CEO Says Betting On Direct Air Capture Helps ‘Control Our Own Destiny’

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Vicki Hollub.

Occidental Petroleum Corporation has had its eye on getting more anthropogenic or atmospheric carbon dioxide to the Permian Basin for enhanced recovery for more than a decade.

“We tried, for years, to talk to industry about capturing anthropogenic CO2, but we were having those conversations when emissions weren’t top of mind,” said the company’s president and chief executive officer Vicki Hollub.

With direct air capture (DAC), she said, it sees a “pathway where we were able to control our own destiny, build those [the DAC technology] anywhere we wanted to, anytime we wanted to, and at the volume we needed.”

Hollub spoke on a panel at Columbia Global Energy Summit 2023 this month.

Oxy will have the world’s largest DAC plant in Texas.

“We latched onto that technology to ensure we had the capability to get more oil out of our reservoirs,” she said, adding that with atmospheric or anthropogenic CO2, it is possible to produce a carbon neutral or carbon negative bbl of oil, depending on the efficiency of the CO2 in the reservoir.

“That is not greenwashing,” Hollub continued. “While some environmentalists think it provides us the capability just to continue to produce more oil, demand around the world will be what it is, demand. We don’t control demand.”

She added: “So, this gave us the capability to, with our conventional reservoirs in the Permian, we can get up to 70 per cent of the oil in the ground, whereas … with primary waterflooding we were only getting 40 per cent or less.”

“It is the right thing to do for the [energy] transition because, otherwise, [in] the models I have seen, the world cannot afford the transition that most people think needs to happen. It just can’t afford it. So, we have to use this technology.”

The University of Alabama alum, with a bachelor of science in mineral engineering, was asked about financing and the role played by carbon credits in making this commercially-viable. She called the mechanism important.

“Actually, what solidified our decision to do this was when Senator Heidi Heitkamp got 45Q enhanced previously,” she said. “It was her capability and ability to do that that gave us the final investment decision to build direct air capture.

“The [Inflation Reduction Act] … has given us the capability, the revenue certainty so that we can actually accelerate the number of these that we will build around the world.

“So now instead of building 70 between now and 2035, we expect we’ll be able to build over a hundred of these.”

NOC: Long on oil

On the same panel, Shaikh Nawaf S. Al-Sabah was asked if national companies are expected to be “almost the last standing” due to low emissions, low-cost, and willingness to invest. He is the deputy chairman and chief executive officer of Kuwait Petroleum Corporation (KPC).

“Precisely because of all those,” he replied. “Right now, we are the lowest cost barrel in the world, we are also the lowest carbon intensity barrel in the world. We are going to continue to invest to maintain both of those positions.”

“After 85 years of producing oil and gas in Kuwait, our fields are starting to age and we are going to need additional energy to produce the same barrels of oil that we are producing right now, so the challenge for us is how to produce those barrels in an environmentally-friendly manner.”

Al-Sabah said they have investments in solar to power facilities. Furthermore, he added, “through using CO2 that would be otherwise dissipated into the atmosphere — use it as enhanced oil recovery techniques.”

“ … I usually say the last barrel on Earth will be produced from our region. That is because throughout the energy transition, however large the pie for energy grows, there will always be a wedge for oil.

“We will invest to make sure that our oil is produced in that wedge. You find that really only … responsible producers like KPC will make investments of billions of dollars to maintain spare capacity that ultimately may not be used right now but will be used during supply disruptions or as needed.”

The panel conversation extended to the current mood of capital discipline and whether this is related to government policy or a poor return on investment.

“Poor vision, I think,” Al-Sabah said, referencing the oil price collapse in 2015.

“The world used to discover about six billion barrels of oil per year. After that, with exploration budgets completely dried up, it was discovering less than a third of that. When you add the period of time that takes up until now, you are seeing where that production should have been materializing right now and it didn’t.

People were scared of what prices would look like,” he added. “At that point the energy transition had not picked up as much as it has today — but there was a fear of where demand was going with oil and there was this abundance of supply that was coming from shale, the Permian and other places in Texas.

“We kept saying, throughout that process, ‘no, we are going to need every single barrel. We are going to need every single barrel that can be produced because demand will continue to be strong, continue to increase.’

“There is no replacement for oil. We have to work on decarbonizing the oil that we are producing, but we are not going to be able to replace it completely. The concern, as well, from the ESG perspective [is] people not being able to find financing.

He added: “We are going through the investment cycle because we look at it as an NOC completely differently than international oil companies because we are long on oil and will continue to produce for decades to come, and we will make it net zero.”

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