Occidental Building Costly Plant to Bury Carbon Dioxide, Hoping to Be the Last Firm Still Allowed to Produce Oil

The “oracle of Omaha,” Warren Buffett, has been investing in Occidental.

(p. A1) About fifty miles southwest of Midland, Texas, deep in the oil-saturated Permian Basin, more than 100 workers are busy laying out roads and water lines, preparing to build an elaborate complex of fans, each as large as a tennis court.

When they start running in 2024, the fans will suck massive amounts of carbon dioxide out of the air. The carbon will be funneled thousands of feet down deep wells into geological formations, where it should remain for centuries.

The company behind this environmental moonshot is Occidental Petroleum Corp., one of the country’s most successful oil-and-gas producers. It hopes the enterprise will give it license to keep operating as a driller decades into the future.

It is spending more than $1 billion to build the first in a planned fleet of plants using direct-air capture to pull the CO2 out of the air, a budding technology with fuzzy economics. Bolstering the move are generous tax incentives included in the climate package President Biden signed into law last year that cover up to 45% of Occidental’s expected initial costs per metric ton.

. . .

(p. 8) To be successful, Occidental will need to bring the cost of capture and containment down by hundreds of dollars per metric ton of CO2, according to energy executives and analysts.

Occidental estimated its initial cost to remove a metric ton of CO2 would be between $400 and $500. It said that as it manufactures more plants and efficiencies kick in, it will be able to roughly halve that to between $200 and $250 a ton by the end of the decade, according to the company. None of the figures include federal tax credits.

The Inflation Reduction Act, signed into law by President Biden last year, rewards companies that capture and store atmospheric CO2 with a $180 tax credit per metric ton contained permanently, up from $50. Credits for capturing atmospheric CO2 and using it in enhanced oil recovery rose to $130 a metric ton, up from $35. The bill also offers incentives to companies that capture CO2 at industrial plants and sequester it, which Occidental also plans to do.

. . .

Howard Herzog, a leading researcher on carbon capture at the Massachusetts Institute of Technology, said he didn’t think bringing the cost of direct-air capture down to around $100 a metric ton was a realistic goal. Occidental is “probably more bullish on direct-air capture than I would be,” he said. But he added that how much buyers of carbon credits are willing to pay will also determine how profitable direct-air capture turns out to be.

Ms. Hollub told The Wall Street Journal in August that Occidental’s efforts on carbon capture and on becoming a net-zero emitter would allow it to keep up its investments in oil and gas. She warned that underinvestment in fossil fuels, which she says will be needed for years even amid the broader transition to clean energy, will lead to a scarcity of supplies. In contrast, she said, other oil majors such as BP PLC and Shell PLC have shrunk their oil segment and invested in renewables.

Oil companies will have to find ways to remove as much carbon dioxide as they emit “if they want to be the last producer standing in the world,” Ms. Hollub said.

For the full story, see:

Benoît Morenne. “Occidental’s Green Bet To Keep Pumping Oil.” The Wall Street Journal (Tuesday, April 11, 2023): A1 & A8.

(Note: ellipses added.)

(Note: the online version of the story has the date April 10, 2023, and has the title “Occidental Makes a Billion-Dollar Climate Moonshot—So It Can Keep Pumping Oil.”)

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