ExxonMobil (NYSE: XOM) is a fervent believer that oil will remain vital to the economy for decades to come. This view drives it to continue investing in oil projects. However, the the company’s focus is on on the bigger energy picture, which is much broader than oil. It is aimed at participating in the overall growth of energy demand, regardless of which direction the world ultimately goes.
Here’s a closer look at ExxonMobil’s the long-term outlook for the energy market and how this shapes the investment strategy.
Built for the future
Exxon CEO Darren Woods discussed the company’s energy outlook about his recent second quarter conference call. He stressed that the report “predicts that global energy demand will be 15% higher in 2050 than it is today. We see oil demand remaining stable at around 100 million barrels per day through 2050, while demand for renewables and natural gas grows significantly.” He noted that growing energy demand “creates possibility for ExxonMobil, regardless of the speed or direction of the energy transition.”
Woods further noted:
As it becomes increasingly clear over time that heavy industry and commercial transportation will not be meaningfully powered by renewable energy sources, the world will become increasingly dependent on technologies where we have an edge, including hydrogenbiofuels and carbon capture and storage.
That’s why The company’s current focus in the transition to low-carbon energy is to leverage its expertise in molecules. Exxon know how extract, process, transport, refine, upgrade and sell hydrocarbon molecules. The company believes that the market for low-carbon energy molecules will reach $6 trillion by 2050. This is a huge opportunity for the company.
It is working to set up several molecule-based businesses to leverage its expertise in hydrocarbons and complement its upstream production and downstream product activities. This strategy will enable it to remain flexible and take advantage of future opportunities, while continuing to deliver profitable growth regardless of the energy path of the economy. eventually chooses.
Investing broadly in the future of energy
Exxon’s broad-based investment approach has been on full display this year. The company continues to invest heavily in growing its oil and gas production. It recently completed its needle-moving acquisition of Pioneer Natural Resources. The deal significantly strengthened its position in the oil-rich Permian Basin, where Exxon delivered record production in the second quarter.
The company also continues to invest in its world-class position offshore Guyana, where it set a production record during that period. The company recently filed an application to develop its seventh project in the region. The Hammerhead project would produce 120,000 to 180,000 barrels per day from 2029.
At the same time, ExxonMobil is investing heavily in energy with lower CO2 emissions. For example, it is working on the construction of the the world’s largest low-carbon hydrogen production facilityThe project would produce 1 billion cubic feet of clean hydrogen per day and 1 million metric tons of ammonia per yearIt would supply low-carbon hydrogen to markets along the U.S. Gulf Coast to help industrial customers decarbonize their operations.
Meanwhile, the company recently signed a new carbon capture agreement with a fertilizer and ammonia producer CF Industries. The deal would see Exxon remove up to 500,000 tons of carbon dioxide annually from a site in Mississippi, cutting emissions in half. Exxon now has customers contracted to remove 5.5 million tons of carbon dioxide annually. That is equal to Replace 2 million gas-powered cars with electric vehicles (EVs). By using carbon capture technology, companies can continue to use oil and gas while Also reduce their carbon footprint.
Exxon is also using its drilling expertise to produce lithium for electric vehicles. The company operates land in Arkansas that contains saltwater rich in lithium. The company plans to become a major lithium producer in the coming years. Exxon recently agreed to supply leading electric vehicle manufacturer SK On with up to 100,000 metric tons of lithium from its first project in Arkansas.
Investing to benefit from the growing demand for energy
ExxonMobil knows that the world will need much more energy in the future, including oil and lower-carbon energy. This vision drives Exxon to continue investing in oil projects while building out several lower-carbon energy businesses. The company’s broad strategy positions it to continue growing its profits, regardless of which energy source becomes dominant in the future.
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Matt DiLallo has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
ExxonMobil Believes the World Will Need Much More Energy in the Future was originally published by The Motley Fool
