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Oxy CEO: Low-Carbon Oil ‘Will Command a Premium’

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Occidental Petroleum CEO Vicki Hollub said Wednesday that buyers are willing to pay more for low-carbon oil volumes despite increasing cost inflation in the sector.

Oxy has already inked a handful of deals to supply customers with low-carbon oil. That means it has offset the emissions associated with crude volumes either by purchasing certified credits or through future emissions to be captured by its first direct air capture (DAC) facility in the Permian Basin, which is slated to come on line in 2024.

“We've had conversations with companies … either they'll invest in the direct air capture or they'll pay a premium for the oil,” she said at the Energy Intelligence Forum in London.

SK Group, which plans to purchase up to 200,000 barrels of net-zero oil from Oxy for five years to convert the volumes into net-zero products, is one company that has shown a willingness to pay extra for low-emissions hydrocarbons.

“Other companies are now expressing the same thing,” Hollub said. “So I do think that it will command a premium. And I think we'll be able to get that. I don't know how much, that's still open right now.”

Certified Oil

While the SK Group deal was announced earlier this year, Oxy also delivered a “carbon-neutral” oil cargo to India's Reliance Industries last year, which it claimed was a first for the sector.

On Wednesday, Hollub told Forum attendees the deal was made to show that sellers can get a premium for low-emissions products. However, she added that Oxy is working to improve transparency as the offset market grows.

“We need to get to the point where the tracking on that is more definitive, so that people can understand it,” she said. “We expect that by the time we have our direct air capture facility built, and we're able to provide from our enhanced oil recovery the net-zero barrels of oil, what's going to be important for that is that it's certified and that people understand it's a real carbon-neutral barrel. And where people are buying offsets, to make sure that that is also certified. So that's the key — but people are willing to pay for that.”

Supply Chain Decarbonization

Hollub said that oil and gas companies should in turn be prepared to pay a premium for low-carbon supplies such as steel and cement. She pointed to Oxy’s participation in a partnership to decarbonize a cement factory in Colorado as an example.

“That's where we have to get to,” she said. “There are some big companies that are starting to do things and operate in a way that will ultimately get them there. But ... it's not fast enough. We need to accelerate.”

Topics:
ENERGY INTELLIGENCE FORUM 2022, CO2 Emissions, Carbon Capture (CCS), Emerging Technologies, Corporate Strategy , Independent E&Ps
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