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Exxon Mobil Corporation XOM, the U.S.-based oil and gas giant, has inked a long-term agreement with Japanese trading house, Marubeni, for the supply of low-carbon ammonia. This also marks ExxonMobil’s first customer agreement related to its planned hydrogen facility, located in Baytown, TX.
Per the terms of the agreement, XOM will supply Marubeni with 250,000 metric tons per year of low-carbon ammonia. The Japanese trading house has also agreed to acquire a stake in the Baytown hydrogen facility. However, the companies have not specified the details regarding the percentage of stake to be acquired. ExxonMobil’s agreement with Marubeni is subject to the U.S. energy giant making a final investment decision (FID) on the construction of its planned hydrogen facility.
The agreement notably advances ExxonMobil’s plans to develop the largest low-carbon hydrogen facility at its chemical complex in Baytown. Despite facing setbacks that led to delays in the project's advancement, the company noted that the new customer agreement is a major positive for the development of this low-carbon energy project.
Hydrogen, which could be produced with the help of natural gas (also known as blue hydrogen), renders a clean-burning fuel that releases water when burned. However, there are difficulties associated with the direct transportation of hydrogen. As such, ammonia can be used as a carrier for hydrogen, enabling it to be shipped over long distances in a liquid form. To ensure that the project aligns with XOM’s low-carbon initiatives, the carbon dioxide from the production process shall be captured and stored in underground storage units.
ExxonMobil’s low-carbon hydrogen facility in Baytown is expected to be the world’s largest facility of this kind, with the capability to produce approximately 1 billion cubic feet per day (Bcf/d) of low-carbon hydrogen. The customer agreement marks a key step forward in the company’s efforts to develop low-carbon energy solutions. The company has stated that it plans to take an FID related to the development of this project within this year. However, the decision is contingent upon supportive government policies and the receipt of necessary regulatory approvals.
XOM’s Zacks Rank and Key Picks
XOM currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks from the energy sector are Archrock Inc. AROC, Diversified Energy Company plc DEC and Galp Energia SGPS SA GLPEY. While Archrock currently sports a Zacks Rank #1 (Strong Buy), Diversified Energy and Galp Energia carry a Zacks Rank #2 (Buy) each. You can see the complete list of today’s Zacks #1 Rank stocks here.