Lower-carbon oil key to transition: ExxonMobil

Continued production of oil and gas — but in a more responsible manner – will do as much to help the energy transition as renewables, the heads of ExxonMobil, Aramco and CNPC said at the World Petroleum Congress today.

Energy transition solutions began as "a very singular approach focused on electrons," ExxonMobil chief executive Darren Woods said on a panel at the event in Calgary, Alberta, but the path forward has evolved to a "broader approach."

Now solutions are focusing on "molecules, carbon capture and storage, hydrogen [and] biofuels, which are areas [where], frankly, the industry has a lot of experience," Woods said.

Environmental groups have accused oil companies of dragging their feet in the transition even after accepting climate change. But weaning the world off of hydrocarbons too quickly could cause other problems, the panelists said.

The energy supply and price shocks in the wake of economic recovery after the Covid-19 pandemic eased could be repeated if there is a greater economic recovery in 2024-25, Aramco chief executive Amin Nasser said. He worries that transition advancement could "go down the drain" if there is not enough investment in hydrocarbons.

"We thought that alternatives would [meet] the additional demand," in the last economic shock, he said. "It didn't, and prices went up significantly and impacted the whole globe."

China's CNPC noted it is pushing to move quickly to transition in many cases to electrification, including evaluating the idea of catalytic crackers at refineries than run on renewable energy.

"It is indeed more important to speed up the energy transition," CNPC president Hou Qijan said. "But you need to build up the new before discounting the old, while maintaining a stable and secure supply of traditional hydrocarbon products."

ExxonMobil and CNPC are "broadly aligned" on the role the oil industry should play in the transition, Woods noted. CNPC said that it has access to plenty of capital, despite concerns over the pace of the Chinese economy.

But the industry needs better public policies, fiscal incentives and technology to transition more quickly, Woods and Nasser said.

"In the short term we need policy all around the world that focuses on the key objective of emissions reduction," said Woods, noting a lot of government's appear focused instead on eliminating today's available energy system, specifically oil and gas.

Regulation, particularly in the US, is often designed to "stop building things rather than start building things," Woods noted, pointing to the company's plans in areas such as carbon sequestration and storage that will demand build-out.

With only 16 spots in the world that have significant CCS, the world will need 120 times more capacity by 2050, Nasser added.

Developing carbon markets is also step forward, as "government cannot subsidize [the transition] in perpetuity," Woods said. "Carbon is going to be a very low-cost feedstock," and Woods has his company analyzing how to transform those molecules into other products.

Assuming that oil and natural gas development will trail off too quickly could leave people exposed to energy scarcity, the executives said. European energy watchdog the IEA in June projected that peak demand could come by 2030, an outlook rejected by some industry leaders, including Opec.

Many projections for oil demand in 2010 called for 125mn b/d by 2030, while something closer to 110mn b/d compared with today's roughly 102mn b/d may be more realistic, Nasser said. While oil demand is lower that first forecast, "it is growing, it is not declining," he said. "So we need to invest. Otherwise in the mid- to long term, we will have another crisis."

By Carla Bass

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