I Was CCS When CCS Wasn't Cool - Carbon Capture Spurs ExxonMobil's Denbury Acquisition

Friday, 07/28/2023 Published by: Rusty Braziel  rbnenergy.com

A great deal of attention has been heaped on the carbon-capture industry over the past couple of years, from its inclusion in major federal legislation such as 2021’s infrastructure bill and last year’s Inflation Reduction Act, plus all sorts of recently announced carbon sequestration projects. Still, there are plenty of concerns that the technology is not fully baked, that many of the projects are not ready for prime time, and that few have the practical know-how to deploy carbon capture and sequestration (CCS) at scale. But what if there was a company that has been doing carbon sequestration for a very long time — decades in fact? And what if that company has built out a huge carbon dioxide (CO₂) collection, distribution and sequestration system on the Gulf Coast along with concrete plans for a massive expansion of this network to capture a lot more manmade, “anthropogenic” CO₂, not in decades but in just a few short years? A company like that would be pretty much the ideal acquisition candidate for a cash-flush multinational with big ESG goals and strategies, right? As we discuss in today’s RBN blog, that is just what is happening with ExxonMobil’s acquisition of Denbury, a deal that will create today’s undisputed leader in CCS.

ExxonMobil announced July 13 that it is acquiring Denbury in an all-stock transaction valued at $4.9 billion. As stated in the press release, the Denbury deal “provides ExxonMobil with the largest owned and operated CO₂ pipeline network in the U.S. at 1,300 miles, including nearly 925 miles of CO₂ pipelines in Louisiana, Texas, and Mississippi … as well as 10 strategically located onshore sequestration sites.” And all of this is located along the Gulf Coast industrial corridor, an area that has some of the highest concentrations of CO₂ emissions anywhere in the world. 

Yup, it’s a big deal that will move CCS forward much faster than would be the case otherwise. We’ve been big fans of Denbury for a long time at RBN, so we are compelled to describe this deal with that highly overused phrase: “game changer.” The combination brings together two of the leading companies focused on CCS, both with deep experience in the technology, one with a leadership position in existing assets (Denbury) and the other with the money and strategic intent to take it where it needs to go (ExxonMobil).

It’s a great outcome for Denbury, a company that struggled for years to explain its strategy and to make money using its technology — getting started long before anybody even thought about huge government subsidies and tax breaks for pumping CO₂ underground. It defied convention and built its business model, often with less-than-mediocre support from the broad energy investment community, eventually becoming the only good-sized (~50 Mb/d) U.S. oil producer focused exclusively on CO₂-based enhanced oil recovery (EOR). Denbury was definitely into CCS when CCS wasn't cool.