Speaker 1: Welcome to zero. I am Akshatrati. Today Egxon's new tactic.
Speaker 1: An oil CEO walks into a climate conference. No, it's
Speaker 1: not a joke. Actually, these days it's not even an
Speaker 1: uncommon occurrence. But it is still a big deal when
Speaker 1: that CEO is Darren Woods, who leads Exonmobile Corporation. Regardless
Speaker 1: of where this interiview happened, I would have jumped on
Speaker 1: the opportunity. Far too few oil CEOs opened themselves up
Speaker 1: to journalistic scrutiny. That it was at a climate conference
Speaker 1: in Baku, Azerbaijan only made it more interesting. And this
Speaker 1: was not Darren's first rodeo. He became the first Exon
Speaker 1: CEO ever to attend a climate conference at COP twenty
Speaker 1: eight in Dubai last year. When we spoke, it was
Speaker 1: only days since the US election result had come out,
Speaker 1: and Darren had things to say about Donald Trump that
Speaker 1: I wasn't expecting. He also had strong ideas about how
Speaker 1: Eggxon can be a positive force on climate. Now that
Speaker 1: might seem odd. It is among the world's largest oil
Speaker 1: companies and it has increased oil production quite a lot
Speaker 1: over the last few years. There is also a well
Speaker 1: documented history of companies like Eggxon showing doubt about climate
Speaker 1: science to slow down climate action. But something has clearly
Speaker 1: changed and it's worth hearing Darren's take. Welcome everybody to
Speaker 1: a live taping of the Zero Podcast at COP twenty nine,
Speaker 1: and welcome to the show, Darren.
Speaker 2: Thank you. It's good to be so here.
Speaker 1: We are in Baku, And before I get to important questions,
Speaker 1: let me ask you what are you doing for fun?
Speaker 1: While you're in od Zerbaijan. People keep recommending to me
Speaker 1: that I should take a bath in crude oil. It's
Speaker 1: a thing that a famous spa offers over here, and
Speaker 1: I fact checked it and it's real.
Speaker 2: I'm not doing that. I got in last night and
Speaker 2: I'm spending the day here talking to a number of
Speaker 2: people trying to share ex Molble's perspective on how we
Speaker 2: can contribute to this challenge that we're all discussing this week.
Speaker 1: So let's get to business. Then, many people here will
Speaker 1: see Eggxon as a barrier to tackling climate change. But
Speaker 1: you're here at a cop. You're here at a cop
Speaker 1: for the second time, so you clearly don't think so
Speaker 1: why do you come to a cop?
Speaker 2: Well, I think one of the things that's been happening
Speaker 2: over the last several years is the challenge of significantly
Speaker 2: reducing emissions while continuing to meet the growing demand for
Speaker 2: affordable energy is a tough challenge to solve. I think
Speaker 2: the paulice that have been pursued to date are very
Speaker 2: narrowly focused on limiting the supply of traditional sources and
Speaker 2: trying to drive more expensive alternatives. That frankly isn't accomplishing
Speaker 2: the overall objective. If you look at where we stand today,
Speaker 2: oil is that record levels of demand a coal, gasoline, diesel,
Speaker 2: and so I think while wind and solar, elected vehicles
Speaker 2: are going to play a very important role, they're necessary,
Speaker 2: they're not sufficient. We need more solutions. Frankly, as a company,
Speaker 2: we think we can bring those solutions to bear. If
Speaker 2: you look at what we're doing today, we have the
Speaker 2: only large scale carbon caption storage system in the world.
Speaker 2: We've got five customers with almost seven million tons per
Speaker 2: am of contracted storage for CO two. No other company
Speaker 2: in the world has that. We're developing the world's largest
Speaker 2: virtually carbon free hydrogen facility in the US. We've got
Speaker 2: plans to build that if the IRA legislation gets translated
Speaker 2: into regulation. We're developing a new technique for producing lithium
Speaker 2: to supply battery markets. We're doing work on carbon and
Speaker 2: we have an opportunity to build a new type of
Speaker 2: anode for batteries which have the potential to increase battery
Speaker 2: capacity by thirty percent. And so a lot of things
Speaker 2: we're doing across the very broad spectrum of opportunities, leveraging
Speaker 2: our core capabilities to try to help reduce the world's emissions.
Speaker 1: But COP is mainly about countries negotiating over I will
Speaker 1: say laborious text because I've seen some of that text.
Speaker 1: What conversation do you have as a corporate CEO here
Speaker 1: at COP that are beneficial to you as a company.
Speaker 2: Well, I think it's trying to make sure we have
Speaker 2: a good understanding of where people are, what their concerns are,
Speaker 2: where they're focused at. You know, there are a lot
Speaker 2: of ambitions and aspirations that come out of the COP discussions.
Speaker 2: We're very focused on the action and how do you
Speaker 2: go from ambition to plan. So we're trying to help
Speaker 2: provide a perspective from a company in an industry that
Speaker 2: has a very long history of taking ambitious plans or
Speaker 2: ambitious objectives in trans leading those into real war plans
Speaker 2: and ultimately putting steel in the ground and building facilities
Speaker 2: to accomplish them.
Speaker 1: So we are going to unpack a lot of the
Speaker 1: solutions you've talked about, but before we dive deeper into that,
Speaker 1: I think it's worth addressing too elephants in this room,
Speaker 1: Trump and Trust. Let's start with Trump. Do you think
Speaker 1: Donald Trump, he's going to be in his second presidential
Speaker 1: term in the US in January, do you think Donald
Speaker 1: Trump is a threat to global climate action?
Speaker 2: I think you know, if you look at the time
Speaker 2: scale it's going to be required to address this challenge,
Speaker 2: and the way that we think about it is a
Speaker 2: long term investment. There's work that has to be done,
Speaker 2: and so I'm not sure that any one administration is
Speaker 2: going to significantly advance the pace of the transition or conversely,
Speaker 2: significantly slow the pace. I think there's a lot of
Speaker 2: work that needs to be done across the world, a
Speaker 2: lot of sectors that need to be advancing the work
Speaker 2: in this space. Frankly, we need more comprehensive policy, things
Speaker 2: that encourage and tap into the capabilities of companies and
Speaker 2: markets to reduce submissions. We're leaving a lot of opportunity
Speaker 2: on the table today as a global society, as governments
Speaker 2: around the world, there's a lot of work to be
Speaker 2: done here. I don't think we're depending on anyone administration
Speaker 2: or anyone country, frankly, to advance the global objectives.
