ExxonMobil (XOM -0.88%) believes carbon capture and sequestration (CCS) -- a process that captures carbon dioxide and stores it in underground formations -- will play a key role in reducing global emissions. That's leading the company to invest heavily to build out its CCS capabilities. It estimates that the global CCS market could reach as much as $4 trillion by 2050.

The oil giant recently unveiled the largest-of-its-kind commercial agreement to capture and permanently store carbon dioxide in Louisiana. The landmark project could serve as a blueprint for future deals, putting Exxon in an excellent strategic position to capitalize on this potentially massive market opportunity.

A landmark deal

ExxonMobil inked an agreement to capture and permanently store up to 2 million tons of carbon dioxide emissions annually from a manufacturing complex in Louisiana operated by hydrogen and nitrogen products-maker CF Industries (CF 0.89%). That represents the largest commercial agreement for carbon capture and storage.

CF Industries is investing $200 million to build a carbon dioxide dehydration and compression unit at its Donaldsonville facility to enable it to capture carbon dioxide. That's part of its plan to produce 1.7 million metric tons of blue ammonia annually from the complex, with blue denoting a carbon-neutral form as all the associated carbon has been captured and sequestered.

ExxonMobil will transport the captured carbon and permanently sequester it in the secure geologic storage it owns in Vermilion Parish. The company plans to develop a 125,000-acre site for carbon dioxide sequestration.

Exxon has also signed an agreement with EnLink Midstream (ENLC -0.80%) to use its pipeline network to transport carbon dioxide to its storage site. The midstream company has over 4,000 miles of pipeline in the ground in Louisiana, giving it an extensive system to repurpose for carbon dioxide transportation at a low cost and environmental impact.

The companies expect the project to come online in early 2025. It will have the capacity to store the carbon dioxide equivalent of removing 700,000 gas-powered cars from the road.

A blueprint for the future

The landmark commercial agreement with CF Industries is a big step forward for Exxon's lower-carbon ambitions. The company initially launched its low-carbon solutions business early last year to commercialize its extensive technology portfolio. It planned to invest $3 billion in lower-emission energy solutions through 2025.

The company accelerated its lower-carbon energy ambitions last fall by boosting its investment plan to $15 billion. It's investing that capital across various technologies, including CCS, hydrogen, and biofuels.

Exxon has been working on several large-scale CCS opportunities around the world. The CF Industries deal is the first big one to push a project from concept to construction. It will likely serve as a blueprint for other deals as industrial manufacturers seek to reduce carbon emissions through CCS.  

Exxon is also reportedly looking at other opportunities to expand its CCS capabilities, including potentially acquiring Denbury Resources (DEN), a leader in using captured carbon to produce oil. Denbury has extensive expertise and infrastructure in the Gulf Coast and could enhance Exxon's ability to market its CCS solutions.

The company's early success in getting a large-scale, commercially secured CCS project off the ground puts it in a strong position to capitalize on additional market opportunities. That would enhance the company's ability to become a leader in the potentially enormous CCS market, which could be a huge growth and profit driver for the company in the future.

Exxon's lower-carbon ambitions are starting to pay off

ExxonMobil has taken a different approach to the energy transition than many other large oil companies. Instead of investing in renewables, the company has focused on reducing the energy-sector's carbon intensity through CCS. That bold move is starting to pay off. 

Because of that, the company's longer-term outlook is beginning to come into sharper focus. That makes it a potentially more compelling oil stock to own amid the energy transitions, since it seems more likely that its strategy will pay dividends over the long haul.