Oil and Gas Titans Embracing Carbon Capture

HOUSTON — Two titans of the Texas oil industry are teaming up on a carbon capture and transportation project they believe could be the cornerstone of a future low-carbon economy in the heart of oil and gas country.

The partners on the ambitious projects are Oxy Low Carbon Ventures, a subsidiary of Occidental Petroleum, and Enterprise Products Partners.

Under the terms of a letter of intent signed in late April, the joint project would initially focus on providing carbon sequestration services to emitters in the industrial corridors that extend from the greater Houston metro south to Beaumont and Port Authur, Texas.

The effort would combine Enterprise’s transportation network with carbon sequestration hubs currently under development by Oxy.

Essentially, Enterprise would develop the CO2 aggregation and transportation network utilizing a combination of new and existing pipelines along its expansive Gulf Coast footprint. 

Oxy, through its 1PointFive business unit, is developing sequestration hubs on the Gulf Coast and across the U.S., some of which are expected to be anchored by direct air capture facilities. 

Defined simply, and by no means comprehensively, carbon capture involves preventing emissions from escaping from facilities like power plants, while carbon removal processes involve literally sucking harmless greenhouse gases out of the air.

In both cases, the plan then would be to store the nasty pollutants deep underground.

If all works as envisioned, the two companies said in a joint statement, their carbon management services could provide the sequestration solution for the entire Texas Gulf Coast.

“For many years, Enterprise and Oxy have successfully collaborated in developing traditional oil and gas projects,” Enterprise co-CEO Jim Teague said. “We are excited to evolve that relationship to provide reliable and cost-efficient CO2 transportation and sequestration services to advance a low-carbon economy for the energy capital of the world.”

Richard Jackson, president, U.S. Onshore Resources and Carbon Management, Operations, at Occidental said, “We believe that our low-carbon strategy enhances Oxy’s business value and creates a path to net zero for ourselves while providing organizations everywhere with the tools they need to achieve net-zero or net-negative emissions.”

Rystad Energy, a global energy consultancy based in Oslo, Norway, said earlier this year that thanks to wide-scale efforts to address climate change and the energy transition that’s currently underway, spending on carbon capture and storage is set to skyrocket over the next decade.

Total spending for announced commercial projects in 2022 is projected to hit $4.4 billion, up from $2.8 billion last year, Rystad Energy said. 

Projections show 2024 and 2025 will see an additional $18 billion and $19 billion, respectively, bringing the projected total to $52 billion by the middle of the decade. 

North America and Europe will be the biggest drivers of the spending, with 63 out of the 84 announced commercial carbon capture projects expected to start operations by 2025 situated in these two regions.

“CCS technology is viewed as a fundamental component of the societal decarbonization required for a successful energy transition,” said Lein Mann Hansen, Rystad Energy senior analyst, in a written statement.

“Although the technology dates back to the 1970s, the number of CCS project announcements has surged in the last two years, and service sector spending is expected to go through the roof in the coming years as a result,” Hansen said.

Oxy had previously announced plans to spend up to $1 billion on a facility that could remove 500,000 tons of carbon dioxide directly from the air. Upon completion, it will be the world’s largest direct air capture project.

Once operational, the Dallas-based firm EnLink Midstream will use its existing pipelines and new lines to transport carbon dioxide to the planned Oxy Low Carbon Ventures facility in Livingston Parish, Louisiana. 

Occidental Petroleum is leasing about 30,000 acres of land from Weyerhaeuser, the real estate and timberland company, for the facility.

“The Mississippi River corridor has one of the highest concentrations of industrial CO2 emissions in the U.S. and EnLink is uniquely positioned to serve customers in the region given our extensive pipeline infrastructure already in the ground,” Barry Davis, EnLink’s chairman and CEO, said in a statement.

Despite all this activity, carbon capture remains a controversial practice. Some environmentalists bemoan it, seeing it as a way to bolster the dominance of the fossil fuel industry ad infinitum.

Others, including the Intergovernmental Panel on Climate Change, argue that while carbon capture and removal technologies may help limit global warming, they remain largely unproven.

The oil and gas industry has embraced the technology as having the best chance to significantly reduce its fossil fuel emissions. 

They also see it as a major future profit center. Occidental Petroleum itself has estimated carbon capture and storage could become a $3 trillion to $5 trillion global industry. 

“We think ultimately it’s going to generate as much earnings and cash flow as our oil business does today. We believe it’s a long-lasting business,” said Occidental CEO Vicki Hollub on a recent episode of the CERAWeek Conversations podcast.

Dan can be reached at [email protected] and @DanMcCue