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Occidental Petroleum sees major build-out of US DACC plants
30 March 2022S&P Global Commodity Insights Editor
Despite current high costs for the emerging technology,
Occidental Petroleum announced plans last week to build some 70
direct air carbon capture (DACC) projects by 2035 to suck carbon
dioxide out of the atmosphere and store it underground, assuming
they reach better efficiency and economies of scale.
In an
update for investors in Occidental's Low Carbon Ventures
subsidiary on 23 March, Occidental executives also said the oil and
gas producer expects to start up the firm's first direct air
capture plant within two years, at a cost of $800 million to $1
billion. They said the facility would be capable of permanently
removing some 500,000 metric tons of CO2 from the air, and that it
would run by 1PointFive, a subsidiary of the Oxy Low Carbon
Ventures business unit.
Occidental first announced plans in August 2020 to build the
plant in Texas' Permian Basin using technology developed by
Canadian startup Carbon Engineering.
In the update, Richard Jackson, Oxy's president of US onshore
resources and carbon management and operations, said the global
engineering firm Worley was currently nearing completion of the
facility's front-end engineering and design, setting the stage for
start-up of the project by the end of 2024.
According to Jackson, 1PointFive's strategy will also involve
creating a carbon-removal credit that businesses can purchase to
offset their emissions. Oxy earlier this month announced that
European aerospace firm Airbus had already purchased credits
covering some
400,000 metric tons of CO2 emissions over the next four years
from the first direct air capture facility. Separately, Oxy it
signed an agreement through which SK Trading International, based
in Seoul, South Korea, will purchase up to
200,000 bbls of Occidental's net-zero oil, created with direct
air capture, produce aviation fuel.
Looking forward, Jackson said Oxy plans a massive expansion as
the technology is refined and improved, with economies of scale
also helping to bring down costs. "In a current support scenario,
we see market and policy conditions as supportive of 1PointFive
building 70 direct air capture facilities by 2035," he said.
Carbon storage plans
However, numerous studies have indicated that the current
federal
CCUS tax credit of $50 per ton of CO2 stored underground is not
sufficient to make direct air capture plants economic. Congress
increased the credit to $50/ton in 2018 and specifically made
direct air capture eligible, but CCUS advocates say a higher credit
is still needed if the industry is to gain market traction.
Jackson said Oxy estimated that, worldwide, direct air capture
technology has the potential to economically remove up to 5,000
million metric tons per annum (Mtpa) of CO2 from the atmosphere in
the near term.
In addition to the direct air capture projects, Oxy said it is
also focusing on rolling out a significant number of point-source
industrial carbon capture, utilization, and storage (CCUS) projects
for carbon-intensive industries such as cement, ethanol, and steel.
Jackson claimed the company is "currently working with over 40 Mtpa
of point-source capture potential that we believe can move forward
over the next few years."
In its presentation, Oxy estimated that US industrial
point-source CO2 emissions stood at 2,600 Mtpa in 2019. "[J]ust a
small portion of this 2,600 Mtpa of U.S. point-source emissions is
economic to capture today," Jackson acknowledged. "However, [with]
just a moderate increase in support, or with a reduction in capture
cost, we can unlock substantial volumes for economic capture and
sequestration."
To help build economies of scale and reduce costs, Oxy is
planning to build three "sequestration hubs" at US locations by
2025. Those hubs, which would take CO2 both from point-source
facilities as well as from direct air capture, would each have at
least 6 Mtpa of sequestration capacity, with each facility
containing more than three CO2 injection wells as well as more than
five monitoring wells to ensure no leakage of CO2 levels from
reservoirs.
"In the near term, we expect to secure more than 100,000 net
acres for these sites by the end of 2022 and to have filed multiple
Class VI permit applications for dedicated injection wells,"
Jackson said, referring to the US Environmental Protection
Administration's designation for wells that inject CO2 into deep
rock formations.
Article by Jason Fargo, "The Energy Daily".
This article was published by S&P Global Commodity Insights and not by S&P Global Ratings, which is a separately managed division of S&P Global.
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