There remains some debate about the verbiage that best describes the dynamic reshaping of the oil and gas industry, but there is little room for doubt that the business of energy is changing.

This year, the EPA reported total emissions from the petroleum and natural gas systems sector increased 13% to 312.2 million metric tons of carbon dioxide equivalent (MMt CO₂e) in 2021 from 276.7 MMt CO₂e in 2016. While methane emissions fell 27% to 70.9 MMt CO₂e from 89.8 during the same period, CO2 emissions jumped more than 29% to 241.2 MMt CO₂e from 186.7 MMt CO₂e.

Carbon capture and storage (CCS) is a likely key to wrangling emissions. And incentives in the Inflation Reduction Act of 2022—such as an increase to the 45Q tax credit, expanded construction deadlines and lower carbon capture thresholds—are luring companies to incorporate CCS into their emission reduction strategies.

The Inflation Reduction Act, which became law in August 2022, is designed to encourage more developers to pursue such projects as significant tax credits and other benefits to improve project economics. The 45Q tax credit is $17/metric ton for sequestered qualified carbon oxide, but the value jumps to $60/ton for storage associated with EOR, $85/ton for dedicated geologic storage, $130/ton for direct air capture with carbon utilization and up to $180 per ton for direct air capture with carbon storage.

The U.S. government in 2021 guided how the business model can work with an updated 45Q policy; and across the U.S. space, carbon capture is gaining momentum and a growing share of corporate spending. Stephen Stokes, global head of CO2 transport and storage at Wood, told Hart Energy in June that there is a growing industry trend for economies of scale in CCS projects. Occidental Petroleum, BP, Pioneer Natural Resources and many other producers are targeting CCS investment in technology and deal making.

From in-house research and development to acquisitions and asset repurposing, companies such as Exxon Mobil and EnLink Midstream are developing ways to integrate carbon capture into their business models.

In mid-July, Exxon Mobil made a $4.9 billion all-stock deal to buy Denbury Resources. The acquisition gives Exxon the largest owned and operated CO2 pipeline network in the U.S. with 1,300 miles throughout Louisiana, Texas and Mississippi. Exxon executives said the synergies expected will enable annual emissions reductions of roughly 100 million tons and drive returns.

In an exclusive interview with OGI this month, EnLink CEO Jesse Arenivas lays out how the firm achieved first-mover status among midstream players in the CCS space. Working with BKV Corp. in Texas and Exxon in Louisiana, EnLink is relocating and repurposing certain pipeline assets with proximity to both emissions and the sequestrations sites needed. The venture with Exxon has capacity of up to 10 mt of CO2 annually.

Still the International Energy Agency (IEA) estimates that the more than 500 projects in various stages of development throughout the value chain is just enough to meet one-third of what’s required to reach global net zero by 2030.

Gains are happening, but ongoing capital deployment between $400 billion and $500 billion would be needed every year until 2030 to close the net-zero gap, according to IEA.