Occidental buys carbon capture technology company Occidental for $1.1 billion

Aug 15 (Reuters) – U.S. oil and gas producer Occidental Petroleum agreed on Tuesday to pay technology supplier Carbon Engineering Ltd $1.1 billion to help it develop a series of carbon capture sites it hopes will benefit from tackling climate change. .

The US oil producer aims to build about 100 plants using direct air capture (DAC) technology that strips carbon dioxide (CO2) from the atmosphere to bury it underground or use it to make products like concrete and jet fuel.

DAC technology is still in the early stages of commercialization and will require billions of dollars of investment to prove that it can operate economically and be profitable.

“This is not a huge deal for Occidental, but we believe it adds to leverage in the near term and increases concerns about liquidity burn in Occidental’s Low Carbon Ventures division,” brokerage Roth MKM said in a note.

The two companies said the payments will be distributed in three roughly equal annual payments, with the first due at closing, expected before the end of 2023.

Carbon dioxide is a greenhouse gas. President Joe Biden’s administration views DAC technology as a tool to help achieve the goal of emissions neutrality by 2050, if it can be commercialized and applied on an industrial scale.

While carbon capture is applied to emissions produced in industrial facilities, DAC removes carbon dioxide from the air.

Last Friday, the US Department of Energy announced that sites in Texas and Louisiana will receive more than $1 billion in federal grants. Some of that money will fund DAC’s proposed 30 Occidental plants in Kleberg Country, Texas.

The two sites will be the first to be funded by a $3.5 billion mandate for regional DACs funded by Congress from a bipartisan infrastructure bill.

Occidental said it has been working with Carbon Engineering on the DAC deployment since 2019.

“The acquisition enables Occidental to catalyze broader development partnerships to deploy DAC in the most capital efficient and valuable manner,” said Occidental CEO Vicki Holub.

(Reporting by Surasis Bose in Bengaluru); Editing by Shelby Majumdar and David Gregorio

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