Denver Business Journal

 

Energy  

 

Occidental CEO eyes enhanced oil recovery, CO2 capture in Colorado

 Oxy goes on the record with n exclusive interview with the leader of Colorado's largest oil and gas producer.

 

 By Greg Avery – Senior Reporter, Denver Business Journal

 

 

Occidental Petroleum Corp. (NYSE: OXY) is winning permits to drill new wells in Colorado with regularity not seen since before 2020 and state rule reforms, a trend that makes the energy giant’s CEO envision carbon dioxide capture and enhanced oil recovery projects in the state.

The Houston-based company, Colorado’s largest oil and gas producer, experienced a rare rejection of an oil project in March but has since grown comfortable enough with Colorado’s tight rules to consider the state as important to the company’s low-carbon oil vision as its larger operations in Texas — if it can count on regulatory predictability, said Vicki Hollub, president and CEO of Occidental, in an exclusive Denver Business Journal interview.

Hollub’s long-term vision includes investments in Colorado plants that capture carbon dioxide from the air and use it to enhance oil well production and in new natural gas-burning power plants that create electricity without greenhouse gas emissions.

In Texas, Occidental is building its first direct-air-capture plant that sucks carbon dioxide from the air, a $1.1 billion facility to gather 1 million tons of the greenhouse gas annually and pipe it deep underground for permanent storage or to be used in industrial processes.

Since 1983, Occidental has used CO2 in enhanced oil recovery in West Texas, pumping naturally occurring carbon dioxide underground to push more crude into vertical wells nearer the surface.

The company aims in coming years to start using CO2 from direct-air-capture systems and emissions gathered from industrial processes in Colorado for enhanced oil and gas production from horizontal wells here, Hollub said.

An Occidental-backed startup called Net Power is developing a natural gas and oxygen-burning power plant that captures its CO2 emissions and creates electrical power without releasing greenhouse gases into the atmosphere.

Occidental’s long-term plan in Colorado would boost production from oil and gas wells in the Denver-Julesburg Basin using CO2 from the company’s direct-air-capture systems that may be powered by Net Power plants, creating a low-carbon fossil fuel energy business positioned to address climate concerns, Hollub said.

She described, in an interview edited for length, clarity and style, the oil and chemical refining giant’s transformational vision and Colorado’s place in that plan.

Where does the DJ Basin fit in Occidental’s business, and what — given Colorado’s tight rules about drilling and oil and gas operations — does Oxy think of Colorado as an operating environment? We wanted to become more focused on U.S. operations with our Anadarko acquisition [in 2019]. We got to be bigger here and to reduce our geopolitical risk by having 70% of Occidental’s operations focused domestically. The DJ [Basin] is a big part of that.

We understand what they need to feel comfortable that an operation is going to be safe and be beneficial for both the state and us while not putting anybody at risk. That’s good, and we’re comfortable with that. I’d just like not to see every year some sort of legislation come about that’s trying to change things. Our teams have figured out how to work through the enhanced rules and the enhanced requirements in Colorado, and I think it’s good. That’s why we brought that rig back.

The DJ will always be a key part of what we do. It’s not just the primary development of oil and gas there that we’re interested in — it’s also, ultimately, the CO2 application there in Colorado and using some of the new technologies we have there as well.

Our Oxy Low-Carbon Ventures business is trying a couple technologies that no one else is really doing yet, one is the direct-air-capture of CO2 at scale. And then there’s Net Power. In Colorado, we want to use both of those technologies. By using them in concert we can operate in a less carbon-intensive way while we recover more oil from the reservoirs there. It’s a smaller version of the Permian Basin for us, but it is as important.

There’s a great deal of skepticism in the environmental community about carbon capture and sequestration by fossil fuel companies, concern that it will allow harmful fossil use to continue instead of being phased out. What are they not getting about what Oxy’s doing? First of all, they’re not doing enough research themselves to understand it better. Secondly, they’re not understanding the impact of not continuing oil and gas development. Oil is the highest energy-intensity, lowest-cost fuel there is for the world. I believe that we as a society need to stop focusing on trying to eliminate energy sources, and we should focus more on emissions control. That’s the problem that we’re fighting — we’re fighting emissions that are in the atmosphere that are causing climate change. We know that it’s happening. We see it happening, and we believe it’s happening. So, we need to figure out ways to control emissions, not to eliminate the source.

