Houston-based Occidental Petroleum Corp. is expecting to slowly back away in the coming years from its primary oil and natural gas developments to zero in on ways to manage carbon emissions, according to CEO Vicki Hollub.
In a recent interview with IHS Markit Vice Chairman Daniel Yergin, Hollub said carbon capture operations could become the primary business in the years to come. Hollub during a 3Q2020 conference call said Oxy, as it is better known, had said the company’s plan to achieve net-zero emissions would be centered around capturing and then reusing carbon dioxide (CO2).
The evolution has been ongoing for years, Hollub said.
“We had been in CO2 enhanced oil recovery for about 40 years,” she noted. “We were trying to figure out a way to ensure the sustainability of our enhanced oil recovery using CO2, not only the sustainability, but how do we lower the cost? Ten years ago, we started thinking about trying to move away from organic CO2 for those projects to anthropogenic CO2.”
Oxy management eventually realized “that there was no way to cap global warming at 2 degrees without a significant amount of carbon capture,” said the CEO. “We then realized that there was an opportunity for us to go further with our anthropogenic plan and make it into a business.”
Other industries also needed a way to lower their carbon footprints, offering other opportunities, she told Yergin.
“Without some way to purchase CO2 credits or to partner in a sequestration or a CO2 use project, they can’t otherwise do it,” Hollub noted. “We saw a lot of opportunities to not only become carbon neutral ourselves but to help others do the same thing.”
It takes more CO2 injected into the reservoir than the barrel of oil that is produced from that CO2 emits when burned, said the CEO. “More injected and less burned means that you are either carbon neutral or negative. It depends on the reservoir as to how much CO2 offset difference there is between the injection and the emission.”
There is no specific timeframe, but Oxy is aiming to become a “carbon management company and our oil and gas would be a support business unit for the management of that carbon.”
Eventually the CO2 would be used in the oil reservoirs and captured for sequestration. That would give Oxy three ways to manage the CO2, with chemicals unit OxyChem and the oil and gas business as support.
“I believe this industry is going to be huge,” Hollub said.
Key to Oxy’s carbon capture ambitions is a massive direct air capture (DAC) project proposed for the Permian Basin under the purview of Oxy Low Carbon Ventures LLC (OLCV). OLCV in August partnered with private equity firm Rusheen Capital to create 1PointFive to advance financing and develop the Permian project using DAC technology created by Carbon Engineering Ltd.
Once operational, the Permian facility is expected to capture up to 1 million metric tons/year of CO2. Final front-end engineering and design is slated to begin in early 2021 with construction underway in 2022.
The carbon capture technology also could be a positive way to work with the incoming Biden administration because of a bigger focus on climate change issues, Hollub told Yergin.
“With President-elect Biden I do believe we have the opportunity to collaborate with him,” she said. “They want to have a climate story. I believe that our climate story and what we want to do could match very well with what they’re trying to accomplish. I believe that, at least on one point, we’re going to be aligned and we can collaborate, and we can hopefully make things happen.
“On other issues, we want to be there with the Environmental Protection Agency and the Bureau of Land Management as they will almost certainly introduce more regulation on the industry. We don’t have a problem with that because a lot of what’s been recommended in the past we’re doing anyway.”
Hollub said “there’s some middle ground that we can achieve if we are proactive in dealing with all of the regulatory agencies and doing it early on. They have to put some regulation in. We need to just make it something that’s effective, but reasonable.”
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