Speaker 1: So even as the president of the largest economy in
Speaker 1: the world, the second largest emitter, if it's a four
Speaker 1: year term, you're not that worried, But you do want
Speaker 1: to see policies. And we know that Trump pulled the
Speaker 1: US out of the Powis Agreement the first time around.
Speaker 1: He has said that he will do so again. You
Speaker 1: have said that you would see that as a mistake.
Speaker 1: Trump pulling the US out of the Powis Agreement will
Speaker 1: be a mistake. Why would it be a mistake.
Speaker 2: First of all, what I'd say is the world needs
Speaker 2: to find ways to reduce submissions in a thoughtful, constructive way,
Speaker 2: in a consistent approach. We need to do that while
Speaker 2: we're balancing the needs of people around the world to
Speaker 2: have affordable energy. And so we call it the end equation.
Speaker 2: You got to do both. You can't focus on one
Speaker 2: at the exclusion of the other. That's going to require
Speaker 2: a global effort. There's no one country that's going to
Speaker 2: solve this problem. And so I do think in a
Speaker 2: coord that brings together the world community to focus on
Speaker 2: this subjective, which I believe is needed, is an important
Speaker 2: accord in one that countries should stay in. And I
Speaker 2: think the focus out to be not necessarily on pulling
Speaker 2: in and out of the agreement, but finding a constructive
Speaker 2: way to advance the goals of the agreement without compromising
Speaker 2: economic growth, without compromising the growth in people's prosperity all
Speaker 2: around the world. And there is the opportunity to do that.
Speaker 2: I just don't think we've seen the policy manifest themselves
Speaker 2: to achieve it.
Speaker 1: Yet there is also a chance that he doesn't just
Speaker 1: pull the US out of the Paris Agreement, that he
Speaker 1: pulls the US out of the UN Climate Treaty. Now,
Speaker 1: from a presidential perspective, they can't just rejoin a treaty.
Speaker 1: So say there's a new president who does care about
Speaker 1: climate change, who comes to power after Trump, They'll have
Speaker 1: to go to the Senate, And as you know, the
Speaker 1: Senate is really divided, and a likelihood of getting a
Speaker 1: two thousand majority to join a climate treaty seems very
Speaker 1: far fetched right now. So there could be irreversible consequences
Speaker 1: of a Donald Trump election. Does that not wor you?
Speaker 2: I We're very focused on what we as a company
Speaker 2: can do to contribute to this space. We're not a
Speaker 2: political entity, and so I mean I continue to stay
Speaker 2: focused on the long term. We serve global markets. We
Speaker 2: work all around the world, and that's what we're focused
Speaker 2: on doing, is taking our capabilities and contributing. We're doing
Speaker 2: work not only in the US, but in Asia, in
Speaker 2: Singapore and Indonesia, looking for opportunities to help with that.
Speaker 2: And so we'll continue to look for and pursue the
Speaker 2: opportunities where there's a need and a desire for us
Speaker 2: to contribute.
Speaker 1: So if there's more energy transition opportunities outside of the US,
Speaker 1: you already have a global company, you'll pursue those opportunities outside. Yeah,
Speaker 1: let's look at the domestic front. We know under Trump
Speaker 1: last time around, you saw lower corporate taxes. That means
Speaker 1: for corporations, higher profits. He has said he wants to
Speaker 1: cut taxes further and that would mean even higher profits
Speaker 1: than the last time around. But he's also said he's
Speaker 1: going to roll back regulations domestically in the US, and
Speaker 1: you've talked about how having that back and forth that
Speaker 1: uncertainty is bad for business. But do you think the
Speaker 1: higher profits will make up for the regulatory uncertainty that
Speaker 1: is coming.
Speaker 2: Yeah, I'm not sure. I would look at profitability and
Speaker 2: regulatory uncertainty as a plus and a minus, or a
Speaker 2: balancing factor. I actually consider those two very separate things.
Speaker 2: I think there is a role for smart regulation, effective regulation.
Speaker 2: There's also a role to eliminate unproductive and inefficient regulation,
Speaker 2: and so that's a separate category. We're supportive of regulation
Speaker 2: for the industry. We think it's important, but we think
Speaker 2: it's important to have cost effective, productive regulation that's consistent
Speaker 2: to allow business to get businesses a runway to implement
Speaker 2: that regulation. I also believe that spurring economic growth is
Speaker 2: an important element of not only making the economy more successful,
Speaker 2: but then lifting people up and raising their standards are living.
Speaker 1: Can you give some examples of regulations that you think
Speaker 1: are ineffective and should go.
Speaker 2: I think you know, what we're looking for is making
Speaker 2: sure that the intent of the regulation is clear and
Speaker 2: that the regulations are set in such a way that
Speaker 2: you achieve that intent at the lowest possible cost, that
Speaker 2: it's practical that it can be implemented in the timeframe
Speaker 2: that's suggested. But no specific regulations come to mind, any
Speaker 2: specific ones now.
Speaker 1: So one thing that may happen is Donald Trump gets
Speaker 1: a trifecta. You know, he's won the presidency, he's won
Speaker 1: the Senate, Republicans have won the Senate. There is a
Speaker 1: likelihood that they get the House as well, and that
Speaker 1: gives them a mandate which could in principle allow them
Speaker 1: to take actions such as repealing many of the things
Speaker 1: that are there under the Inflation Reduction Act. You brought
Speaker 1: it up, you said, IRA is something that you're looking
Speaker 1: forward to. You're hoping that rules will be settled, the
Speaker 1: tax credits for all kinds of climate solutions that you
Speaker 1: mentioned earlier. Do you think the repeal of some parts
Speaker 1: of the IRA will happen and do you welcome that?
