Investing in Carbon Capture & Storage (CCS) - Apr 14

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dan_s
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Investing in Carbon Capture & Storage (CCS) - Apr 14

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Note from Morgan Stanley Equity Research April 14

MS Research Analysts Devin McDermott and Mark Carlucci and the energy and chemicals teams highlight
that throughout the 'green' recovery, the US Energy sector has been slow to reduce reliance on oil & gas
relative to European peers. Now, the team sees the sector well positioned to scale Carbon capture and
storage (CCS), a required technology in a "net-zero" world, underpinned by key competitive advantages: (1)
geologic expertise and ample access to sequestration capacity, with the US holding ⅔ of the world's storage
for CO2, (2) infrastructure capabilities to build out CO2 hubs, critical to the scalability of CCS, and (3)
increasingly supportive policy backdrop for CO2 monetization. Secondary to US Energy, the team sees
opportunities across Chemicals and Utilities / Power which altogether, could address a social cost of carbon
globally of ~$225 billion in the team’s base case. Beyond this addressable market, the team sees a role for
CCS to address Scope 3 emissions through partnerships between Energy and other industries. Across MS
US Energy coverage, the Devin highlights that OXY (EW, $31 PT) offers the most direct exposure to CCS,
while XOM (OW, $71 PT) and CVX (OW, $127 PT) have also led investment in the technology. Further,
opportunities from low carbon technologies reinforce the team’s constructive view of US Energy.
Energy: Carbon Capture: A Hidden Opportunity? (14 Apr 2021)
Dan Steffens
Energy Prospectus Group
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