Is Big Oil Ready to Invest $1.2 Trillion? WoodMac Predicts CCUS Surge, but Investors and Boards May Disagree

Wood Mackenzie’s analysis paints an optimistic picture for CCUS, forecasting a market worth trillions by mid-century. Currently, only 50 CCUS projects are operational globally, with a capacity to store 51 million tonnes of CO2 annually. However, with $80 billion already committed—primarily by the U.S., Canada, and Europe—the consultancy expects the gap between capture and storage capacity to narrow significantly, from 50% in 2030 to 20% by 2050.

Big Oil is already making moves. ExxonMobil’s $4.9 billion acquisition of Denbury Inc., a CCUS specialist with the largest CO2 pipeline network in the U.S., signals a strategic pivot toward low-carbon opportunities. Exxon’s CEO, Darren Woods, claims the company’s low-carbon business could outpace its traditional oil and gas operations within a decade. Similarly, Shell, Equinor, and TotalEnergies have invested $714 million to expand the Northern Lights CCS project in Europe, underscoring the technology’s growing appeal.

Yet, WoodMac tempers its enthusiasm with caution, revising its 10-year forecast downward by 22% due to policy uncertainty in the U.S. This uncertainty could reshape the CCUS landscape, particularly if the U.S. reclassifies CO2 and scales back support.

The rise of environmental, social, and governance (ESG) investing has forced Big Oil to balance climate commitments with shareholder demands for returns. European majors like BP, Shell, and TotalEnergies have faced intense pressure to pivot toward renewables, with ambitious pledges to become “energy companies” rather than oil giants. However, these firms have often funneled far more capital into oil and gas than into green energy. A 2021 International Energy Agency report noted that the oil and gas industry spent just 1% of its capital expenditures on clean energy in 2020, though European companies have since increased this to above 10% in some cases.

Investors, particularly in the U.S., have been skeptical of Big Oil’s renewable ventures. A 2021 Reuters report highlighted that U.S. oil majors like ExxonMobil, Chevron, and ConocoPhillips have doubled down on drilling, rejecting direct investments in wind and solar. Fund managers overseeing $7 trillion in assets expressed a preference for oil companies to focus on their core competencies and deliver cash to shareholders, who can then invest in renewables independently. The XOP ETF, tracking oil and gas stocks, delivered a 92% total return in 2021, far outpacing the 22% return of a representative ESG fund.

This shareholder-first mentality has led to record payouts. In 2022, the five supermajors—BP, Shell, Chevron, ExxonMobil, and TotalEnergies—distributed $104 billion in dividends and share buybacks, prioritizing immediate returns over long-term green investments. ESG funds, while growing, have struggled to reconcile these payouts with climate goals, with many sustainable fund managers criticizing Big Oil’s failure to address Scope 3 emissions (from fuel use), which account for 85% of their carbon footprint.

This scenario would have ripple effects. The U.S. accounts for a significant portion of the $80 billion committed to CCUS globally, and its withdrawal could jeopardize WoodMac’s projected $196 billion investment by 2034, 70% of which is expected from North America and Europe. Companies like ExxonMobil, which have built CCUS portfolios anticipating 20% returns, could see projects shelved, redirecting capital to oil and gas.

The UK, EU, and Canada have robust CCUS frameworks, with policies like the UK’s business models, Canada’s Investment Tax Credit, and the EU’s Industrial Carbon Management Strategy driving investment. If the U.S. exits CCUS, these regions could face increased pressure to fill the funding gap, potentially straining budgets or requiring private sector buy-in. Europe’s Northern Lights project and Canada’s efforts to decarbonize Alberta’s oil sands (which emit ~160 pounds of carbon per barrel) would need to scale up without U.S. technological or financial support.

For investors, the divergence between U.S. and European oil majors presents a dilemma. U.S. companies, unburdened by aggressive renewable mandates, have outperformed their European counterparts in recent years. The XOP ETF’s 92% return in 2021 underscores the market’s preference for U.S. firms’ focus on oil and gas. If the U.S. deprioritizes CCUS, this trend could intensify, with capital flowing to traditional upstream projects offering higher, immediate returns.

European majors, however, face a tougher balancing act. Their ESG commitments and government mandates (e.g., the EU’s push to phase out fossil fuel subsidies by 2030) limit their flexibility, potentially capping returns. Yet, their CCUS investments could pay off long-term if global demand for carbon-neutral energy grows. The risk is that a U.S. withdrawal from CCUS could undermine global momentum, leaving European firms overexposed to a nascent market.

As Big Oil navigates the “New Energy Trilemma” of dividends, fossil fuel investment, and green technology, the path forward is fraught with uncertainty. Will CCUS be the game-changer WoodMac predicts, or will it falter without unified global support? Investors and boards will ultimately decide, but one thing is clear: the stakes have never been higher.