Speaker 2: So let me maybe start with why we think the
Speaker 2: IRA makes sense. And if you look around the world
Speaker 2: and a lot of the climate policies that are being pursued,
Speaker 2: they pick winners and losers, and they choose a technology
Speaker 2: and insist that that then gets pursued. The advantage of
Speaker 2: the IRA was it focused on outcomes carbon intensity. Our
Speaker 2: view was that's if you're going to mandate carbon emissions reductions,
Speaker 2: you ought to focus on the outcomes that you're looking for,
Speaker 2: put in place the regulations to dictate those outcomes, and
Speaker 2: then let companies, individual businesses, the market figure out how
Speaker 2: best to meet those outcomes. And that's what the IRA
Speaker 2: has done. And so we're supported of the IRA and
Speaker 2: that it approached emissions reductions in the right way. And
Speaker 2: what it allowed us to do as a company then
Speaker 2: is basically draw on all of our resources. So we
Speaker 2: are today investing to decarbonize the production of natural gas
Speaker 2: in the permium. I can take that decarbonized natural gas.
Speaker 2: I can move it down a pipeline system that I
Speaker 2: operate that I control the emissions on. I can bring
Speaker 2: it into my facility where I operate and control the emissions,
Speaker 2: and convert that GOPE wanted to zero methane into hydrogen,
Speaker 2: capture the CO two that's released in that conversion, and
Speaker 2: store that so that I get a near zero hydrogen source.
Speaker 2: And I can do that and then qualify for the
Speaker 2: incentives that the IRA has. That's what we like about
Speaker 2: the IRA, and frankly, the IRA reflected what the administration
Speaker 2: felt like the people of America wanted them to do.
Speaker 2: The Trump, as you say, if he gets all three
Speaker 2: the two houses in the White House, he has a mandate.
Speaker 2: He will then interpret what the people of America want.
Speaker 2: And our job is to respond to what work the
Speaker 2: people around the world want. We deliver on the needs.
Speaker 2: We use our capabilities to help address society's needs. We
Speaker 2: don't determine what those needs are.
Speaker 1: But the Inflation Reduction Act you're saying is technology neutral?
Speaker 1: Is it so? Because the tax skurits are different for
Speaker 1: different technologies. Some tax skrates have much more money than others.
Speaker 1: And yes, they are all geared towards reducing emissions, not
Speaker 1: just emissions intensity. They are geared towards reducing absolute emissions
Speaker 1: because they were geared towards the US being able to
Speaker 1: hit its climate goals, which it currently isn't on track,
Speaker 1: but the IRE would have start to put it on track.
Speaker 2: So so why I say it's technology agnostic is it's
Speaker 2: focused on a carbon intensity for say, hydrogen, a carbon
Speaker 2: intensity level right doesn't specify a technology to achieve that level.
Speaker 2: There may be an underlying assumption as to what technology
Speaker 2: you need in order to reach that. But from my
Speaker 2: perspective and what we're advocating for is irrespective of what
Speaker 2: technology you use, if you can achieve that level, you
Speaker 2: should qualify for the credits. So that makes it technology agnostic.
Speaker 1: So let's take the example of hydrogen, because that's something
Speaker 1: that you have worked on quite consistently. So within the IRA,
Speaker 1: there's a tax cred called the forty five V tax Credit.
Speaker 1: Currently there's a lot of back and forth going around
Speaker 1: to figure out what the rules of that tax credit
Speaker 1: would be. Most of the rules right now, if they're written,
Speaker 1: would prefer that that hydrogen is produced from renewable energy only.
Speaker 1: So you take solar and wind power, you put that
Speaker 1: into an electrolyzer, you split water, you create hydrogen. You
Speaker 1: are arguing that there should be another route allowed to
Speaker 1: be counted under those tax credits, which is to take
Speaker 1: natural gas, do carbon capture, So do steam methane reformation,
Speaker 1: convert that into hydrogen capture the CEO to bury that,
Speaker 1: do you think you'll succeed in getting the equivalency between
Speaker 1: what is known as green hydrogen coming from renewables and
Speaker 1: what is known as blue hydrogen that comes from carbonator.
Speaker 2: Actually, if you look at the legislation, it doesn't specify
Speaker 2: a color. Yes, it's the regulations that come from the
Speaker 2: legislation that will then specify how that. But the legislation
Speaker 2: is very focused on carbon intensity levels. The regulations will
Speaker 2: then tell you how you qualify to meet those carbon
Speaker 2: intensity levels. And there are ways to do that today
Speaker 2: to meet high levels or low levels of carbon intensity,
Speaker 2: high tiering within the legislation that doesn't require a color.
Speaker 2: And all we're saying is if I decarbonize my natural gas,
Speaker 2: I spend billions of dollars to reduce the emissions associated
Speaker 2: with production and natural gas, that as a company, I
Speaker 2: should get credit for that. And frankly, that's what you
Speaker 2: want to do. You want to incentivize our industry to
Speaker 2: invest the money to reduce the emissions associated with production
Speaker 2: and natural gas. That's what we're doing today, and what
Speaker 2: we're advocating for is that that reduction gets reflected when
Speaker 2: we're trying to qualify for a credit within the IRA.
Speaker 2: If that happens, which is what I think the intent
Speaker 2: of the legislation was, then that will justify the investments
Speaker 2: that we're making and the investment in the blue hydrogen.
Speaker 2: If it doesn't happen and they want to incentivize green
Speaker 2: hydrogen and electoralizers, we're not in that business. We won't
Speaker 2: make the investments. That's how it'll work.
Speaker 1: It's billed as the world's largest hydrogen plant. How much
Speaker 1: is it going to cost if you do get these
Speaker 1: tax credits?
Speaker 2: A lot, no number, no number for you. Billions here, here's.
Speaker 1: One way to think about numbers. Right this year, in
Speaker 1: the first three quarters, Exon has given shareholders twelve billion
Speaker 1: dollars back in dividends, fourteen billion dollars as shareholder buyback.
Speaker 1: So you're just buying your own stockback. That's twenty six
Speaker 1: billion dollars in the first three quarters. If I calculate
Speaker 1: the cost of this hydrogen plant, it's a few billion
Speaker 1: dollars two three four billion dollars. You could be doing
Speaker 1: that without the tax credits. Why don't you?
Speaker 2: Well, I have a responsibility shareholders, not my money, and
Speaker 2: so my job is a business and this is I
Speaker 2: think one of the challenges that as you look at
Speaker 2: incentivizing all aspects of an economy, we all have different
Speaker 2: roles to play. I take shareholders money, and I have
Speaker 2: a responsibility to generate a return on that shareholder money,
Speaker 2: and so it's critical for me to make sure that
Speaker 2: the investments that I'm making generate return for the shareholders.
