ExxonMobil And Chevron Book Record Quarterly Profits, Ramp Up Low-Carbon Investments
ExxonMobil and Chevron made history by reporting record quarterly profits for Q2 2022. The results standout even more considering we aren’t far removed from 2020, which marked ExxonMobil’s largest loss in company history. Here are company highlights, notable long-term fossil fuel and low-carbon investments, projects to watch in the years to come, and what it all means for the energy industry.
Performance And Production
ExxonMobil booked a record quarterly high of US$17.9 billion in net income for Q2 2022 compared to US$4.69 billion in Q2 2021. Year-to-date (YTD), ExxonMobil has booked US$23.33 billion in profit, which is more than the US$23.04 it earned for all of 2021. ExxonMobil has now made up for the US$22.4 billion it lost in 2020.
Similarly, Chevron booked a record quarterly high of US$11.6 billion in net income for Q2 2022 compared to US$3.08 billion in Q2 2021. YTD, Chevron has booked US$17.88 billion in profit compared to just US$4.46 billion for the first six months of 2021. Chevron’s first half 2022 (1H 2022) profit is already higher than the US$15.63 billion it made in all of 2021. Chevron has now easily made up for the US$5.54 billion it lost in 2022.
ExxonMobil’s capital and exploration expenditures stand at US$9.51 billion for 1H 2022, which is up 37% compared to 1H 2021. Compared to 1H 2021, ExxonMobil increased its Permian Basin oil and gas production by 130,000 barrels of oil equivalent per day (boe/d) compared to 1H 2022. It also increased its refining throughout by 180,000 barrels per day (bpd).
Despite these investments and production increases, ExxonMobil’s Q2 2022 production of 3.73 million boe/d was only 1.6% higher than Q1 2022 and 4.2% higher than Q2 2021. First half 2022 production of 3.7 million boe/d was just 0.5% higher than 1H 2021. Put another way, ExxonMobil is keeping a lid on production and letting high margins work in its favor while reinvesting capital in long-term oil and gas projects, liquefied natural gas (LNG) projects, and the energy transition.
Chevron’s capital and exploratory expenditures for 1H 2022 were US$6.7 billion, which was 26% higher than 1H 2021. Chevron said that upstream represented 79% of its 1H 2022 capital and exploratory expenditures.
Chevron’s Q2 2022 production was 2.9 million boe/d. Internationally, Chevron produced 13% fewer boe/d in Q2 2022 than in Q2 2021 because concessions in Thailand and Indonesia ended. US production increased by 3% compared to Q2 2021.
LNG Investments
ExxonMobil had two major LNG announcements for the quarter. The first is that its Coral South Floating LNG project offshore Mozambique initiated gas flows in June and is expected to deliver its first LNG Cargo in the second half of 2022.
The second is that ExxonMobil and QatarEnergy entered into a joint venture (JV). The JV holds a 25% stake in QatarEnergy’s North Field Expansion East (NFEE). ExxonMobil holds a 25% stake in the JV, giving it the equivalent of a 1/16 stake in the NFEE or roughly 2 MTPA of LNG capacity. ExxonMobil has held a presence in Qatar since 1955 and was the largest foreign investor in Qatar’s early 2000s LNG infrastructure. According to ExxonMobil, the 8-MTPA JV bumps up its total Qatar LNG volumes from 52 to 60 MTPA.
Chevron was noticeably absent from the group of American and European majors that invested in the NFEE (ExxonMobil, Shell, TotalEnergies, ConocoPhillips, and Eni). However, Chevron did say that it signed agreements to export 4 MTPA of LNG from the US Gulf Coast. Chevron also accepted a hefty US$600 million charge to terminate a long-term LNG regasification contact at Cheniere’s Sabine Pass. However, the company continues to grow its global LNG portfolio. It’s worth mentioning that the vast majority of Chevron’s LNG investments are through equity stakes in Australia’s largest LNG megaprojects. “In Australia, we shipped 87 LNG cargoes from Gorgon and Wheatstone in the first half of this year, up more than 10% from last year,” said Jay Johnson, Chevron’s executive vice president of upstream during the company’s Q2 2022 earnings call. “Our reliability benchmarks in the first quartile and we intend to stay there with an ongoing focus on operational excellence. Gorgon Stage 2, the first backfill project is on track to deliver first gas in September. Our Gulf of Mexico projects are progressing well with Ballymore receiving final investment decision [FID] as a tieback to Blind Faith, an example of leveraging our existing infrastructure to improve returns. The Anchor hull is currently sailing from Korea and work on its top sides continues in Texas. Lastly, we recently signed agreements to export 4 MTPA of LNG from the US Gulf Coast, with 1.5 MTPA expected to start in 2026. These agreements leverage our growing US natural gas production and expand our value chains in Atlantic Basin markets.”
Chevron made a FID with a new gas consortium to boost LNG output from its Angola LNG project. Angola LNG has 1.1 Bcf/d of natural gas processing capacity, had average daily production of 787 MMcf/d of natural gas in 2020, and average daily total production of 29,00 barrels of natural gas liquids in 2020. Chevron holds a 36.4% stake in the US$12 billion project.
