Hydrogen has immense promise. The lower-carbon fuel could help address climate change concerns while meeting the world’s growing energy needs. While estimates vary, Deloitte believes green hydrogen could become a $1.4 trillion market by 2050. That’s the tip of the proverbial iceberg. The potential size of the lower-carbon market for molecules alone could reach $6 trillion by 2050.
ExxonMobil (NYSE: XOM) wants a piece of that massive market opportunity. The oil giant is currently working to develop the world’s largest low-carbon hydrogen project. It’s one of several steps the oil company is taking to cash in on the potentially lucrative demand for lower-carbon energy.
Partnering on a potential needle-moving hydrogen project
ExxonMobil recently revealed that Air Liquide is coming on board to support its low-carbon hydrogen and ammonium project at its facility in Baytown, Texas. The agreement will enable Exxon to transport low-carbon hydrogen through Air Liquide’s existing pipeline network. In addition, Air Liquide will build and operate four Large Modular Air separation units to supply the company with oxygen and nitrogen for the facility. Those units will primarily use low-carbon electricity to power their operations.
The oil company’s planned hydrogen production facility would be the largest in the world. It could produce 1 billion cubic feet of low-carbon hydrogen each day, enough energy to power 1.5 million homes. In addition, it would produce more than 1 million tons of ammonia each year. Exxon plans to capture more than 98% of the emissions associated with the project. By partnering with Air Liquide, Exxon could supply lower-carbon hydrogen to markets along the Gulf Coast to help industrial customers decarbonize their operations by replacing fossil fuels.
“Momentum continues to build for the world’s largest low-carbon hydrogen project and the emerging hydrogen market,” stated Dan Ammann, the President of ExxonMobil’s low-carbon solutions business, in the press release unveiling the agreement. He noted, “This partnership with Air Liquide further strengthens our Baytown project by enabling hydrogen distribution through existing networks and securing key feedstocks.”
The company hopes to make a final investment decision on this project this year. If it does, the Baytown facility could be operational by 2028. The project will require government approval and supportive policies to generate a high enough return to justify the investment. This project alone represents nearly 10% of the Biden administration’s clean hydrogen goal.
Building a low-carbon energy behemoth
The Baytown facility is one of many lower-carbon energy projects Exxon is pursuing. It aims to invest more than $20 billion in the 2022 to 2027 period. That’s on top of the $5 billion it spent to acquire Denbury Resources for its carbon dioxide infrastructure and expertise.
The oil company is taking an all-encompassing approach to lower-carbon energy. It’s investing in hydrogen, carbon capture and storage, lithium, and renewable fuels.
The company has signed deals with CF Industries, Linde, and Nucor to support the build-out of carbon capture and storage infrastructure to reduce their carbon emissions. It expects its first projects to be operational in 2026. Exxon could capture and store 5 million metric tons of carbon dioxide per year for those three customers. That’s equivalent to replacing 2 million gas-powered cars with electric vehicles (EVs).
Exxon also plans to become a leader in supplying the lithium needed to power EVs. The company plans to produce lithium by drilling into brine reservoirs on land it controls in southern Arkansas. It aims to produce enough lithium by 2030 to meet the needs of 1 million EVs annually. Exxon recently agreed to supply up to 100,000 metric tons of lithium to SK On, a leading global EV maker.
The company’s investments in the lower-carbon energy sector significantly expand its total addressable market opportunity. It estimates that the market for molecules (carbon capture, hydrogen, and biofuels) could reach $6 trillion by 2050.
Making progress
ExxonMobil is embracing the lower-carbon energy transition. The oil giant plans to invest billions of dollars over the next few years to build several lower-carbon energy platforms. It’s making progress toward starting construction on a massive hydrogen production facility to tap that $1.4 trillion market opportunity. That’s part of its strategy to capture the even larger $6 trillion future market for lower carbon molecules. These investments could pay big dividends for investors by giving Exxon the fuel to continue growing even as demand for fossil fuels could subside in the future.
Should you invest $1,000 in ExxonMobil right now?
Before you buy stock in ExxonMobil, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and ExxonMobil wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Nvidia made this list on April 15, 2005… if you invested $1,000 at the time of our recommendation, you’d have $692,784!*
Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.
*Stock Advisor returns as of July 29, 2024
Matt DiLallo has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Linde. The Motley Fool has a disclosure policy.
ExxonMobil Is Taking a Big Step to Capture This $1.4 Trillion Market Opportunity was originally published by The Motley Fool
Source Agencies