Speaker 2: If I can't do that, if I have more money
Speaker 2: than I can productively invest and get a return, I
Speaker 2: have a responsibility to return that money to the shareholders
Speaker 2: so that they can invest in some other company to
Speaker 2: generate a return. So what I'm doing doing is balancing
Speaker 2: across the portfolio. I'm frankly building a business and have
Speaker 2: a strategy that allows me to be successful. And frankly,
Speaker 2: any scenario that you can forecast going forward, if you
Speaker 2: want to take the IA net zero a very extreme
Speaker 2: decarbonization scenario, if you look at the businesses that we've
Speaker 2: established within the company, the core capabilities that we're building
Speaker 2: those businesses on. In that scenario, using the assumptions of
Speaker 2: the IA, I grow earnings and I grow cash flow.
Speaker 2: That's good for my shareholders. I'm responsible for doing that.
Speaker 2: You can take the other extreme and say we don't
Speaker 2: make any progress with the transition. I'm using the same
Speaker 2: core capabilities and I can grow earnings in cash flowd
Speaker 2: with my business, and so what you want. What you need,
Speaker 2: What the world needs is a transition that companies can
Speaker 2: make money in and generate returns on. Otherwise you're not
Speaker 2: going to drive the investment that you need. So I
Speaker 2: think you know what the world I'd be focused on
Speaker 2: is finding ways to profitably manage the transition. Because we
Speaker 2: can't afford to give to give that away, governments can
Speaker 2: afford to pay that and subsidize it in perpetuity. We've
Speaker 2: got to find a market that rewards for decarbonization.
Speaker 1: So take the example of carbon capture, which you talked about.
Speaker 1: You said you have seven million tons per anem of
Speaker 1: contracted carbon capture facility right.
Speaker 2: Now close to that.
Speaker 1: Yeah, Now that is if you took all your emissions,
Speaker 1: which is Scope one, two and three, less than two
Speaker 1: percent of your total emissions. If you exclude Scope three,
Speaker 1: it's still less than ten percent of your total emissions.
Speaker 1: But Exxon has a reputation for getting results, has top
Speaker 1: notch engineers, has the resources. You bought Denberry, a company
Speaker 1: that has carbon dioxide pipelines and that supports a lot
Speaker 1: of your carbon capture business. Are you betting now that
Speaker 1: because of your spend on Denbury, that carbon capture is
Speaker 1: going to be a viable business without subsidies.
Speaker 2: So I would tell you today, if you look at
Speaker 2: the drives to invest in the transition, there aren't any
Speaker 2: market forces or incentives to invest, which is why government
Speaker 2: policy is either mandating or subsidizing. And that's true across
Speaker 2: all the transitions. To go from the system that we
Speaker 2: have today to a less carbon intensive systems is going
Speaker 2: to require money, and it's going to be more expensive.
Speaker 2: And so the trick is to start down that path,
Speaker 2: you've got to drive the cost of technology down. And
Speaker 2: so I would tell you as we've started this business,
Speaker 2: we've leveraged the IRA and the government incentives as a
Speaker 2: catalyst to get started while we work on the technologies
Speaker 2: to lower the cost. But ultimately this has to transition
Speaker 2: away from government subsidies and then to market driven investments,
Speaker 2: because ultimately that's what it's going to take to be
Speaker 2: successful if you want to roll this out across every
Speaker 2: economy around the world.
Speaker 1: But you've done that for other types of hydrocombon technologies.
Speaker 1: You've done it for offshore drilling, you've done it for
Speaker 1: shale technology where you did not have subsidies, you did
Speaker 1: have to take real big risks with the technology, and
Speaker 1: the market rewarded us, and the market reported because you executed,
Speaker 1: you've made the technology viable. And now if I look
Speaker 1: at your per barrel cost of oil over the past
Speaker 1: few years, they've been falling as a result of your
Speaker 1: investments in a technology. So I understand the theory completely
Speaker 1: that if you invest in a technology and you build
Speaker 1: projects at scale, you can drive down the cost. But
Speaker 1: you've done that so far really well for the hydrocarbon
Speaker 1: exploration and extraction technologies. But the set of investments when
Speaker 1: it comes to climate solutions is still very small.
Speaker 2: So nobody will pay you for me. And that's the
Speaker 2: sad fact today is nobody will pay us for emissions reductions.
Speaker 2: I could provide sustainable aviation fuel, but no airline will
Speaker 2: sign a contract with me to provide it because it's
Speaker 2: more expensive than existing aviation fuel. That's the challenge of
Speaker 2: the transition is it's going to be more expensive and
Speaker 2: today the market won't bear that additional cost. And so
Speaker 2: as a company that has a responsibility to invest and
Speaker 2: generate a return, I got to find ways to do
Speaker 2: that without market forces that exist today, without the demand
Speaker 2: or the customer base. That's willing to pay for it.
Speaker 2: That's the challenge in this space.
Speaker 1: And one thing where people could start to pay for
Speaker 1: these solutions, And something that you have argued for over
Speaker 1: a decade is to have a carbon price, a broad based,
Speaker 1: economy wide carbon price. Now, if you look at the
Speaker 1: politics of a global broad based carbon price, it doesn't exist.
Speaker 1: There is no global government that's going to put a
Speaker 1: carbon price at a global level. Even at a national level,
Speaker 1: when many countries have tried to put a carbon price,
Speaker 1: look at your northern neighbor, Canada, the politics has become
Speaker 1: really toxic. So what you do have today is regional
Speaker 1: carbon pricing. You know, the European Union has been quite
Speaker 1: successful in certain sectors. It has a carbon price. In
Speaker 1: the US, you have California, you have some Northeastern states
Speaker 1: that have a carbon price. We know that under a
Speaker 1: Trump presidency there is going to be very unlikely that
Speaker 1: there will be a even conversations about based carbon price
Speaker 1: across the US. So what specific regulations will you ask
Speaker 1: for now that you can't get a broad based carbon
Speaker 1: price in the US.
