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Behind those hookups between carbontech firms, oil and gas majors

In the spotlight: the burgeoning relationship between direct air capture firm Carbon Engineering and Oxy Low Carbon Ventures.

In order to rein in runaway climate change, we must do more than curtail emissions — we must actively remove carbon dioxide from the atmosphere. There are two major pathways toward that goal: natural sequestration methods involving forestry and agriculture; and, of course, those grounded in new technologies.

On the technology side, direct air capture (DAC) is gaining considerable attention, in part due to the inclusion of the 45Q tax credit for carbon sequestration in the FUTURE Act. Another development that deserves close, ongoing scrutiny is the collaborations being announced between major oil and gas companies and fledgling companies in the DAC space.

One partnership announced in January is between carbon capture company Carbon Engineering and Oxy Low Carbon Ventures, a subsidiary of Occidental Petroleum. Occidental, along with Exxon-Mobil and Chevron, joined the Oil and Gas Climate Initiative last year. Oxy CEO Viki Hollub said at the time, "Industry innovation and collaboration have a critical role to play in addressing climate change." Occidental was the first among the major oil companies to declare a goal of carbon neutrality.

One year later, Oxy, along with Chevron, announced it would provide equity investments in Carbon Engineering, a DAC company based in British Columbia, to accelerate the commercialization of the company’s technology.

Carbon Engineering was founded in 2009 by Harvard professor David Keith. The company has developed what it is positioning as a scalable industrial process that can pull carbon dioxide out of the air. The technology follows a "keep it simple" philosophy, using many off-the-shelf components and materials in an effort to keep costs low.

In June 2018, Carbon Engineering made news when it announced, in a peer-reviewed paper, that it could pull CO2 from the atmosphere at a cost of "less than $100 per ton," at a time when conventional wisdom was saying this process would cost $600 or more. Carbon Engineering claims each plant it builds will have the capacity to remove 1 million tons of CO2 from the air each year. The company also has developed a second process that can convert carbon dioxide into fuel.

The fundamental value proposition for direct air capture ... is that we need to decarbonize, and we need to do so quickly, but we're not in a position where we can eliminate fossil fuel overnight.
The first of these capabilities captured Oxy’s attention, because it coincides well with the mission of the recently formed company to capitalize on Occidental’s "enhanced oil recovery leadership by developing carbon capture, utilization and storage projects that source anthropogenic carbon dioxide and promote innovative technologies that drive cost efficiencies and economically grow Occidental’s business while reducing emissions."

One advantage of DAC technology is that it is location-independent (because atmospheric CO2 concentration is more or less the same everywhere). That means it can be co-located with an oilfield operation for enhanced oil recovery. After drilling is complete, the wells are sealed and the carbon dioxide remains underground. If more CO2 is pumped underground than is contained in the oil recovered, the process can be considered carbon-negative.

Representatives of both Oxy and Carbon Engineering were on hand at VERGE 2019 to discuss their plans. Carbon Engineering CEO Steve Oldham spoke at a breakout session, "Carbon Removal Will Create a Wealth of Opportunities. Are You Ready?" Oxy Low Carbon Ventures President Richard Jackson participated in "Capturing Carbon from Industrial Sources and Directly from the Air."

"If you’re an oil company and you want to be carbon-neutral, you’re going to need partners," Jackson told the VERGE 19 audience.

As Oldham explained to GreenBiz, "The importance of getting that first full-scale plant up and running can’t be overstated." This is true from both an economics and a capability perspective: "We're a carbon capture company, but we need a partner who can bury it," Oldham said.

In addition to the deal with Carbon Engineering, Oxy has invested in NET Power, developer of a low-cost, natural gas power system that generates zero atmospheric emissions and includes full carbon dioxide capture. It also signed an agreement to work with Texas-based White Energy, "to evaluate the economic feasibility of a carbon capture, utilization and storage project that would capture carbon dioxide at White Energy’s ethanol facilities in Hereford and Plainview, Texas, and transport it to the Permian Basin, where it would be used for [enhanced oil recovery]."

Fuel for thought

The agreement between Chevron and Carbon Engineering is focused on synthetic fuel development. Chevron, California’s largest fuel supplier, is looking for a way to reduce the carbon intensity of its fuel. Carbon Engineering’s synthetic fuel process uses clean hydrogen, which is combined with the CO2 to make a synthetic crude with a very low carbon intensity. This allows the fuel supplier to meet the carbon intensity criteria spelled out in the state’s Low Carbon Fuel Standard. The standard assesses a $200/ton penalty on excess CO2 in the fuel, so avoiding that penalty by using this fuel is the lower-cost option.

In both cases, movement at the public policy level helped to get these deals done.

The Permian Basin alone could hold 100 years' worth of emissions.
Some people on the environmental side balk at the idea of capturing CO2 only to use it to produce more oil and gas.

Oldham addresses this. "The fundamental value proposition for direct air capture that I think people are beginning to understand is that we need to decarbonize, and we need to do so quickly, but we're not in a position where we can eliminate fossil fuel overnight," he said. "So how do you decarbonize while continuing to support the economy and the energy needs that we all have?"

Oil and gas produced in conjunction with CO2 captured from the air, which ends up stored underground, does have a lower climate impact than oil and gas produced conventionally. So, it does become the "lesser evil."

And, as Oldham points out, "Direct air capture can also be used to offset those emissions that are most difficult to eliminate," such as those related to aviation, marine and other heavy equipment activities. Perhaps most important of all, "Direct air capture can also contribute to the effort to reduce those legacy emissions that are already in the atmosphere," he said.

When asked how much carbon removal capacity could be developed in the years ahead, Oldham said "there is no limit on storage.

"The Permian Basin alone could hold 100 years' worth of emission. There's no limit on our ability to build plants. (No rare or exotic materials are involved.) The technology is available for licensing. It's simply a matter of choice. In the more immediate term., the market is waiting to see large scale direct air capture demonstrated and proven, which is why this plant in Texas is so important for us."

That plant should be operational between 2022 and 2023, which could represent a tipping point for commercialization of Carbon Engineering's technology, Oldham said.

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