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ExxonMobil’s net-zero goal for Permian Basin operations criticized as limited in scope

08 December 2021 Amena Saiyid

ExxonMobil's plan to reach net-zero carbon levels from its Permian Basin operations has been met with dismay from groups that say the global oil giant should have targeted worldwide assets and emissions across the value chain of its products, not just upstream production.

ExxonMobil announced 6 December it would reduce Scope 1 (direct releases from production activity) GHG emissions and Scope 2 (indirect emissions through purchases of heat and power for its operations) from its hydraulic fracturing operations in New Mexico and Texas to reach net-zero carbon levels by 2030.

According to the company, "unconventional" hydraulic fracturing techniques are responsible for producing an average of 500,000 barrels of oil equivalent per day in the Permian Basin, which represents 40% of ExxonMobil's net US upstream production.

However, this figure represents just 13% of Exxon's global production, noted Andrew Logan, senior oil and gas director for Ceres, a nonprofit sustainable network of institutional investors.

"So, the Permian is significant to ExxonMobil, but it is only one asset among many," Logan told Net-Zero Business Daily on 7 December.

The Irving, Texas-based company said the GHG reduction plans for the Permian Basin are part of its overall corporate strategy to reduce its operational GHG intensity by 40-50% compared with 2016 levels by 2030.

Renewables to power production

The company's plan is to reach this target by upgrading equipment as well as plugging methane leaks from existing operations using satellite monitoring and aerial flyovers, plus putting an end to routine flaring of waste oil by the end of 2022. ExxonMobil said it also plans to electrify its Permian Basin operations via wind, solar, and hydrogen gleaned from natural gas facilities equipped with carbon capture and storage, as well as employing carbon offsets that would include nature-based solutions, such as reforestation projects.

"Our goal of net zero for Scope 1 and Scope 2 greenhouse gas emissions is one of the most ambitious and wide-reaching in the Permian Basin," Bart Cahir, senior vice president of unconventional at ExxonMobil, said in a 6 December statement accompanying the announcement.

However, Logan said, "Exxon's approach to climate change as a whole, fails to address the company's main source of climate risk, which is the emissions embedded in its products."

ExxonMobil's announcement comes just shy of a month after Chevron said it is adopting a net-zero goal for Scope 1 and 2 emissions from its upstream operations by 2050. Chevron also announced that it has set a greater than 5% carbon emissions intensity reduction target encompassing Scope 1, 2 and 3 from 2016 levels by 2028.

Kevin Birn, IHS Markit vice president for GHG estimation and coordination, told Net-Zero Business Daily that ExxonMobil's plans to target Scope 1 and 2 GHG emissions from the Permian Basin are significant because they signal "not only a rise in ambition, but also their intention to compete on decarbonization."

Commenting on ExxonMobil's lack of any plan to reduce Scope 3 emissions, which encompass GHG releases across the value chain including its end use in the transportation sector, Birn noted that "Scope 3 represents a significant challenge and one that will take effort not only from upstream, but through the entire value chain, including consumers."

"Few" net-zero targets

According to IHS Markit's Corporate GHG Emissions Tracker, there are a very "few" net-zero targets among the biggest US oil companies as yet, and they certainly do not include Scope 3 emissions, unlike those of European oil majors. TotalEnergies, for instance, has a net-zero goal that includes Scope 3 emissions, but the company's reduction in Scope 3 emissions remains focused in the medium-term on its European downstream operations.

The biggest US oil companies in most cases have announced net-zero ambitions, and announcements have been forthcoming where these companies have seen the economics line up. To date, these include APA, Occidental, Conoco, Chevron, Devon, Diamondback, EOG, Hess, and Pioneer.

ExxonMobil is targeting GHG emissions just from its upstream production and then only from its Permian Basin operations so IHS Markit analysts say it can't be placed in the category of companies that are targeting reductions across their operations.

Both Chevron and ExxonMobil have been forced to reckon with climate impacts as a result of collective action by sustainable shareholder groups.

No consistency in GHG reporting

Besides, it is difficult to pin down these net-zero goals on the basis of Scopes 1, 2, and 3 emissions, as there is no standardized definition for these categories and no harmonized way for reporting the reductions, Suramya Sharma, IHS Markit research analyst, told Net-Zero Business Daily 8 December.

"Where do Scope 3 emissions begin and where do they end (for upstream oil producers)? One has to dig deeper to see what assets are being targeted, the timing of the reductions, and the economics underlying those reductions," Sharma said.

In ExxonMobil's case, IHS Markit Associate Director Christopher Elsner noted that the Permian Basin is an oil play that has many levers to decarbonize economically, so this is a natural starting point for ExxonMobil to decarbonize its operations. These levers include divesting legacy conventional wells still producing in the play, which are relatively large polluters, and ready sources of renewable power supplies.

ExxonMobil in 2018 started to lay the groundwork for electrifying its West Texas operations when it entered into a 12-year power purchase agreement with Danish renewable energy firm Ørsted for 500 MW of wind and solar power.

"Similar economic drivers led Chevron to initiate a joint venture in July 2020 with Algonquin Power for 500 MW of incremental renewables capacity, much of it focused in the Permian," Elsner added.

Small yet significant steps

Logan, however, agreed with Birn that ExxonMobil's announcement could mark the beginning of series of steps the company is slowly making to reduce its carbon footprint.

ExxonMobil already is on record as supporting the US-EU Global Methane Pledge, which aims to reduce worldwide methane releases by 30% by 2030.

The Permian Basin announcement comes a week after the company unveiled plans to invest $15 billion through 2027 in projects that lower GHG emissions at existing operations and new projects funded by its Low Carbon Solutions business. ExxonMobil said it would use some of its low-carbon investments to lower GHGs from its operations.

ExxonMobil already is partnering with 10 other companies in supporting a large-scale $100 billion carbon capture and storage hub in the Houston area, where 14.3% of US oil refining capacity and 42% of US petrochemical processing capacity is located.

According to US Department of Energy data, the geological properties along the US Gulf Coast could allow for storage of as much as 500 billion mt of CO2—or more than 130 years' worth of total US carbon emissions, based on the country's tally in 2018.

ExxonMobil recently bid on as many as 94 shallow water plots in the Gulf of Mexico region, which IHS Markit analysts say is an indication that the company is making tangible investments in these reservoirs to achieve potential scale in CCS.

Non-profit calls it "greenwashing"

Alan Zibel, an analyst with the Texas-based nonprofit Public Citizen, isn't swayed by ExxonMobil's efforts to decarbonize, calling it "greenwashing." This is because a Public Citizen analysis of oil and gas leases on public lands revealed that ExxonMobil subsidiary XTO Energy was behind just EOG Resources and Devon Energy in picking up leases to drill and extract fossil fuels from public lands.

Between 2017 and November 2021, XTO Energy secured 839 leases, while EOG secured 2,932 and Devon won 1,434.

The same analysis also shows that public lands in New Mexico, which is part of the Permian Basin, were where most of the leases were handed out during this period.

Posted 08 December 2021 by Amena Saiyid, Senior Climate and Energy Research Analyst

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