Speaker 2: We've been advocating differently recognizing the political challenges of a
Speaker 2: carbon price or a carbon tax and I would also say,
Speaker 2: as we've worked through how that would function globally, it
Speaker 2: falls apart because of the reasons that you said that
Speaker 2: those prices change as you move around the nation. What
Speaker 2: we're now advocating from what we've been talking about is
Speaker 2: starting first with establishing a global carbon accounting system. You know,
Speaker 2: it's amazing to me today if you think about what
Speaker 2: we're trying to do as a planet, as a world,
Speaker 2: that we want to reduce emissions, but today we have
Speaker 2: no mechanism for accounting for all those missions. And so
Speaker 2: step number one is establish a global mechanism for accounting
Speaker 2: for carbon so that we know where all the carbon's
Speaker 2: being generated. As a chemistry person, you will know that
Speaker 2: CO two gets created one time. We ought account for
Speaker 2: that so we know where it's coming from. You get
Speaker 2: a carbon accounting system in place around the world, you
Speaker 2: can then start to calculate what the carbon intensity is
Speaker 2: for every aspect of your economy and for all the
Speaker 2: products those economies are making. If you have a carbon
Speaker 2: intensity for the products that you're making, governments can now
Speaker 2: start to specify what the carbon intensity of the products
Speaker 2: sold in their markets. Have to be very similar to
Speaker 2: how today we sell diesel all around the world, but
Speaker 2: we have different desulfurization requirements for the desers, so different
Speaker 2: specs for sulfur and diesel as you move around the world.
Speaker 2: And so there is an approach today that exists that
Speaker 2: we meet day in and day out to meet a
Speaker 2: specification for the products that we sell globally. Doesn't require
Speaker 2: barriers or trade carbon border or border adjustments or anything
Speaker 2: like that. If you want to sell a product in
Speaker 2: that market, you have to meet that specification. We could
Speaker 2: establish carbon intensity specifications for products in any market, and
Speaker 2: if you want to sell a product in that market,
Speaker 2: you have to meet that carbon intensity specification.
Speaker 1: But the system you're describing already exists, so which we're
Speaker 1: sitting at a cop meeting, which is under the U Entreaty.
Speaker 1: Under the Unreaty, every country has to report their annual
Speaker 1: greenhouse gas accounting two different greenhouse gases into the UN.
Speaker 1: So that exists at a country level. The second thing
Speaker 1: that exists, which was created in two thousand and one,
Speaker 1: is the Greenhouse Gas Protocol, which is created by not
Speaker 1: for profits and by corporations to come up with a voluntary,
Speaker 1: rules based system that you report under. So when we
Speaker 1: talk about Scope one, two and three direct and indirect
Speaker 1: emissions that is under the Greenhouse Gas Protocol. So what
Speaker 1: exactly are you trying to reinvent here?
Speaker 2: I'm very familiar with that. I'm not trying to reinvent
Speaker 2: anything that's not a carbon accounting system. Because you account
Speaker 2: for the carbons. Several times you have people double in
Speaker 2: triple counting carbon. That's not an accounting system. It has
Speaker 2: to add up to global emissions. You can't have multiple
Speaker 2: people counting the same molecules of CO two. You need
Speaker 2: to establish where that's coming from in the As you
Speaker 2: add up those emissions across different reporters, it should all
Speaker 2: add to the same total. You couldn't do that today
Speaker 2: with the JHG protocol.
Speaker 1: You can't do it with the GG protocol. But the
Speaker 1: UN system does exactly.
Speaker 2: You can't manage at a country level. You can't manage
Speaker 2: you need. You need carbon accounting for a product level
Speaker 2: so that you can start to understand what the carbon
Speaker 2: intensity of the product is. That will then drive different
Speaker 2: manufacturers of that product to try to meet these carbon
Speaker 2: intendency specifications. That's exactly think about desulfurization of diesel. There's
Speaker 2: no country wide desulfurization number. It's done at a product
Speaker 2: level so manufacturers can meet those specifications. That does not
Speaker 2: exist today.
Speaker 1: So the GREENOSKT protocol, if you ignore Scope three, does
Speaker 1: include Scope one and two, which are direct emissions. They
Speaker 1: if you only added Scope one and two emissions.
Speaker 2: I will guarantee you that everyone's calculating those things differently.
Speaker 2: There's not a consistent standard as you move around the world,
Speaker 2: around the countries, or even between businesses. That's the challenge.
Speaker 2: That's the difference between sitting at a table like this
Speaker 2: and talking about it and running a business like I
Speaker 2: have to actually deliver on those things. There is not
Speaker 2: a consistent approach. That's what we're advocating for.
Speaker 1: So one thing that axand does really well is be
Speaker 1: able to lobby for outcomes you want that would help
Speaker 1: support many of the goals that you've stated. Are you
Speaker 1: lobbying for new rules and carbon accounting, what are they?
Speaker 2: Well, that's what we're asking xon. Molbill can't create a
Speaker 2: global system, but we are talking to governments around the
Speaker 2: world to suggest that they form a basis to start
Speaker 2: this work to establish a system for accounting for carbon
Speaker 2: around the world, establish protocols for how you calculate carbon
Speaker 2: intendency for different products, and then each government has the
Speaker 2: opportunity to set carbon intensity specifications. We are working to
Speaker 2: try to see that idea and then to get governments
Speaker 2: around the world to start driving that.
Speaker 1: So one place that might have been happening, and tell
Speaker 1: me if that's true, is when the SEC in the
Speaker 1: US was working towards reporting rules on Scope one and
Speaker 1: two emissions for corporations. Were you engaged in those conversations
Speaker 1: when they ask for a request for comment? Did you
Speaker 1: send in a request for comment asking for what rules
Speaker 1: you do?
Speaker 2: Yeah, we did, And I'd say the SEC is not
Speaker 2: the body for establishing carbon accounting system across It's there's
Speaker 2: a it's not a gap accounting system. It needs it
Speaker 2: needs to be like a gap accounting system where you
Speaker 2: have consistent approach. But as you know CO two is
Speaker 2: there's a science that sits behind and so the SEC
Speaker 2: is not the body to do that. You need a
Speaker 2: regulatory body. Well, that's what we've got to establish. This
Speaker 2: is a brand new approach that we're trying to establish,
Speaker 2: consistent with what we've done in other areas of our products,
Speaker 2: but this is one that has to be established today.
