Chevron (CVX 1.27%) makes billions of dollars each year producing oil and gas. However, because those fossil fuels emit carbon dioxide when consumed, they're significant contributors to climate change. With the world working hard to reduce those emissions, fossil fuels could eventually become extinct.
That's a fate Chevron and its oil sector peers would like to avoid. The industry believes it can do that by using carbon capture and sequestration (CCS) technology to significantly reduce global carbon emissions. It represents a multi-trillion-dollar opportunity. Chevron wants in on that action, which recently led it to invest in Svante to accelerate the manufacturing of its carbon capture technology.
NYSE: CVX
Key Data Points
Chevon's growing low-carbon investments
Chevron launched its low-carbon business, Chevron New Energies (CNE), in 2021. This business aims to reduce the carbon intensity of Chevron's operations and help its customers meet their lower carbon goals. The energy giant accelerated that business late last year, aiming to invest $10 billion in capital through 2028. Chevon plans to double its lower carbon investments in 2023 to $2 billion as part of that pledge.
The company set ambitious targets for its lower carbon businesses. By 2030, Chevron aims to:
- Grow its renewable natural gas output to 40,000 MMBtu per day.
- Boost its renewable fuels production capacity to 100,000 barrels per day.
- Increase its hydrogen output to 150,000 tons per year.
- Grow its carbon capture and offsets to 25 million tons per year.
Chevron is taking a notable step toward delivering on that last target by leading Svante's Series E fundraising round. That company raised $318 million from Chevon and other investors to accelerate the manufacturing of its carbon capture technology.
Svante developed carbon capture and removal technology using structured absorbent beds known as filters. They can capture carbon dioxide from industrial flue gas. It then concentrates the captured gas into a high-purity, pipeline-grade gas that can move via pipelines to a sequestration or utilization site. With the new funding, Svante can produce enough filters to capture millions of tons of carbon dioxide each year.
A massive opportunity
Chevron wants to build a business that can capture the full carbon capture, utilization, and storage value chain. It sees Svante as an essential piece of that puzzle because its technology positions it as a leader in enabling carbon capture solutions. Chevron could eventually offer customers an end-to-end solution to capture, transport, and permanently store carbon dioxide. That would put it in an even better position to compete against rivals in securing this potentially enormous opportunity.
ExxonMobil estimates that CCS will be a $4 trillion market by 2050. That's 60% of the $6.5 trillion oil and gas market it forecasts at that time. Meanwhile, Occidental Petroleum sees a $3 trillion to $5 trillion market opportunity for CCS. Because of that, the company believes it can eventually make as much money providing CCS solutions as it currently does from its oil and gas business.
NYSE: XOM
Key Data Points
Both oil companies are working hard to capitalize on that massive potential commercial opportunity. Exxon recently signed the largest-of-its-kind commercial agreement with CF Industries. The landmark deal will capture and permanently store 2 million metric tons of carbon dioxide from a manufacturing complex CF Industries is building in Louisiana. The captured greenhouse gas will move through pipelines operated by EnLink Midstream to an underground storage hub Exxon is building in the state.
Meanwhile, Occidental Petroleum recently started constructing a $1.1 billion direct air capture (DAC) project in Texas to pull carbon dioxide from the atmosphere. It has already started to commercialize the project. SK Trading International agreed to purchase 200,000 barrels of net-zero oil for five years, supported by carbon captured from this facility. In addition, Airbus purchased 400,000 tons of carbon removal credits backed by this facility. Occidental hopes to build 100 DAC facilities by 2035 to capitalize on the need for lower-carbon energy.
Chevron's future is coming into greater focus
Chevron continues to advance its low-carbon strategy. Its latest investment puts it in a better position to secure the potentially massive CCS opportunity. That market could be a game-changer for Chevron because it could significantly extend the life of its legacy fossil fuels business while providing the company with a new growth platform. It makes Chevron a much more compelling long-term investment.
