The global economy is striving to switch fuel sources rapidly. It's seeking to pivot from carbon-spewing fossil fuels to cleaner alternatives -- an energy transition that has many believing fossil fuels will eventually go extinct.

That's not the view of ExxonMobil (XOM 3.18%) and its partners Hess (HES 0.70%) and CNOOC. The oil companies are investing another $12.7 billion to build a fifth oil production platform offshore in Guyana. The project won't come online until 2026 and should produce for 20 years, suggesting they believe oil will remain critical to fueling the economy for decades to come.

Drilling down into the project

Exxon, Hess, and CNOOC recently made a final investment decision for their Uaru development offshore in Guyana. The $12.7 billion project will include building a Floating Production Storage and Offloading (FPSO) vessel called Errea Wittu. It will feature 10 drill centers and 44 production and injection wells to tap an estimated 800-million-barrel oil resource. Due to cost inflation, the expected investment is 27% higher than the partners' similarly sized fourth project (Yellowtail) they approved last year.

Uaru will have the capacity to produce about 250,000 barrels per day (BPD) when it comes online in 2026 and maintain that rate for around two decades.

Since 2019, Uaru, Exxon, Hess, and CNOOC have approved $42.7 billion of investment across five projects offshore in Guyana. They have already brought the Liza Destiny and Liza Unity FPSOs online, which are producing about 375,000 BPD. Meanwhile, they expect to complete a third FSPO (called Prosperity) later this year, adding 220,000 BPD. Yellowtail and Uaru will increase their total output to around one million BPD by 2027.

The partners aim to approve at least one more project to boost regional production to more than 1.2 million BPD by 2027, with the potential to grow even higher by the end of the decade.

What's fueling these investments?

A big factor driving the decision to invest in the Uaru project is the returns Exxon and its partners can make. Despite the much higher price tag compared to Yellowtail, the project will deliver a strong return on investment, given the very low cost of supply. The breakeven costs for the Guyana projects are in the $25 to $35 per barrel range because of the significant in-place oil resources and favorable contracts with the government of Guyana.

Another decision driver is the lower greenhouse gas intensity of the Guyana projects compared to other assets. They produce 30% fewer emissions than the average across Exxon's portfolio. Independent research firm Rystad Energy found that emissions from the Guyana developments are less than 75% of the world's oil- and gas-producing assets.

Along those same lines, Exxon believes carbon capture and storage technology can significantly extend the life of fossil fuels, making investments like Guyana even more sustainable. The company is investing in carbon capture and storage infrastructure to help reduce global carbon emissions. Exxon sees an enormous commercial opportunity in carbon capture by providing other companies with decarbonization services. In addition to making money by delivering carbon capture services, the technology would enable Exxon to continue producing oil and gas.

A wager on oil's future

Exxon and its partners are betting big to build out several oil production facilities offshore in Guyana. They'll produce for at least 20 years, showing that these companies believe oil has a long-term future. That's due in part to the lower carbon intensity of the Guyana projects and the potential for carbon capture and storage to help reduce global emissions.

The bold bet could pay off big time for Exxon and its partners over the long term if oil demand remains strong, as the projects could generate lots of cash, given its low production costs.