Low-Carbon Investments
ExxonMobil claimed it is “leading the drive to net zero” with carbon capture and storage (CCS), biofuels, and hydrogen investments. “Key to our success is continued investment in our advantaged portfolio, including Guyana, the Permian, global LNG, and in our high-value performance products, along with efforts to reduce structural costs and improve efficiency,” said ExxonMobil CEO Darren Woods in a statement. “We’re also helping meet increased demand by expanding our refining capacity by about 250,000 barrels per day [bpd] in Q1 2023 — representing the industry’s largest single capacity addition in the United States since 2012. At the same time, we’re supporting the transition to a lower-emissions future, growing our portfolio of opportunities in CCS, biofuels, and hydrogen.”
ExxonMobil continues to be the most aggressive investor in CCS out of the oil majors. The company is investing in a 10 MTPA of carbon dioxide (CO2) CCS project in China. ExxonMobil said it could become the first large petrochemical complex to remove CO2 emissions. ExxonMobil and a consortium of other investors, including Neptune Energy, Rosewood, and EBN, signed an agreement to advance the L10 CCS project in the Dutch North Sea, which could store 4 to 5 MTPA of CO2. ExxonMobil is in the preliminary stages of a CCS project in Southeast Australia that could have a capacity of 2 MTPA of CO2 with operations beginning as early as 2025. ExxonMobil and Indonesia’s state-owned energy company, Pertamina, signed a joint study agreement to assess the feasibility of large-scale CCS and hydrogen projects in Indonesia.
In its effort to provide 200,000 bpd of lower-emissions fuels by 2030, ExxonMobil is investing in sustainable aviation fuel (SAF). In July, it delivered its first cargo of SAF to Singapore, and its first cargo of SAF via proprietary pipeline to Heathrow Airport. ExxonMobil, through its majority ownership in Imperial Oil Ltd., is advancing its plans to produce renewable diesel at a new complex in Edmonton, Alberta, Canada. The refinery will use locally grown plant-based feedstocks to produce 20,000 bpd of renewable diesel, which ExxonMobil estimates could reduce emissions in the Canadian transportation sector by about 3 MTPA. ExxonMobil is also making progress on its Baytown, Texas, blue hydrogen plant, which is expected to be able to produce 1 Bcf/d of blue hydrogen and store 10 MTPA of CO2 per year, which would more than double ExxonMobil’s current capacity.
ExxonMobil has a smaller hydrogen project in the works at its Slagen terminal in Norway. In partnership with Grieg Edge, North Ammonia, and GreenH, ExxonMobil signed a memorandum of understanding (MoU) to study production and distribution of green hydrogen and ammonia for low-emissions marine fuels. The research project could produce up to 20,000 metric tons of green hydrogen and distribute up to 100,000 metric tons of green ammonia per year — which would be driven by hydroelectric power.
Like ExxonMobil, Chevron aims to reduce its carbon emissions by investing in projects where it can leverage its oil and gas expertise instead of venturing completely away from its oil and gas roots toward solar and wind energy. The most notable low-carbon investment for Chevron this year has been its US$3.15 billion acquisition of Renewable Energy Group Inc. (REG), which was announced in March and completed in Q2 2022. The acquisition combines REG’s growing renewable fuels production and feedstock capabilities with Chevron’s manufacturing, distribution, and commercial marketing position.
Chevron has also been growing its CCS portfolio, albeit at a slower rate than ExxonMobil. In Q2 2022, Chevron launched a CCS project in its home state of California to reduce emissions from its upstream operations. It also expanded a JV for the Bayou Bend CCS hub in Texas. If the project goes as planned, Chevron will help launch the first offshore CCS project in the United States.
The acquisition of REG and Chevron’s CCS investments are part of Chevron’s multi-year long low-carbon investment plan. In September 2021, the company said it would invest US$10 billion in low-carbon projects through 2028. Prior to that announcement, Chevron had earmarked just US$3 billion toward lower-carbon projects. US$10 billion is a large commitment relative to Chevron’s excess cash, which it expects will average around US$5 billion per year over the next five years assuming an average Brent crude oil price of US$60 per barrel. Chevron defines excess cash as the cash that is left over after its capital spending and dividends are paid. “Chevron intends to be a leader in advancing a lower-carbon future,” said Wirth. “Our planned actions target sectors of the economy that are harder to abate and leverage our capabilities, assets, and customer relationships.”
Unlike other majors that are investing in renewable energy, such as Total Energies with solar, Equinor with offshore wind, or BP with wind and solar, Chevron is turning its attention toward renewable natural gas (RNG), renewable diesel, SAF, hydrogen, and CCS. It expects RNG production to be 40,000 MMBtu/d by 2030. It also plans to construct a network of fueling stations. It expects renewable fuels production to total 100,000 bpd by 2030, mainly from renewable diesel and SAF. Chevron is forecasting 2030 hydrogen production of 165,347 tons (150,000 tonnes) per year and carbon capture and offsets to grow to 27.56 million tons (25 million tonnes) per year. US$2 billion of Chevron’s US$10 billion commitment will go toward reducing emissions from existing operations, while the other US$8 billion will go toward the projects discussed. The US$2 billion will help Chevron reduce greenhouse gas intensity from its upstream operations by 35% by 2028 compared to 2016 levels.
Decades Of Growth
ExxonMobil and Chevron have taken a measured response to higher oil and natural gas prices by increasing their dividends, boosting share repurchases, and investing in longer-term projects. Short-term increases to production have been minimal. Rather, it seems both companies are more focused on investing in CCS, hydrogen, LNG, and other projects that can lower their emissions and produce earnings down the road. This year will likely be the highest calendar year of earnings in history for both companies. Whether its plant-based feedstocks needed to produce SAF, LNG, or investments in hydrogen, many low-carbon projects support job creation and create a new market for compression applications.
