ExxonMobil is preparing for whatever the future may bring.
ExxonMobil (XOM 0.81%) firmly believes that oil will remain a vital economic driver for decades to come. This belief is what drives the company to continue investing in oil projects. But the company's focus is on a much broader energy picture than oil. Regardless of which direction the world ultimately heads, the company aims to participate in the overall growth in energy demand.
Here, we take a closer look at ExxonMobil's long-term outlook for the energy market and how it affects the company's investment strategy.
Built for the future
ExxonMobil CEO Darren Woods discussed the company's energy outlook during a recent second-quarter conference call. He highlighted that the report “projects that global energy demand in 2050 will be 15% higher than today. We see oil demand stabilizing at about 100 million barrels per day in 2050, while renewable energy and natural gas demand will increase significantly.” He noted that the growing demand for energy “creates opportunities for ExxonMobil, regardless of the speed or direction of the energy transition.”
Woods further pointed out:
Over time, as it becomes increasingly clear that heavy industry and commercial transportation cannot be substantially powered by renewable energy, the world will become even more reliant on technologies where we have an advantage, such as hydrogen, biofuels, and carbon capture and storage.
So the company is now focused on leveraging its molecular expertise in the transition to low-carbon energy. Exxon knows how to extract, process, transport, refine, upgrade and sell hydrocarbon molecules. The company believes the market for low-carbon energy molecules will be worth $6 trillion by 2050. That's a huge opportunity for the company.
The company is committed to building multiple molecular-based businesses to leverage its hydrocarbon expertise and complement its upstream production and downstream products businesses. This strategy will position it to continue to grow profitably while remaining flexible and positioned to take advantage of future opportunities, regardless of the energy direction the economy ultimately chooses.
Investing broadly in the future of energy
Exxon's broad-based investment approach has been on full display this year, as the company continues to invest heavily in expanding its oil and gas production. The company recently took a major step forward with the completion of its acquisition of Pioneer Natural Resources, which significantly strengthened the company's position in the oil-rich Permian Basin and helped the company achieve its highest-ever production in the basin in the second quarter.
The company also continues to invest in its world-class position offshore Guyana, where it has set production records during this period. The company recently filed for development of its seventh project in the region. The Hammerhead project is expected to begin producing 120,000-180,000 barrels per day from 2029.
At the same time, ExxonMobil is investing heavily in low-carbon energy. For example, it is working to build the world's largest low-carbon hydrogen production facility. The project will produce one billion cubic feet of clean hydrogen per day and one million tons of ammonia per year. The project will supply low-carbon hydrogen to the U.S. Gulf Coast market and help industrial customers decarbonize their operations.
Meanwhile, the company recently signed a new carbon capture agreement with fertilizer and ammonia manufacturer CF Industries, which will allow Exxon to remove up to 500,000 tons of carbon dioxide per year from its Mississippi facility, halving emissions. Exxon currently has contracts with customers to remove 5.5 million tons of carbon dioxide per year, the equivalent of replacing 2 million gasoline-powered vehicles with electric vehicles (EVs). Carbon capture technology allows companies to reduce their carbon emissions while continuing to consume oil and gas.
Exxon is also using its drilling technology to produce lithium for EVs. The company controls land in Arkansas that is filled with lithium-rich brines, and it plans to become a major lithium producer in the coming years. Exxon recently agreed to supply up to 100,000 tons of lithium from its first project in Arkansas to SK On, a major EV manufacturer.
Investing to take advantage of growing energy demand
ExxonMobil knows that the world will need more energy in the future, including oil and low-carbon energy. With this in mind, Exxon is continuing to invest in oil projects while also building several low-carbon energy businesses. The company's broad strategy will allow it to continue to grow profitably no matter what energy source predominates in the future.
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.
