Carbon-negative oil

Green Daily

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Oil giants know they have to adapt to a warming planet. Some like BP Plc are ploughing money into renewable energy, while others like Exxon Mobil Corp. are sticking to fossil fuels.

Occidental Petroleum Corp., the biggest oil producer in the U.S.'s Permian Basin, is making a different bet. It wants to become the world's leader in capturing carbon dioxide directly from the atmosphere, then pumping it deep underground where it will remain for millions of years—the reverse of what oil and gas companies do when they extract fuel from the ground.

"We are not afraid of the transition out of oil and gas, because we're a part of that transition," said Vicki Hollub, Oxy's chief executive officer. "I do believe that in 15 to 20 years, more of our income will be from carbon management than from oil and gas."

By 2023, the company plans to build the first large-scale direct air capture (DAC) plant, implementing a technology that scientists say will be essential to meeting global climate goals. To pay for itself, and generate profits for Oxy, much of the carbon dioxide captured will initially be used to push out lucrative oil from underground reservoirs in a process called "enhanced oil recovery."

Though the net effect will produce cleaner (and perhaps even carbon-negative) crude, it's still a hard sell to activists who blame a large part of the climate crisis on oil companies that spent years muddying the waters about the science behind global warming. More so because the first DAC plant is likely to benefit from U.S. tax credits.

Still, there are sectors of the economy, such as aviation, that have no other way to cut emissions economically. The use of cheap carbon offsets, such as tree planting, doesn't always provide the promised benefits. That's why DAC advocates argue that, just like solar and wind power benefited from tax credits, other emissions-cutting technologies should too.

DAC technology works by sifting air through chemicals that can selectively pull out carbon dioxide, like iron filings to a magnet. But because CO₂ only makes up 0.04% of the atmosphere, a huge amount of air has to be filtered to capture the greenhouse gas in sizable quantities. The cost of capturing of carbon dioxide can be as high as $600 per ton.

The hope is that the more direct air capture plants are built, the cheaper the technology will become as engineers learn how to optimize the hundreds of tiny steps required to execute the technologically complex projects. If DAC becomes much cheaper than it is now, it could be a game changer for the industry.

U.S. oil companies already pump more than 50 million metric tons of carbon dioxide underground each year for enhanced oil recovery. Much of that carbon dioxide is mined from underground, transported long distances and then reinjected in a different location. The rest is captured from sources like refineries, hydrogen plants and even, in one case, a coal plant. It's cheaper than DAC because carbon dioxide can be found in high concentrations in the gases emerging from smokestacks at these operations.

But easy to access carbon-dioxide fields are starting to run low and transporting carbon dioxide from far away locations to be buried requires expensive pipelines. Oxy's project would take its carbon dioxide straight from the air, removing the need for transportation. That's one reason Hollub is convinced that it will catch on.

"It's not a technology that's a trial and error type of thing. You know it will work," she said. "We need to just get it to scale." Oxy will be licensing DAC technology from a Canadian startup called Carbon Engineering, which counts Chevron Corp., BHP Group Plc and Bill Gates as investors.

Oxy's DAC plant will be funded through 1PointFive, which is owned by the company's venture arm Oxy Low Carbon Ventures and private equity firm Rusheen Capital Management LLC. It plans to attract outside investors, drawing on the boom in environmental investing and growing pressure on companies to shrink their carbon footprints. United Airlines Holdings Inc. has already invested.

"Carbon Engineering captures carbon dioxide, Oxy buries it underground, and 1PointFive does project finance," said Steve Oldham, chief executive officer of Carbon Engineering, about how the three organizations work to build DAC plants.

If governments around the world take climate targets seriously, models estimate that the world will need to bury as much as 10 billion tons of carbon dioxide underground annually by 2050. That's about a quarter of current global emissions. And the industry that does the job could be raking in $1.4 trillion in revenue each year, about the same amount the global oil and gas industry makes annually today.

There's no guarantee DAC technology will work on the scale Oxy envisions.1PointFive aims to secure the hundreds of millions of dollars needed for the plant in time for construction to begin soon and operations to start by 2023. Only then will investors know if they made a lucrative bet.

Written with Kevin Crowley. Akshat Rathi writes the Net Zero newsletter, which examines the world's race to cut emissions through the lens of business, science, and technology. You can email him with feedback.

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