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ExxonMobil to secure tax break following Denbury CCUS deal
19/7/2023
News
ExxonMobil is to acquire Denbury, a US carbon capture, utilisation and storage (CCUS) solutions and enhanced oil recovery (EOR) specialist, for $4.9bn. The oil major is expected to receive a tax break via the US Inflation Reduction Act (IRA) as a result.
The deal will provide ExxonMobil with the largest owned and operated CO2 pipeline network in the country, at 1,300 miles, including nearly 925 miles of CO2 pipelines in Louisiana, Texas, and Mississippi – located within one of the largest US markets for CO2 emissions, as well as 10 strategically located onshore sequestration sites.
In addition to Denbury’s carbon sequestration assets, the acquisition includes Gulf Coast and Rocky Mountain oil and natural gas operations that comprise proved reserves totalling over 200mn boe, with 47,000 boe/d of current production.
According to ExxonMobil, transaction synergies are ‘expected to enable more than 100mn t/y of emissions reductions over time, driving strong growth and returns’.
The acquisition follows the passing last year of the US Inflation Reduction Act, which is set to provide some $369bn of funding over the next decade to support a more rapid transition to renewable energy and includes tax breaks for companies involved in CCS/CCUS. It is hoped the Act will help tackle climate change and put the US on a path to cut carbon emissions by 40% by 2030.
The Denbury agreement is one of several CCS deals ExxonMobil has made in recent months, including an agreement with US steel producer Nucor last month, under which the US oil major will capture, transport and store up to 800,000 t/y of CO2 emissions from Nucor’s manufacturing site in Convent, Louisiana.
Other agreements include a deal to transport and store up to 2.2mn t/y of CO2 from Linde’s new clean hydrogen production in Beaumont, Texas, which is expected to start up in 2025, and up to 2mn t/y from agricultural fertiliser manufacturer CF Industries’s complex in Louisiana, also due for start up in 2025.
