ExxonMobil Surges Ahead in Low-Carbon Push, BP and Shell Retreat

Exxon Mobil Corporation XOM, the U.S. supermajor, is poised to surpass European rivals Shell plc SHEL and BP plc BP in low-carbon energy investments, marking a shift in the clean energy race among Big Oil players. This pivot highlights ExxonMobil’s growing focus on reducing third-party emissions and diversifying into new energy technologies, particularly carbon capture, hydrogen and lithium.

XOM Targets $30 Billion in Low-Emission Projects

ExxonMobil's December 2024 announcement to pursue up to $30 billion in low-emission projects from 2025 through 2030 is a bold bet on the clean energy transition. Around 65% of this spend is earmarked for projects that will help third-party customers cut emissions. This includes efforts by ExxonMobil’s Low Carbon Solutions business, which is developing projects in carbon capture and storage, low-carbon hydrogen, and lithium — areas that XOM says align with its engineering and process expertise.

According to data from energy consultancy Wood Mackenzie (cited by the Financial Times), the move would place ExxonMobil ahead of Shell and BP in absolute low-carbon investment. While ExxonMobil boosts its clean energy plans, Shell and BP are pulling back amid profitability concerns in their renewable portfolios.

Shell, BP & Equinor Scale Back on Clean Energy

Shell and BP have revised their strategies to favor traditional fossil fuel investments. Shell CEO Wael Sawan said in March that the company will limit its capital employed in low-carbon businesses to below 10% of the total, allocating capital based on expected returns.

BP, meanwhile, made headlines in February when it announced that it would raise upstream oil and gas investment to $10 billion annually while cutting its clean energy spending by over $5 billion. Norwegian major Equinor ASA EQNR followed a similar path, revealing in an update that it would nearly halve its renewables and low-carbon investments to $5 billion, citing inflation, supply-chain constraints and regulatory uncertainty.

ExxonMobil’s Strategy Leans on IRA Stability

ExxonMobil’s clean energy ambitions rely heavily on the continued support of the Inflation Reduction Act (IRA) of 2022, which offers substantial incentives for carbon capture and hydrogen development. Any major political shift, such as a repeal of key IRA provisions under a potential Trump administration, could affect the economics of these projects.

Still, ExxonMobil appears undeterred for now. Its capital plan places it just behind France’s TotalEnergies in percentage of capex devoted to low-carbon investments. TotalEnergies leads with 29% of capex allocated to clean energy, while ExxonMobil and Shell stand at 17% each. BP lags at 12% following its strategy overhaul.

Currently, ExxonMobil, Shell and BP carry a Zacks Rank #3 (Hold) each. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.With its eyes on long-term value and emissions solutions for customers, ExxonMobil is emerging as the most aggressive U.S. investor in low-carbon energy among traditional oil majors. As its European counterparts step back from climate-focused investments, ExxonMobil may find itself not just catching up, but taking the lead in the next phase of energy evolution.

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This article originally published on Zacks Investment Research (zacks.com).

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