 

I strongly believe that as we develop our strategy and others do the same, that continuing oil and gas needs to be a priority for our world. Not doing away with it but continuing it in a way that is much lower carbon and much lower emissions. The best way to fund and accelerate the climate transition has to include the use of oil and gas.

What we’re trying to make people understand is, as in COP 26 [the United Nation’s 2022 climate conference], or what’s been said by the Pope or in studies by Columbia University and Stanford – almost any model you look at says that you can’t successfully transition and cap global warming at 2 degrees unless there’s direct-air-capture of CO2 associated with it because right now there’s 50% more carbon in the atmosphere right now than there was in pre-industrial times.We know that we can’t shut down the emissions that are going into the atmosphere. We can work on trying to reduce them, and in the absence of being able to do that quickly enough we have to have direct-air-capture.

Environmentalists need to accept that this is a technology. They’ve been told by COP, they’ve been told by the Vatican, and they’ve been told by those with valid models that direct-air-capture has to be done. That part is a given.

The other part that should be a given is that most people who have done the work to look at it say the cost of the energy transition is going to be between $200-$300 trillion.

The world absolutely cannot afford that. We have to think about how we do this transition in a way doesn’t bankrupt the world and also doesn’t leave behind what we all care about.

Environmentalists have got to understand that the best way to help provide the funds for the transition is to continue the development of oil and gas but continue it in a way that’s different than we’ve ever done before — continue it in a way that everywhere has regulations similar to the kinds of things that Colorado has done, and which does help significantly reduce emissions. In New Mexico, we worked with the Environmental Defense Fund to put together regulations that were more stringent than almost anywhere, maybe a little bit more stringent than Colorado or equal to it, at least. If you had those kinds of regulations applied everywhere, and you got everybody in the world to adopt them, then you’d have an oil and gas industry that’s a lot lower carbon intensity, and with direct-air-capture then you have the ability to lower the carbon footprint of the entire industry. That makes it a fuel that doesn’t have to go away. It could continue to be used and help people in other areas that have resources get to where we are today.

 

Can these things realistically be done fast enough to make a difference in the climate crisis? That is the issue. It can’t be done fast enough unless we all collaborate and focus and things that need to be done. The focus needs to stop being on eliminating and killing fossil fuels. Let’s accept that we need oil and gas development and let’s get busy on working faster to do carbon capture on emissions sources and to build direct-air-capture. There needs to be money that’s available to do those things, and there needs to be companies that are willing to put carbon capture [systems] on their plants. That should be the focus. Some environmentalists get this. I’m not saying all environmentalists don’t get this, but the extreme environmentalists are more focused on killing fossil fuels because they keep hearing that rhetoric. There are a lot of knowledgeable people out there who have agendas and who just aren’t sharing the right information. We need people in the broader public to understand.

That’s one of the things that will be important about COP 27 [the United Nations climate change conference this year], which will be in Dubai. That’s where you’ll hear a lot about what it’s going to take to make the climate transition successful. We’re working hard to do the things we need to do to make it happen.

When will Oxy propose building its first direct-air-capture system in Colorado? Colorado, unfortunately, might not get the first 10 or so. The first one is near Odessa and the second is in King Ranch, in Texas. Beyond that, I don’t know.

Is Colorado a good place for Oxy to be in business? Yes, definitely. We’re so pleased with what’s happened recently with the Colorado Oil & Gas Conservation Commission and the efficiency with which they’re now approving area development plans and oil and gas development plans. I think that’s working well, and we certainly appreciate all the effort the commission went through to help us understand what was going to work for them. It’s working for us. It’s been a collaborative effort, and I think we’re where we need to be. We’re quite happy with it.

The good thing is that when we go to universities to recruit, they like our strategy. They like our story, and they like that we’re differentiated from other oil and gas companies in that we have a plan we can put in place that people can understand and that we’re committed to make happen. People graduating from universities want to come work for us. Most of the people we talk to at universities would rather go to Colorado to live than to Houston, so Denver is a great attraction for new graduates.