Houston-based Occidental Petroleum Corp. has clinched its first agreement to sell up to 200,00 b/d of net-zero emissions oil over five years to South Korea’s SK Trading International, an indication the direct air capture (DAC) project in West Texas may proceed.

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Oxy, as it is better known, has begun preliminary work on its massive DAC project in the Permian Basin, which basically would suck carbon dioxide (CO2) from the air. 

The net-zero emissions oil would be achieved by combining with environmental attributes, which would be generated by removing and sequestering the atmospheric CO2 through an enhanced oil recovery (EOR) process.

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“Net-zero oil is an important component of the energy transition and provides a critical bridge as society moves to a net-zero economy,” said Oxy’s Richard Jackson, president of U.S. Onshore Resources and Carbon Management, Operations.

In advancing the producer’s Pathway to Net Zero, Jackson said Oxy could “leverage our licensed direct air capture technology and EOR experience to create a new solution for the transportation sector.”

The SK Innovation Co. Ltd. subsidiary plans to use the reconfigured Permian oil to develop net-zero products, including lower-carbon aviation fuel. 

As envisioned, up to 1 million metric tons/year (mmty) of CO2 emissions could be pulled from the air using the DAC system. That would equal around 5% of what Oxy sequesters every year through its EOR business. 

The captured emissions from the DAC facility are “equal to the expected CO2 emissions from the entire crude oil lifecycle, including extraction, transportation, storage, shipping, refining, subsequent use and combustion,” Oxy noted. 

Existing refinery infrastructure also is said to be compatible with the net-zero oil. The emissions, stored underground in geologic formations in West Texas, would offer “permanent and verifiable” CO2 removal, Oxy noted.

When Is DAC Sanctioning Expected?

The DAC project is set to go online in late 2024.. During a presentation on Wednesday, management said it plans to begin with the first facility producing 500,000 mty. Total capital investment is expected to be between $800 million and $1 billion, with some pre-investments made to scale the project.

The SK contract signals the final investment decision is inching forward. Oxy has indicated it would make a decision early in 2022. 

For the DAC project, Oxy is partnering with developer and subsidiary 1PointFive Inc. through Oxy Low Carbon Ventures LLC. Initial funding was provided by Rusheen Capital Management LLC. The technology was created by Calgary-based Carbon Engineering Ltd., in which Oxy is an equity owner.

​​1PointFive has teamed up with global engineering company Worley for the front-end engineering design on the first Permian facility planned, DAC 1. If sanctioned, construction could begin in the second half of this year with initial startup in late 2024.

1PointFive is forecasting up to 170 DAC plants online worldwide by 2035, mostly in North America and Asia.

Oxy, long an exploration and production giant, is undergoing a transformation to become a “carbon management company,” CEO Vicki Hollub has said. “We think that’s going to be needed for the energy transition, and we’re actually filling a gap with what we’re doing.” While some oil and gas companies “are moving more toward renewables – and that’s very much needed…there are others that are working very hard to mitigate all of their emissions from current operations. We’re working on both of those…”

Government Incentives

The Biden administration has set a goal to reduce the cost of removing the CO2 from the atmosphere as part of the Department of Energy’s Carbon Negative Earthshot. The administration wants to reduce the cost of removing CO2 to $100/metric ton by 2030, either through DAC or by improving natural systems such as forestland to capture and store the emissions.

To get U.S. industry onboard with DAC, Hollub has advocated for continuing the tax credit for carbon capture and sequestration. The credit in Internal Revenue Code Section 45Q is computed per metric ton of qualified carbon oxide that is captured and sequestered.

SK has set a net-zero emissions goal by 2050. Under the “Carbon to Green” strategy, SK is transforming its overall portfolio toward low-carbon businesses. It also is pursuing measures to manage the emissions intensity of its customers’ emissions, aka Scope 3.

SK Trading CEO Suh Sokwon said the company wanted the deal with Oxy to be “a part of the world’s first carbon emission reduction initiative that is underpinned by processing net-zero oil on a life-cycle analysis basis…

“In the midst of energy transition, one of the biggest changes in our time, the sustainable business ecosystem built around net-zero oil and low carbon products will contribute to global net zero efforts in a new way.”