Speaker 2: There's a transportation organization that does that for water fuels today.
Speaker 2: That could be one area, but this is an opportunity
Speaker 2: to do it across an entire economy.
Speaker 1: After the break, more of my conversation with x On
Speaker 1: CEO Darren Wards. By the way, if you've been enjoying
Speaker 1: this episode, please take a moment to rate and review
Speaker 1: the show on Apple Podcasts and Spotify. It helps other
Speaker 1: listeners find the show. So let's come to some of
Speaker 1: the other climate solutions that you talked about. You have
Speaker 1: said in the past that as exit mobile, the thing
Speaker 1: you want to invest in in climate solution space is molecules,
Speaker 1: not electrons. Now, when I heard that, and I knew
Speaker 1: that I was going to talk to you, I thought,
Speaker 1: on this table, there's a chemical engineer and that's me,
Speaker 1: and I'm arguing for more renewables, and there's an electrical
Speaker 1: engineer that's you, and you're arguing for molecules not electrons.
Speaker 1: How did that happen?
Speaker 2: Well, I run a business that's in a molecule business.
Speaker 2: That's what happened. I think you know what we when
Speaker 2: I first got into this job, a lot of pressure
Speaker 2: to move into wind and solar and we looked at that.
Speaker 2: I mean, we recognize the need for the world to
Speaker 2: carbonize and whether or not we could contribute something in
Speaker 2: that space. But if you look at what our core
Speaker 2: capabilities are where we have developed competitive advantage. It's not
Speaker 2: an electron business.
Speaker 1: Right.
Speaker 2: People think that we're in the energy business because we
Speaker 2: supply fuel for energy, but we provide fuel for mobility
Speaker 2: for cars. This doesn't put us in the transportation business
Speaker 2: or as an automaker. So we're folks Stone what do
Speaker 2: we do today? Today? We explore for, and produce and
Speaker 2: then manage and transform hydrogen and carbon molecules to a
Speaker 2: variety of products that meet the critical needs of society.
Speaker 2: That's what we do goes far beyond combustible products. That's
Speaker 2: where our strengths are. And so as we looked at
Speaker 2: those capabilities, how can we apply that then to this
Speaker 2: challenge of reducing emissions and the solutions we've come up
Speaker 2: with as our low carbon solutions business.
Speaker 1: And one of those solutions is biofuels in your portfolio,
Speaker 1: and your push on biofuels has been quite interesting. You
Speaker 1: spend roughly three hundred and fifty million dollars trying to
Speaker 1: convert algae into biofuelds. My colleagues worked on a story
Speaker 1: where they found that you also spend sixty million dollars
Speaker 1: on just TV advertising telling the world that you're working
Speaker 1: on it, but now you've wound that down and you're
Speaker 1: not investing in it because you don't see that it's
Speaker 1: working out as a climate solution. So what are the
Speaker 1: lessons from the failure of algae for biofuels that you
Speaker 1: will apply to future climate solutions.
Speaker 2: Well, I think you know. The challenge here is when
Speaker 2: you're trying to develop breakthrough technologies, you never know whether
Speaker 2: or not that's going to be successful. And I think
Speaker 2: that's the case for algae. Was we recognized when we
Speaker 2: were pursuing that that we had to make some significant
Speaker 2: breakthroughs in the productivity of the oil productivity of algae
Speaker 2: if we were going to be successful, and we worked
Speaker 2: on that for several years to try to make those advances,
Speaker 2: But it became very clear as we were working our
Speaker 2: way and actually achieving some of the milestones, that we
Speaker 2: were not going to get to the level of productivity
Speaker 2: that would allow us to effectively scale that technology to
Speaker 2: meet this much broader demand out there. And so we
Speaker 2: had to come to the conclusion that while this held promise,
Speaker 2: it wasn't going to solve the problem, which then had
Speaker 2: us pivot to other technology areas. We're now working on
Speaker 2: a direct air capture technology that is a huge hill
Speaker 2: to climb. There's a huge lot of breakthroughs that we
Speaker 2: need there. So we have built a prototype we're working
Speaker 2: hard on that. We talk about the work that we're
Speaker 2: doing in a direct air capture I can't promise you
Speaker 2: today that we will be successful in it, but what
Speaker 2: I can promise you is we're committed to trying to
Speaker 2: make it successful. And I think that's what you actually want,
Speaker 2: is you want companies that have capabilities around the world
Speaker 2: to be looking for ways that they can innovate and
Speaker 2: drive advancements and technologies to solve this problem. Not all
Speaker 2: of them are going to be successful, but the more
Speaker 2: companies you have doing that, leveraging their core capabilities, the
Speaker 2: better chance we have as a planet of finding a solution.
Speaker 2: And so that's what we're working on, and we're continuing
Speaker 2: to look for other We've got other technologies that we're
Speaker 2: advancing to try to reduce emissions, but they're in the
Speaker 2: very early stages, they require technical breakthroughs. Yep, we're working those.
Speaker 2: We'll talk about them as we go forward, and hopefully
Speaker 2: we'll find some that are successful. But I can't guarantee it.
Speaker 1: But sixty million dollars on TV advertising, surely one of
Speaker 1: the lessons might be not to advertise a solution before
Speaker 1: it's working well.
Speaker 2: I think it's important for people to know what we're trying.
Speaker 2: If you want to limit only talking about the things
Speaker 2: that are going to absolutely work, it'll be an awful
Speaker 2: quiet world out there. And I think, you know, trying
Speaker 2: to make sure that everyone recognizes the need for a
Speaker 2: diversified set of solutions and that you've got many companies
Speaker 2: around the world working hard to try to find those solutions.
Speaker 2: It's important. I would argue, what we haven't done enough
Speaker 2: is to help people understand how we are trying to
Speaker 2: contribute in this space. And so almost the opposite, I
Speaker 2: would suggest we need to do more to help people
Speaker 2: understand the work that we're doing to be a meaningful
Speaker 2: contributor in this space.
Speaker 1: So if you look at the wider business you're here
Speaker 1: at a cop you know that one of the agenda
Speaker 1: items that was agreed on at COP twenty eight, which
Speaker 1: was being argued on in Day one over here is
Speaker 1: how does the world transition away from fossil fuels now.
