Occidental ups spending on direct air capture hubs despite delay of 1st plant

Occidental Petroleum Corp. will at least double spending on its low-carbon businesses after pushing back the startup date of its inaugural direct air capture plant under construction in Ector County, Texas.

The oil producer on Feb. 28 reported in its fourth-quarter 2022 earnings update that the facility, originally scheduled for operations in 2024, will not start capturing CO2 for customers until mid-2025. Occidental President and CEO Vicki Hollub told analysts that the company does not expect the delay, blamed on supply chain issues, to impact the completion dates of other projects.

Occidental subsidiary 1PointFive Inc. announced plans in June 2022 to build at least 70 direct air capture hubs worldwide, piping CO2 from carbon capture facilities to geologic storage sites where the gas can be sequestered underground. The first projects will be on the U.S. Gulf Coast, where Occidental has so far secured about 265,000 acres of land or pore space.

Occidental expects to spend between $200 million and $600 million in 2023 on its low-carbon projects, including the plant in Texas' Permian Basin, subject to any outside funding secured. In 2022, Occidental had planned to spend between $100 million and $200 million.

The company did not disclose how much of that up to $600 million will be spent on its first direct air capture plant, expected to cost $1.1 billion in total as of November 2022.

The wide range in Occidental's capital plan comes as the U.S. Energy Department gets ready to spend $3.5 billion to deploy direct air capture by supporting the development of four regional hubs.

Richard Jackson, president of Occidental's U.S. onshore resources and carbon management operations, declined to speak in detail on Occidental's potential to receive federal funding. However, Jackson said progress on the Permian plant and Occidental's plans to build in South Texas put the company in a "really good position" for the DOE program, funded by the bipartisan infrastructure law of 2021.

Direct air capture is a nascent industry that vacuums CO2 from ambient air and is funded through the sale of carbon credits. Occidental plans to transport and store the CO2 from direct air capture plants and point-source carbon capture facilities, which intercept the CO2 from waste streams. Hollub said Feb. 28 that the company is developing a CO2 pipeline network that will link emitters in the Lake Charles, La., area to another sequestration site in Louisiana.