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Occidental’s Carbon Capture Strategy: A Dual Approach to Fossil Fuel Production and Climate Technology

Occidental Petroleum, a company striving to position itself as a key player in the climate technology arena, is now emphasizing carbon dioxide capture as a cornerstone of its operational strategy. This approach signals the company’s intent to harness what it perceives as a pivotal development in the fossil fuel sector.

Historically, it is not unexpected for a major oil corporation to focus on carbon management. Occidental has notably expanded its business model by investing in initiatives aimed at mitigating climate change impacts. In 2023, the company acquired Carbon Engineering, a leading innovator in technologies designed to remove CO2 from the atmosphere. Its subsidiary, 1PointFive, is currently developing significant facilities in Texas that leverage Carbon Engineering’s technology—a move supported by major corporations like Amazon and Microsoft, which are committed to achieving their own sustainability targets. This direct air capture (DAC) method is promoted as a solution to the greenhouse gas emissions exacerbating climate change.

While DAC presents a technological solution for capturing atmospheric CO2, it does not address the fundamental issues associated with fossil fuel extraction and combustion, which are the primary sources of carbon emissions. The fate of the captured carbon raises additional concerns, as DAC is positioned as a method to sequester carbon underground, thus preventing further atmospheric contamination and stabilizing global temperatures.

Occidental’s strategies extend to its existing practices in which CO2 has long been utilized in enhanced oil recovery (EOR) processes. By injecting carbon into aging oil fields, the company can extract previously inaccessible reserves. During a recent earnings call, Occidental’s leadership underscored the necessity of its DAC operations for increasing oil production. CEO Vicki Hollub stated, “We believe the next round of technology that’s going to add significant barrels—50 to 70 billion barrels of reserves—will be production that comes from the use of CO2 in enhanced oil recovery.” This statement reflects the company’s adaptability in response to shifting regulatory landscapes, especially with changing political administrations that differ in their climate policies.

Hollub further likened the role of captured CO2 in EOR to the transformative impact of fracking during the US shale boom. She emphasized the importance of this technology in not just reinforcing production capabilities, but also in aligning with the business interests of current and former administrations, mentioning her discussions with President Trump regarding the viability of this technology.

Despite facing challenges in enhanced oil production in recent years, Occidental is optimistic about reversing this trend through captured CO2. However, Hollub noted that natural sources of CO2 within the US are insufficient to meet the anticipated demand for enhanced recovery methods.

Nevertheless, DAC technology remains expensive, costing significant sums per ton of CO2 captured. The future viability of DAC initiatives, particularly in the United States, could rely heavily on retaining federal tax credits instituted during the prior administration, as the company aims to prevent its DAC facilities from becoming economically unfeasible. Its inaugural large-scale DAC facility, named Stratos, is set to begin operations later this year in Texas, with plans for a more expansive project at King Ranch that recently received federal support.

In a significant development last year, Microsoft entered into an agreement with 1PointFive for the removal of 500,000 metric tons of CO2, while Amazon committed to financing 250,000 metric tons from 1PointFive’s forthcoming DAC initiative. Notably, both agreements stipulate that the captured carbon should be permanently sequestered rather than repurposed for further fossil fuel extraction.

However, these agreements come with their own set of risks. The success of Occidental’s DAC plants is critical for ensuring that the captured carbon is effectively sequestered. Companies investing in carbon removal services may factor these investments into their emissions reduction strategies, potentially diverting resources that could otherwise support cleaner energy transitions or alternative climate solutions.

Regardless of the outcomes of its DAC initiatives, Occidental retains a hedge against failure through its ongoing fossil fuel operations. Currently, the company can capitalize on profits from oil and gas activities, gain revenue through its CO2 remediation efforts, and utilize the captured emissions to enhance its fossil fuel production.

Source
www.theverge.com