As the world increases its Net Zero and decarbonization efforts, many Energy Transition technologies are being introduced to meet the Paris Agreement’s global temperature targets, an agreement which the U.S has now rejoined. Direct Air Capture (DAC) is one such technology that aims to reduce carbon emissions by removing CO2 from the atmosphere. However, this green-friendly technology has a not-so-green side as well, as it can be used to enhance oil and gas production by injecting the captured CO2 into reservoirs: this method has been used by oil producers for years.
In November, Occidental (OXY) announced their Net Zero program, becoming the first U.S. oil major to target the complete decarbonization of operations by 2040 and counteract indirect emissions by 2050. It also affirmed OXY’s commitment to developing a DAC plant.
In December, OXY joined forces with United Airlines to specifically remove atmospheric CO2 that comes from sources such as vehicles, industrial complexes, and aircraft. United Airlines, a major consumer of refined petroleum products, sensed the appeal of DAC and shared its plan to invest millions in the technology as a way “to become 100% green by reducing greenhouse gas emissions 100% by 2050.” If successful, this technology would mean United Airlines would not have to rely on purchasing carbon offsets to balance their emissions.
OXY’s DAC plant capturing atmospheric CO2.
A Net Zero Partnership Company
Oxy Low Carbon Ventures, a subsidiary of OXY, and Rusheen Capital Management created a partnership via 1PointFive, allowing companies such as United Airlines to join and bolster DAC technology. Importantly, 1PointFive will license the DAC technology from Carbon Engineering.
OXY envisages this technology as being part of the largest DAC plant ever created. This is a view that United Airlines’ CEO, Scott Kirby, echoed in a CNBC interview, remarking “it is the largest [DAC plant] and sequestration project in the world, and we are a partner in it.”
Sequestering, also referred to as CO2 storage, is a crucial component of the DAC plant. Once the CO2 is processed by the DAC plant, the CO2 can then be injected underneath the surface and stored/sequestered in a reservoir. Of course, utilizing a reservoir as the source point for oil and gas production in the context of a global decarbonization effort may be problematic.
The Permian Basin and DAC Technology
OXY has designated the Permian Basin as the construction area for its DAC plant. This is a prolific oil-producing region that stretches across Texas and New Mexico, an area that accounted for nearly 50% of America’s oil production in 2019. OXY has 3.0 million acres dedicated to oil and gas activities in this basin. The DAC plant’s construction is set to commence in 2022 and is expected to have the ability to capture as much as 1,000,000 metric tons of CO2 per year. While a DAC plant in the Permian Basin makes sense, huge cities like Houston with an international airport and plenty of emissions could be targeted with this tech in the future.
In the image above you can see our EOR and sequestration would run in parallel at the proposed DAC plant.
Oil Production via Green Technology
As mentioned, the green-friendly technology that captures CO2 is not entirely green. Case in point: CO2 captured by the DAC plant can be injected into an oil and gas reservoir to increase production, a method known as Enhanced Oil Recovery (EOR), playing a key role in staving off a reservoir’s natural declination. Specifically, EOR is achieved by injecting CO2 into a reservoir that has a path to an oil
and gas producing reservoir. Such an approach promotes the movement of immobile oil, as shown in the image in the previous section, resulting in additional production. The injected CO2 can also become entrapped and captured in a reservoir’s caprock. OXY plans to use the captured CO2 to create fuels that have very low carbon, by way of its “Air-To-Fuel” approach. These methods of repurposing CO2 with the sequestering component, fall under the Carbon Capture Use and Storage (CCUS) category.
The U.N.’s Framework Convention on Climate Change views CCUS as a “key technology for the decarbonization of the energy sector in the long term.” The U.N. played a critical role in establishing a global accord to arrest global warming, prompting OXY, United Airlines, and other companies to strive for Net-Zero emissions.
The DAC Plant and the Paris Agreement
To what degree this technology program will adhere to the spirit of the Paris Agreement won’t be entirely clear until the DAC plant reaches an operational state. The U.S. has rejoined the Paris Climate Agreement, which aims to “limit global warming to well below 2, preferably to 1.5 degrees Celsius, compared to pre-industrial levels,” as outlined by the U.N. Thus, the approach taken by U.S. companies will have to follow the Paris Agreement to the best of there abilities. Only time will tell what bearing DAC technology will have on the global energy transition, but it seems some companies are hopeful.