Speaker 1: One of the things that's happened among the oil majors
Speaker 1: where Egxon has really pulled ahead of all your peers, Shell, Chevron, BP,
Speaker 1: is that Egxon has really increased its production of oil
Speaker 1: over the past few years. And that's proven to be
Speaker 1: a hugely profitable strategy with two things. One price is
Speaker 1: going up, but also your cost of battle of all
Speaker 1: going down, and that's made Shell and Chevron envious of
Speaker 1: what Exon is doing. There's also risk though, say the
Speaker 1: energy transition does speed up at some point, does it
Speaker 1: not wory you you might have stranded assets.
Speaker 2: No, because I'd tell you if you look at oil
Speaker 2: production around the world, first point to make is it's
Speaker 2: a depletion resource. Is a depleting resource. So every barrow
Speaker 2: you produces a barrow you don't have. If you look
Speaker 2: at the supply of oil today in the market, with
Speaker 2: the amount of unconventional oil that's come on out of
Speaker 2: the US, that mix has changed pretty dramatically. Unconventional oil
Speaker 2: depletes at a much faster rate, and so with zero
Speaker 2: investment going into the industry to produce more oil. That
Speaker 2: depletion rate is about fifteen percent per year, and that
Speaker 2: is an extremely steep decline rate, and so the industry
Speaker 2: has to invest significant amount of money just to hold
Speaker 2: production flat. And so as you look at the world,
Speaker 2: the challenge is maintaining enough production to meet the demand
Speaker 2: in the near medium term. And because that depletion curve
Speaker 2: will catch up to you very quickly. The energy system
Speaker 2: is huge. The transition is going to take time. And
Speaker 2: if we make advances in other technologies, if the right
Speaker 2: kind of policies come into place to incentivize the transition
Speaker 2: and move there faster, depletion will take care of the
Speaker 2: resources that are out there today being produced, and investments
Speaker 2: should shift then from that portfolio to a portfolio of
Speaker 2: the new energy sources of the new transition. That's what
Speaker 2: our strategy does. Because we're using the same core capabilities.
Speaker 2: I can put my reservoir engineers onto storing co two
Speaker 2: looking for Brian water with lithium in it, or for
Speaker 2: exploring for oil, and which every one of those businesses
Speaker 2: are more successful and grows faster, I shift the resources there,
Speaker 2: same with my project's organization. I have that opportunity, that flexibility,
Speaker 2: so that I can thrive as a business well into
Speaker 2: the future, irrespective of the scenario that we see.
Speaker 1: Earlier, you were talking about investors when we talked about
Speaker 1: how much money you've going back to investors this year,
Speaker 1: twelve billion dollars in dividends, putteen billion dollars in share buybacks.
Speaker 1: You said that investors are smart people. They can do
Speaker 1: what they want with that money, right, And you've been
Speaker 1: a close watcher of investors even before you became CEO.
Speaker 1: You were in the investor relations role at some points
Speaker 1: in your career during exone. Now it seems to me
Speaker 1: that investors are looking at companies like Exon, not just you,
Speaker 1: but the oil majors in general, and they want as
Speaker 1: much of the profit as possible extracted. But they also
Speaker 1: want you to be very disciplined in what types of
Speaker 1: new oil and gas projects you invest in. Is that
Speaker 1: a right assessment.
Speaker 2: What investors want is to make sure that you're spending
Speaker 2: that money wise and you're going to generate every turn,
Speaker 2: and so yes, the way we look at it, discipline
Speaker 2: investment means investing only in the projects where you have
Speaker 2: an advantage that will be resilient to the down cycles
Speaker 2: because these capital intensative commodities. Businesses have price cycles that
Speaker 2: we have a high price and you move into low price.
Speaker 2: That is a that's they constant in this business. You're
Speaker 2: always moving through these cycles, and so the investments that
Speaker 2: we make have to be robust to the down cycles.
Speaker 2: They have to be advantaged versus the rest of industry.
Speaker 2: They have to be capital efficient. That's what discipline investing.
Speaker 1: Is, and it shows up in your capital expenditure. Say
Speaker 1: you compare yourself during the twenty tens to the twenty twenties.
Speaker 1: You're spending a lot less on your capital expenditure even
Speaker 1: as your oil production is higher than it was back then.
Speaker 1: Would you say One of the ways in which investors
Speaker 1: are thinking about this is that they want not just Egxon,
Speaker 1: but oil companies in general to run in a harvest
Speaker 1: mode where they draw down the profits and the investors
Speaker 1: then invest in the companies they think are building the
Speaker 1: climate solutions. And Egxon does the job of a good
Speaker 1: corporation of producing the profits that it needs, but maybe
Speaker 1: shrinks eventually because the world doesn't need as much fossil fuel.
Speaker 2: Well, I think the facts are counter to that. The
Speaker 2: world needs more fossil fuels. If you look at the
Speaker 2: demand today, as I mentioned at the beginning, demand for
Speaker 2: world today is at record levels. It'll grow going into
Speaker 2: next year. And so that's I think the thing you
Speaker 2: have to You know, we as a very large company,
Speaker 2: represent probably about three percent of the world's oil and
Speaker 2: gas supply, and so as a company, we're not going
Speaker 2: to dictate how much oil and gas gets used in
Speaker 2: the world. In fact, there's no single company that's going
Speaker 2: to dictate that. What dictates the amount of oil that
Speaker 2: gets used in the world is one what is the
Speaker 2: available alternatives that meet the collection of needs, one of
Speaker 2: them being affordability, one of them being reliability, one of
Speaker 2: them being availability. You've got to have an energy supply
Speaker 2: that does That depends on how quickly economies are growing,
Speaker 2: it depends on how quickly people's prosperity are living. So
Speaker 2: those are the things they are going to drive demand,
Speaker 2: and then the challenge for our industry is to meet
Speaker 2: that demand and to meet those different criteria, and as
Speaker 2: we continue to work for ways to decarbonize and meet
Speaker 2: those needs with lower emissions, that's the challenge that we face.
Speaker 2: But you can't stop meeting those needs to reduce emissions
Speaker 2: because now you basically create more and more human hardship.
