Occidental Petroleum Invests $1.1 bn in Carbon-Capture Technology Firm

By Editor

Share

U.S. energy giant Occidental Petroleum has recently announced its agreement to acquire technology supplier Carbon Engineering for a sum of $1.1 billion. This strategic move is aimed at enhancing Occidental’s efforts to establish a series of carbon-capture sites that could yield substantial benefits in the fight against climate change.

Occidental Petroleum intends to construct approximately 100 facilities utilizing direct air capture (DAC) technology. This innovative process involves extracting carbon dioxide (CO2) from the atmosphere to be either stored underground or repurposed for various products, including aviation fuel and concrete production. While the DAC technology is still in its nascent stages of commercialization, its success hinges on significant investments amounting to billions of dollars to demonstrate its economic viability and profitability.

Analysts at Roth MKM brokerage firm commented, “This is not a huge deal for Occidental, but we think it adds to near-term leverage and heightens concerns over cash burn at (Occidental’s) Low Carbon Ventures division.” Despite the scale of the deal not being monumental for Occidental, it contributes to the company’s leverage and raises questions regarding cash flow within its Low Carbon Ventures sector.

The financial agreement will be executed over three annual installments of roughly equivalent amounts. The first payment is expected to be made at the closing of the deal, which is anticipated to occur before the conclusion of 2023.

Carbon dioxide, a greenhouse gas, has prompted the Biden administration to view DAC technology as a valuable tool in achieving the objective of neutralizing emissions by 2050, provided it can be effectively scaled and commercialized. Distinct from carbon capture, which targets emissions from industrial sources, DAC actively extracts CO2 directly from the atmosphere.

The recent announcement by the U.S. Department of Energy disclosed that Texas and Louisiana will receive over $1 billion in federal grants. These funds will be allocated to support Occidental’s proposed 30 DAC plants in Kleberg County, Texas. The selected sites mark the initial beneficiaries of a $3.5 billion authorization allocated by Congress from the bipartisan infrastructure bill to establish regional DAC hubs.

Occidental Petroleum revealed that it has been collaborating with Carbon Engineering on DAC deployment since 2019. Vicki Hollub, CEO of Occidental, expressed enthusiasm for the acquisition, stating that it empowers the company to foster broader partnerships for efficient and valuable DAC deployment.

As global concerns about climate change intensify, Occidental’s significant investment in carbon-capture technology showcases a pivotal step towards sustainable energy practices and aligns with the company’s commitment to mitigating environmental impact.

Latest News

Related