Occidental Petroleum (OXY -1.74%) believes carbon seize and storage (CCS) will ultimately turn out to be a large market. The oil firm estimates it might be a $3 trillion to $5 trillion world trade sooner or later. It isn’t alone in that view. Oil large ExxonMobil (XOM -1.68%) estimates that there might be a $4 trillion marketplace for capturing and storing carbon dioxide by 2050.
Each oil firms are working towards capturing this probably multitrillion-dollar market alternative. Occidental lately signed a cope with a possible accomplice to develop what might be its subsequent direct air seize (DAC) facility in Texas. The corporate’s early management in carbon seize and storage places it in a powerful place to seize a significant portion of what seems like a large alternative.
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Constructing a carbon removing powerhouse
Occidental Petroleum and its subsidiary 1PointFive signed an settlement with XRG, the funding firm of Abu Dhabi’s ADNOC, to guage a three way partnership to develop a DAC facility in South Texas. As a part of the deal, XRG will take into account investing as much as $500 million right into a facility that might seize 500,000 tonnes of carbon dioxide per 12 months.
The oil firm famous that the announcement follows a number of important milestones in growing DAC expertise. That features progress on establishing its first DAC facility in West Texas. The STRATOS facility is on monitor to start industrial operations this 12 months. That facility would additionally seize as much as 500,000 tonnes of carbon dioxide per 12 months. It is partnering with funding large BlackRock, which agreed to take a position $550 million into the undertaking.
Occidental was additionally awarded as much as $650 million in funding from the U.S. Division of Power to assist help the event of its South Texas DAC hub. The preliminary 500,000-tonnes-per-year DAC facility would solely be the start of this hub. The positioning has the potential to help as much as 30 million metric tons of carbon dioxide removing every year via DAC amenities. In the meantime, the location has about 165 sq. miles of acreage that has the potential to retailer as much as 3 billion tonnes of carbon dioxide in underground saline formations.
Commercializing a nascent trade
Occidental Petroleum has additionally been working to commercialize its DAC expertise to make cash from its investments. A significant facet of its technique has been promoting carbon removing credit to firms looking for to scale back their carbon footprints. For instance, it signed an settlement with Microsoft final July to promote 500,000 metric tons of carbon dioxide removing credit over six years to help the expertise large’s carbon removing technique. That was the biggest single buy of carbon removing credit enabled by DAC expertise. These credit will help Occidental’s STRATOS DAC facility. The oil firm has signed agreements to promote carbon credit to a number of different firms, together with AT&T, Amazon, and TD.
The oil firm has additionally signed different industrial agreements associated to carbon seize and storage. In 2022, the corporate signed an settlement with SK Buying and selling Worldwide to provide it with as much as 200,000 barrels of net-zero oil for 5 years. Occidental will inject about 100,000 tonnes of captured carbon dioxide into the bottom, offsetting the complete lifecycle emissions of this crude oil — that’s, extraction, transportation, delivery, refining, and use.
Occidental additionally lately signed a 25-year settlement with fertilizer maker CF Industries (CF -0.21%) to retailer 2.3 million metric tons of carbon dioxide per 12 months at its Pelican Sequestration Hub in Louisiana. This settlement will help a low-carbon ammonia manufacturing facility that CF Industries and its three way partnership companions are constructing in Louisiana.
ExxonMobil signed two related agreements with CF Industries lately. Final 12 months, it agreed to move and completely retailer 500,000 metric tons per 12 months of carbon dioxide captured at a posh in Mississippi, which is able to cut back the location’s emissions by 50%. In 2022, Exxon signed a landmark industrial settlement with CF Industries to retailer as much as 2 million tonnes per 12 months from a facility in Louisiana. CF Industries is considered one of six industrial clients Exxon has lined up lately, representing 16 million tons of carbon dioxide per 12 months.
Occidental and Exxon consider these industrial agreements are solely the start. Occidental thinks it might ultimately make as a lot in earnings and money circulate from CCS because it presently does from oil and gasoline. In the meantime, Exxon believes CCS might be a multibillion-dollar enterprise for the corporate. Moreover, given the long-term contracted nature of its CCS initiatives, the expertise will assist cut back its earnings volatility sooner or later.
Slowly taking steps towards capturing a probably huge alternative
Occidental Petroleum continues to make progress in rising its CCS platform. It is engaged on lining up funding companions resembling XRG and agreements to commercialize its DAC amenities and sequestration hubs. This technique might create plenty of worth for buyers sooner or later if CCS grows as large as the corporate believes it can turn out to be. It makes Occidental a extra compelling long-term funding alternative within the oil patch.
John Mackey, former CEO of Entire Meals Market, an Amazon subsidiary, is a member of The Motley Idiot’s board of administrators. Matt DiLallo has positions in Amazon. The Motley Idiot has positions in and recommends Amazon and Microsoft. The Motley Idiot recommends Occidental Petroleum and recommends the next choices: lengthy January 2026 $395 calls on Microsoft and brief January 2026 $405 calls on Microsoft. The Motley Idiot has a disclosure coverage.