Speaker 2: This is the challenge that I started this conversation with
Speaker 2: is you've got to find a way to do both.
Speaker 1: But if there are no ideologies and there are just incentives.
Speaker 1: We talked through how the incentive to reduce emissions will
Speaker 1: come from carbon pricing, because that will allow people to
Speaker 1: make choices for lower carbon products at a cost that
Speaker 1: is the right cost for those products versus the cost
Speaker 1: that society bars from climate change. If carbon pricing is
Speaker 1: not going to happen, as we've talked about the political
Speaker 1: infeasibility of it, I use supportive of just direct regulation
Speaker 1: to reduce emissions because something has to cause.
Speaker 2: That's what I'm suggesting when I talk about a carbon
Speaker 2: accounting system, a global carbon accounting system, and then a
Speaker 2: mechanism for calculating carbon intensity at a product level, and
Speaker 2: then a regulation that sets the specification for carbon intensity
Speaker 2: for that market, so that every country can set the
Speaker 2: carbon intensity specifications for the products sold in that market.
Speaker 2: That gets rid of the need for these very inefficient
Speaker 2: come or some carbon border adjustments. So yeah, that's what
Speaker 2: we're talking about regulation. As I said at the beginning,
Speaker 2: is there's a need for smart, efficient, thoughtful regulation. We
Speaker 2: think this is an area we could do that and
Speaker 2: the world could do that in.
Speaker 1: So one place where regulations have had an impact to
Speaker 1: some extent is methane. You set a target to reduce
Speaker 1: methane emissions by eighty percent by twenty thirty and you
Speaker 1: say you are on track. There's a reduction of sixty
Speaker 1: percent as of last year, but why not go further
Speaker 1: because your colleagues at the Oil and Gas Climate Initiative
Speaker 1: have a zero methane emissions by twenty thirty target.
Speaker 2: That's what we're doing. We're part of that commitment.
Speaker 1: Yeah, yeah, so you want to go beyond the eighty
Speaker 1: percent that you've set already.
Speaker 2: So it's a near zero methane what's basically possible is
Speaker 2: what the industry is committing to, and we're part of
Speaker 2: that commitment and we're that's what we're working our way to.
Speaker 1: Okay, So that because that right now the official target
Speaker 1: is eighty percent reduction by you.
Speaker 2: Said by twenty thirty eight, Yes, so when you want
Speaker 2: to get nearly at near zero, when we get so
Speaker 2: it's an eight percent reduction gets this down to near zero.
Speaker 1: Now, the second elephant in the room that I wanted
Speaker 1: to bring up, but we got sidetracked into a lot
Speaker 1: of other discussion is one about trust, and it is
Speaker 1: worth acknowledging here. A lot of people in this room
Speaker 1: will be familiar with Exon's history around so in doubt
Speaker 1: on climate science, just load down climate action. At one point,
Speaker 1: Exon employed some of the world's best climate scientists. They
Speaker 1: predicted very accurately, what would happen if you keep burning
Speaker 1: fossil fuels and we are living with those consequences today.
Speaker 1: You've said multiple times Exon is a different company today.
Speaker 1: But given Exon's history, why should people trust you?
Speaker 2: Now? Yeah, Well, I think what you've described there's you
Speaker 2: can debate. I think the facts around that. I think
Speaker 2: we had two scientists working thirty or forty years ago.
Speaker 2: These are things that happened thirty or forty years ago.
Speaker 2: I think what people had to focus on what have
Speaker 2: we been doing, what are we committing to do, and
Speaker 2: what are we demonstrating that we're doing. And as I
Speaker 2: come back to you, if you look at the things
Speaker 2: that we're doing today, we're investing more than any other
Speaker 2: company across a broader array of solution sets to try
Speaker 2: to help economies decarbonize. I think that's what we can
Speaker 2: be expected to do, or what should be expected of us,
Speaker 2: and I think we're working harder to deliver on that.
Speaker 2: But at the end of the day, you've got to
Speaker 2: have supportive policy in lieu of a market but ultimately
Speaker 2: you got to have market forces.
Speaker 1: But when we talk about those efforts, which you say,
Speaker 1: we're thirty forty years ago, now you were at the
Speaker 1: company at the time you joined in nineteen ninety two,
Speaker 1: Many of these efforts were done in the nineties and
Speaker 1: the two thousands. I know you weren't in a role
Speaker 1: which made the decisions whether these efforts go forward or not.
Speaker 1: But you are in charge of the entire company today,
Speaker 1: and the questions I'm asking you are questions that your
Speaker 1: predecessors took actions on, and now you're answering those questions.
Speaker 1: Twenty years from now, your successors will be answering questions
Speaker 1: about the actions you take today. So that will be
Speaker 1: a time when climate impacts will be worse. And I'm
Speaker 1: saying will because that's a scientific certainty, as exon scientists
Speaker 1: have predicted so what are you doing now to protect
Speaker 1: your legacy At EGXON.
Speaker 2: We're trying to solve the problem is leveraging the capabilities
Speaker 2: that we have as a company. That's what we've been
Speaker 2: talking about this whole podcast. I mean, the reality is
Speaker 2: there's no one company out there doing more than we're doing.
Speaker 2: If you look at the amount of money that we're
Speaker 2: investing on an annual basis, the commitments on an average
Speaker 2: annual basis, it's a third of what the US EPA
Speaker 2: is spending. That's one company doing that. So again, I'm
Speaker 2: not claiming that we're going to solve the problem, and
Speaker 2: I'm claiming is we're going to use our capabilities to
Speaker 2: contribute to solving that problem. I think that's all that
Speaker 2: we can ask of ourselves as a company, and that's
Speaker 2: what we're doing. Thank you, Dare, thank.
Speaker 1: You, thank you for listening to zero. Now for the
Speaker 1: sound of the week, that's the sound of the heaters
Speaker 1: keeping us warm in the Bakwu Stadium here at COP
Speaker 1: twenty nine. If you like this episode, please take a
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Speaker 1: of podcast is Sage Bauman, and head of Talk is
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Speaker 1: Special thanks to Kevin Crowley, jend De, Louis schwan Wagner,
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Speaker 1: the Atlantic Council, the International Chamber of Commerce and Uwe
Speaker 1: sabiovski I am Akshatrati Band