US oil producer Occidental and its subsidiary 1PointFive announced plans to begin detailed engineering and early site construction for their first large-scale Direct Air Capture (DAC) plant, using Carbon Engineering’s technology.
Oxy (NYSE: OXY) is to start construction on direct air capture (DAC) plant in Texas using Carbon Engineering’s technology.
The investment decision was driven by the sale of carbon credits and tax incentives from the Inflation Reduction Act for carbon capture are expected to accelerate the deployment of the 70 further projects in the pipeline.
Concern about climate change and new tax incentives will drive DAC deployment, but is it an excuse for oil companies to continue business as usual (BAU)?
The plant will be built in Ector County, Texas, close to Oxy’s portfolio of acreage and infrastructure that are conducive to safe and secure storage of carbon dioxide. The first stage of construction, which includes site preparation and road work, is scheduled to begin in the third quarter of 2022, and start-up is expected in late 2024.
Offtake agreements
1PointFive has advanced product sales for the plant, including carbon removal credit purchases from Airbus, Shopify and ThermoFisher. The four-year carbon credit agreement with Airbus earlier in 2022, for it to buy credits worth 100,000 tonnes of CO2 credits each year, is understood to have been pivotal in reaching investment decision on the plant build. Oxy has also agreed to an offtake agreement with SK Trading International for an opportunity to purchase net-zero oil.
Oxy also entered into an agreement with Origis Energy to provide zero-emission solar power for the DAC plant and other projects in the Permian Basin.
“Carbon Engineering has been innovating for more than a decade to deliver climate solutions at megaton scale,” said Daniel Friedmann, CEO, Carbon Engineering. “Now, with construction starting on this first, large-scale facility, we are seeing our vision become a reality. In collaboration with our partners at 1PointFive and Oxy, today marks a pivotal moment in the deployment of Carbon Engineering’s large-scale Direct Air Capture solutions.”
Upon completion, the first DAC plant will be the world’s largest of its kind and would be an important step in advancing Oxy’s low-carbon strategy to deliver large-scale carbon management solutions that accelerate a net-zero economy.
Once operational, the plant is expected to capture up to 500,000 metric tons of carbon dioxide per year with the capability to scale up to 1 million metric tons per year – which is equivalent to the carbon removal work of approx. 40 million trees. 1PointFive has announced a scenario to deploy 70 DAC facilities worldwide by 2035 under current compliance and market scenarios.
DAC technology to be commercialised
The decision to proceed with construction follows the successful completion of a Front-End Engineering and Design (FEED) study and extensive testing and validation at the Carbon Engineering Innovation Centre.
1PointFive partnered with Carbon Engineering, a climate solutions company, to commercialise and deploy DAC technology at scale. 1PointFive has also agreed on substantive terms with Worley for engineering, procurement, and construction (EPC) services, and expects to work toward a definitive agreement for the EPC contract by the end of the year.
1PointFive and Carbon Engineering continue to progress innovation workstreams to improve the DAC technology at the Innovation Centre. The focus is on carbon capture and energy efficiency, as well as operating cost improvements during the life of the plant.
Vicki Hollub, president and chief executive of Oxy has previously described CCUS as another ‘value-adding business’ for the oil and gas group, telling investors it could be more valuable than its chemical operations, which turned over $1.5 billion in 2021. Of the news she said, “We are fortunate to partner with Carbon Engineering and Worley, who share our vision in creating a carbon removal industry that can accelerate the path to net zero.”
Richard Jackson, president of US Onshore Resources and Carbon Management, Operations, Oxy added: “This plant’s development is rooted in our carbon management expertise, strong record of delivering major projects and existing infrastructure that supports the commercialisation of carbon capture, utilization and storage technologies. This plant could also anchor future low carbon projects and strengthen our portfolio of carbon management solutions.”
One step closer to net zero
The plant is expected to provide cost-effective solutions that hard-to-decarbonise industries can use in conjunction with their own emissions reduction programs to help achieve net zero. Captured carbon dioxide can be sequestered deep underground in saline formations – often meaning that it is used in enhanced oil recovery (EOR) to help pump more fuel out of oil and gas fields.
Alternatively, it can be used in the production of hydrocarbons to enable lower-carbon or net-zero transportation fuels, and in products like chemicals and building materials. While several questions remain about the markets for such products, as well as questions about whether or not CCS is an excuse for the oil industry to continue as is, there is increasing recognition that CCUS will play a significant role in meeting the 2050 Paris Agreement emissions goals.
The project is expected to employ more than 1,000 people during the construction phase and up to 75 once operational. The Inflation Reduction Act’s increased incentives are expected to further accelerate DAC deployment as a solution to help achieve net zero.
