industry?

In March, Shell partnered with Total (TOT) and Equinor (EQNR) to create a joint venture which stores carbon in Norway. It is slated to be operational in 2024, and the carbon will be buried in a rock formation deep beneath the sea. When the project launches, it will give non-oil companies the opportunity to have their carbon collected and stored. Shell has plans to bury carbon for Fortum Oslo Varme and HeidelbergCement (HDELY) and has said 10 other companies have also expressed interest in the service.

Meanwhile, ExxonMobil is also creating a new unit to capture and store carbon for companies. The company thinks it may be a $2 trillion industry by 2040. Chevron (CVX) and BP (BP) are also working on carbon storage projects.

Questions About Carbon Capturing Costs

The oil companies are optimistic about the potential revenue stream but have not said how much it will cost to offer carbon capturing services. They also have not yet laid out what the profits may look like, saying numbers will depend on demand and other factors. Executives in the oil industry have said they expect the cost of capturing carbon to decline over time.

As it stands, most of these carbon-storage projects are backed by governments. For example, Norway is footing about 80% of the costs for the Shell project, which amounts to $1.6 billion. Whether the oil companies can successfully handle carbon capturing on their own remains to be seen. Though there are unanswered questions about carbon capturing, the world is becoming more aware of the need for controlling emissions. Oil companies are working on ways to address that shift.

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