Occidental, the oil giant that has tried to position itself as a leader in climate technology, is now clearly talking about carbon capture, which it sees as the next big step in fossil fuel production.
This shouldn’t come as a surprise, since this is an oil company. But Occidental has created an entire line of business aimed at fighting climate change. In 2023, it acquired Carbon Engineering, a startup pioneering technologies that filter CO2 from the air. A subsidiary of 1PointFive is building giant facilities in Texas using Carbon Engineering’s technology. These projects have received support from the Biden administration and large companies, including Amazon and Microsoft, which have their own climate goals. Sucking carbon dioxide out of the air aims to get rid of the pollution that causes climate change.
But this strategy, called direct air capture (DAC), doesn’t get to the root of the problem: the extraction and burning of fossil fuels is what causes the pollution that heats up the planet in the first place. What happens to that carbon once it is captured is an even more complex issue. DAC is marketed as a climate solution because the captured carbon can be sequestered underground, preventing greenhouse gases from building up in the atmosphere and raising the global average temperature.
But fossil fuel companies have historically used CO2 in a process called enhanced oil recovery, injecting carbon into depleted oil fields to displace hard-to-reach reserves. This week, Occidental described its EOR business as necessary to enable the company to produce more oil.
“We believe that the next technology that will add significant barrels – 50 to 70 billion barrels of reserves – will be production by using CO2 to enhance oil recovery,” Occidental President and CEO Vicki Golub said during a conference call. This was in response to a question about what the company thinks about its carbon extraction business in light of this year’s change in administration – from one that prioritized climate change action under Joe Biden to one that aims to “drill, baby, drill” under Donald Trump.
In fact, Holub characterized the use of captured carbon to enhance oil recovery as the greatest boon to fossil fuels since fracking enabled the US shale revolution. “Taking CO2 out of the atmosphere is a technology that should work for the United States, and President Trump knows the business case for it,” Ms. Golub said, adding that she has had “several conversations” with Trump.
Occidental has experienced a slight decline in oil production over the past few years, but the company believes it can remedy the situation with the help of captured CO2. “There’s not enough organic CO2 in the country to flood all the stuff we need to flood to get that 50-70 billion barrels,” says Holub.
However, direct capture from the air is still too expensive, costing hundreds of dollars per ton of CO2 captured. Its future in the U.S. may depend on whether the Trump administration preserves the Biden-era tax incentives for this technology, which Holub mentioned during the phone call. Ultimately, the company doesn’t want to risk its DAC fabs turning into bad assets. Its first major DAC manufacturing plant, called Stratos, is set to start up this year in Texas, and the company has plans for an even larger project at King Ranch that has received federal funding in 2023.
Last year, Microsoft signed a deal with 1PointFive to remove 500,000 metric tons of carbon dioxide. And Amazon agreed to pay for 250,000 metric tons of carbon removal from 1PointFive’s first future DAC plant. Both of these deals at least include provisions that the captured carbon will be permanently sequestered and not used for oil and gas production.
But there is another disturbing result of such agreements. The DAC plants that Occidental is building must be successful in order for this CO2 to be sequestered. Other companies that buy carbon sequestration services take this into account in their carbon accounting to meet their own climate goals. Time and money that could have been spent on reducing greenhouse gas emissions in other ways – say, by switching to cleaner energy sources – may be wasted on carbon removal technologies that may never become commercially viable.
However, Occidental will still have its fossil fuel business even if DAC fails. In the meantime, it can profit from its oil and gas business, profit from cleaning up some of the CO2 emissions it creates, and then use the pollution it captures to produce even more fossil fuels.
