Carbon dioxide emissions are a big problem for the environment. Oil and gas combustion is a key source of this climate-changing gas. Because of that, many energy companies are looking for ways to be part of the solution instead of only contributing to the problem.

That’s leading big oil giants Chevron (NYSE: CVX) and ExxonMobil (NYSE: XOM) to explore the potential of carbon capture and storage (CCS). They believe CCS will not only be a major part of the solution (according to the International Energy Agency, it’s nearly impossible for the world to reach net zero without it) but also a very lucrative business opportunity. Exxon believes CCS could grow into a $4 trillion global market by 2050.

Slowly building its CCS portfolio

Chevron has been working to build out its CCS capabilities. The oil giant recently won an assessment permit in offshore Western Australia to evaluate the potential of building a hub to store carbon dioxide emissions from third parties and its operated liquefied natural gas (LNG) assets in the region. The permit involves a joint venture between Chevron (70% interest) and Woodside Energy (30%).

Chevron has agreed to farm down 5% of its equity in the permit to Korea’s GS Caltex. The partners have unique assets, capabilities, and customer relationships to support a potential CCS development at this site.

This project could expand Chevron’s CCS operations in Australia, which includes its currently operating Gorgon CCS project. The platform has the potential to enable the oil company to lower the carbon intensity of its existing operations. It can also provide opportunities for customers to help reduce or offset some of their emissions.

Chevron has a bold goal to capture 25 million metric tons of carbon dioxide annually by the end of the decade. That’s equivalent to taking 5 million cars off the road each year. It’s working on several projects worldwide to achieve that goal, including the Bayou Bend CCS Hub in the U.S. (one of the largest in the country with the potential capacity to store more than 1 billion metric tons of carbon dioxide). However, other than Gorgon CCS, most of Chevron’s projects are very early in development.

A slightly different game plan

Chevron’s initial CCS focus is on reducing the emissions of its operations by building projects to capture those produced at its sites for storage at its sequestration hubs. Exxon is taking a slightly different approach. While it’s working on CCS developments to reduce its emissions, it’s also focusing on capturing and storing third-party emissions volumes.

For example, the company recently signed an agreement with CF Industries to transport and permanently store up to 500,000 metric tons of carbon dioxide per year from its complex in Yazoo City, Mississippi. That project will cut emissions from this site in half when it starts up in 2028.

It’s Exxon’s second commercial contract with CF Industries. It now has contracts to store up to 5.5 million tons of carbon dioxide annually for several customers. That’s equal to replacing 2 million gas-powered cars with electric vehicles (EVs), more than the total number of EVs sold in the country last year.

No other company has come close to the magnitude of commercial CCS contracts signed by Exxon. A big driver has been its nearly $5 billion acquisition of Denbury Resources last year, which bolstered its carbon transportation infrastructure capabilities.

Exxon believes its CCS business could generate billions of dollars in annual revenue in the next five years, with much greater potential in the coming decades. Further, this revenue would be more stable than its oil and gas earnings, which fluctuate with commodity prices. Because of that, it could put a firm and growing floor under its earnings.

Working to cash in on a potentially lucrative opportunity

CCS will be crucial in helping the world reduce carbon emissions. Oil giants Chevron and Exxon want to be at the forefront of this technology, leading both to invest heavily in its development.

While Exxon is farther along, especially in commercializing third-party volumes, Chevron continues to build out its global CCS portfolio in hopes of capturing a share of this potentially massive opportunity. Their success in developing commercial CCS projects could enable these oil giants to create a lot of value for their investors in the coming decades.

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Matt DiLallo has positions in Chevron and Woodside Energy Group. The Motley Fool has positions in and recommends Chevron. The Motley Fool has a disclosure policy.

Chevron Continues to Take Steps to Capture This Potentially $4 Trillion Opportunity (But it Remains Well Behind Rival ExxonMobil) was originally published by The Motley Fool