Strategy

Oxy Eyes the Future With Groundbreaking 'Stratos' Plant

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On a tract of wind-whipped scrubland in remote Ector County, Texas last week, Occidental Petroleum formally unveiled the project it now calls “Stratos,” a direct air capture (DAC) facility foundational to the company’s future ambitions. With numerous executives, partners, local officials and other interested parties in attendance, the formal groundbreaking didn’t offer much to look at beyond an early-stage construction site and some ceremonial shovels. But the event was imbued with a sense that something big was under way — the first glimpse of a plant that is one day expected to pull up to 1 million tons of CO2 from the air. Stratos, using technology from Canada-based Carbon Engineering, will be the first and largest project of its kind and a milestone in the battle to reduce CO2 emissions. Oxy CEO Vicki Hollub said the plant’s new name is meant “to convey a real sense of scale and possibility,” both in terms of the technology and the climate challenge itself. “It’s an ambitious challenge,” she told the crowd.

Stratos is the first of potentially dozens of DAC plants Oxy intends to build over the next decade-plus. It is initially designed to capture 500,000 tons/year of CO2, with start-up due in late 2024 and commercial operations set to commence in 2025. A second, identical plant would double the capture capacity of the site in the Permian Basin. Oxy has wagered a good part of its future on DAC; Hollub believes that within about 10 years the company’s low-carbon business will be about equal to the revenue, earnings and cash flow of its chemicals business, which is expected to generate income of $1.3 billion-$1.6 billion in 2023. Oxy is already the world’s largest handler of CO2, permanently storing up to 20 million tons per year, almost exclusively for enhanced oil recovery (EOR). The DAC business will support EOR as well, initially, but will also open up new revenue streams through the sale of carbon offsets, a business line that is already gaining momentum.

Cost Considerations

The strategy will not come cheap. Stratos is expected to cost at least $1 billion. Oxy’s hope is that each future plant will get successively less expensive as it incorporates best practices and moves more into “mass production.” Michael Avery, president of 1PointFive, the Oxy subsidiary leading the Stratos project, said “this first facility will not just be a milestone in size, but a cornerstone of learning, informing how we optimize direct air capture plants going forward.”

Carbon Engineering is constantly working to improve its technology, striving for greater efficiencies and lower costs. Lori Guetre, Carbon Engineering’s head of business development, says opportunities for cost reduction are “kind of everywhere.” The company has launched this first scaled iteration of its technology with “repurposed industrial equipment,” she explains, “but there are innovations within each one of the processes.” In particular, the air contactor — the module in which the CO2 is actually captured — has shown great potential for improvements, she says. Last year, the company changed some of the “fill” material inside the air contactor, and it resulted in a 20% improvement in capture efficiency, she says — “there are step changes … we’re going to make evolutionary changes.” She adds that Carbon Engineering is also working on some “next-generation technologies that will step-change down the cost,” but she declined to elaborate.

Reducing Risk

Proving this first plant can work at scale will also be critical to further cost reductions, Guetre says. “Fully a third of the first plant is cost of capital, so as we de-risk things we’re going to see improvements there,” she says. But reducing risk takes more than just a successful proof of concept.

Julio Friedmann, chief scientist at Carbon Direct, a CO2 management and advisory firm, says Oxy and Carbon Engineering have a number of “synergies” that make them logical partners. That includes Oxy’s project management experience and its position as one of the world’s largest manufacturers of potassium hydroxide, the main sorbent material in Carbon Engineering’s capture technology. But having a capable engineering, procurement and construction (EPC) partner on board — Worley, in this case — is critical in getting a project over the finish line, Friedmann says. “These guys are going to spend a lot of money building this project — there better be a company like Worley that knows how to do this; there better be a company like Oxy that knows how to manage it. Because if not, you’re adding a huge amount of project risk,” he says.

Carbon Engineering has already begun front-end engineering and planning for a second DAC plant for Oxy at another site, in Kleberg County in South Texas. Oxy has said that site could eventually host as many as 30 different megaton-scale plants. The companies have devised a “deployment approach” based on standardized and modularized components and equipment that allows the partners to “work at an accelerated pace.” Carbon Engineering says this approach will allow them to complete work “50% faster than earlier projects.”

Topics:
Emerging Technologies, Carbon Capture (CCS), Corporate Strategy
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