The Exxon Low Carbon Chronicle. I heard from many of you about Exxon’s climate chief commentary, thank you for the thoughtful responses. What struck me most about Dan Ammann’s commentary was that it was eerily similar to what we heard from BP several years ago. It was just a few years back when the BP CEO said that if he wanted to invest $10billion into solar or wind, he wouldn’t be able to. That train has left the station as funds fight to deploy the capital, albeit with a momentary lull as we all await the IRA treasury guidance. Exxon is taking a different approach, less focused on infrastructure investment and more challenged to find ways to deploy capital that are more tied to a base resource. That means that Exxon is looking to find projects that are technology innovation, ready to deploy and scaled. The argument with that goes back to the bankability/commercialization challenge. How can a technology be developed into a billion dollar project when it hasn’t been deployed into a $10million pilot? And if it hasn’t been deployed into a pilot, who would spend the money to develop the technology even further with the hope that Exxon (or similar) spends a billion doing a master project. The closest thing I can think of is the solar concentrating solar projects. Of course this is all commentary to get into the gold mine that could be carbon capture at massive scale.
My 2 Cents For Exxon. This message is for the Exxon executives that read this newsletter. When it comes to the shift in energy consumption, don’t think of it as an oil and gas versus solar and wind. The energy transition is about how society is changing the way that we use energy while also increasing our use of energy. Your gas stations are essentially energy storage stations and for the first time your competition isn’t with the gas station across the intersection but with the distribution wires that keep your lights on and the cars charged. The energy transition is shifting molecular energy to electrified energy products, especially for consumers. The ecosystem you are operating in has just doubled in global market because oil companies now have to become electric companies as well. In an alternate scenario, think of your electric utility buying gas stations 50 years ago and getting into the fuel business. Exxon and the oil majors are challenged to figure out how to deploy their billions in a way that takes the new energy ecosystem and continues the trend of cash generation.
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Opinion
Best, Yann