Oxy Advances Commercial-Scale CCS Partnership

Occidental Petroleum is teaming up with a California private equity fund and Canadian carbon capture firm to advance the world's largest direct-air carbon capture facility in the heart of the West Texas oil patch. The facility will strip up to 1 million tons of carbon dioxide annually from the air, equivalent to removing around 216,000 passenger vehicles from the road, according to the US Energy Information Administration. The captured carbon will support Oxy's existing enhanced oil recovery operations in the Permian Basin, with carbon dioxide injected into aging reservoirs to boost recovery rates and permanently store carbon below the surface. Oxy's low-carbon venture fund and Rusheen Capital Management have formed a new development company to fund the plant, which will deploy Carbon Engineering's direct-air capture technology. Critical Scale The Oxy-backed scheme is significant because it advances direct-air capture from concept to commercial scale. Existing direct-air capture facilities can only capture several thousand tons of CO2 annually. Even Carbon Engineering only has a pilot project running to date -- a scheme in southern British Columbia that captures just a single ton of CO2 per day. But the stakes changed after Carbon Engineering grabbed the attention -- and pocketbooks -- of Oxy, Chevron and BHP last year. The trio have all provided equity funding to Carbon Engineering, and Oxy has taken the partnership further, agreeing in May 2019 to proceed with engineering and design of a commercial-scale plant in the Permian. This week's agreement puts the funding in place via Rusheen to make those plans a reality. Oxy says final front-end engineering and design work should be completed in the first quarter of 2021, with construction likely starting in 2022. Capturing Lower Costs Carbon capture technologies already exist and have been deployed globally, with 19 projects in operation, four in construction and another 28 in various stages of development, according to the Global CCS Institute. Combined, these schemes have the capacity to capture and store 97.5 million tons per year of CO2. But with global energy consumption emitting 33 billion tons of CO2 annually, according to the International Energy Agency (IEA), such schemes only scratch the surface. In fact, the IEA says meeting Paris climate agreement goals will likely require over 2,000 carbon capture and storage (CCS) facilities to be in operation by 2050, requiring a build rate of 70-100 facilities per year. The main hurdle for deployment is cost. CCS costs vary widely based on technology, application, storage availability and access to end-use markets, but most schemes are not economically viable without a price on carbon or other economic incentives. Oxy, for one, noted in its new partnership announcement that policies such as the so-called 45Q federal tax credit and California’s Low-Carbon Fuel Standard are critical to enabling such investments (OD Jun.2'20). But oil companies are also increasingly partnering with start-ups, universities and carbon capture technology firms to find ways to lower development costs and improve CCS' viability. In that pursuit, Exxon Mobil, Oxy, Chevron and BHP are all testing direct-air capture, among other technologies, according to Energy Intelligence's Low-Carbon Investment Tracker. A 2018 article from Science magazine noted that estimates at the time pegged direct-air capture technologies costs at around $600 per ton of CO2. Now, Carbon Engineering says its technology at scale can capture CO2 at $100/ton. Casey Merriman, Phoenix