Occidental Petroleum to Acquire Carbon Capture Technology Supplier for $1.1 Billion

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Fatima Attarwala
Fatima Attarwala
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Fatima Attarwala is a business news writer and editor with a decade of experience researching, analyzing, and commenting on issues influencing the economy.
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Published August 16, 2023
Vicki Hollub, president and chief executive officer of Occidental Petroleum Corp. (OXY), speaks during a groundbreaking ceremony at the Occidental Petroleum and 1PointFive Direct Air Capture (DAC) plant in Ector County, Texas, US, on Friday, April 28, 2023.

Jordan Vonderhaar/Bloomberg via Getty Images

Oil and gas producer Occidental Petroleum (OXY) announced on Tuesday its plans to acquire Canadian carbon capture technology supplier Carbon Engineering Ltd. for $1.1 billion.

KEY TAKEAWAYS

  • Occidental Petroleum plans to purchase direct air capture technology firm Carbon Engineering Ltd. for $1.1 billion.
  • Spurred by the government's direct air capture incentives, Occidental plans to set up about 100 plants that will strip carbon dioxide from the air and bury it in the ground or use it for manufacturing.
  • By decreasing costs, the acquisition will boost Occidental's profitability as well as provide new revenue streams through technology licensing and royalties.

Occidental aims to build about 100 direct air capture (DAC) plants that can strip carbon dioxide from the air and use it to manufacture products such as concrete or aviation fuel. The CO2 can also be buried underground. The two companies have been working on DAC technologies since 2019. The buyout will enable Occidental to develop multiple carbon-capture sites that can provide climate change solutions.

Carbon Engineering's equity will be purchased for cash in three roughly equal annual payments, with the first due when the deal is finalized. The transaction is expected to close before the end of the year, subject to court reviews and regulatory approvals in the U.S. and Canada.

Accelerating the deployment of DAC as a large-scale, cost-effective, global carbon removal system will enhance Occidental's profitability, the company said. Technology licensing and royalties will add new revenue streams as well.

The efforts come as part of the Biden administration's efforts to use DAC to neutralize greenhouse gas emissions by 2050. To scale up DAC technology, the U.S. Department of Energy announced last week $1 billion in federal grants for projects in Texas and Louisiana that can potentially remove more than 2 million metric tons of carbon emissions annually.

Some of that money will be funneled toward Occidental's West Texas-based Stratos project. Using Carbon Engineering's technology, Stratos is set to be the largest DAC plant in the world by 2025.

As climate-change catastrophes unfold across the globe, the importance of removing carbon from the atmosphere is increasing. Scientists estimate billions of tons of carbon have to be removed from the environment to limit global warming to 1.5 degrees Celsius.

Occidental shares gained 1% in early trading Wednesday.

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  1. Occidental Petroleum. "Occidental Enters into Agreement to Acquire Direct Air Capture Technology Innovator Carbon Engineering."

  2. Reuters. "Occidental buys carbon air capture tech firm for $1.1 billion."

  3. Reuters. "US awards $1.2 billion to Oxy, Climeworks-led carbon air capture hubs."

  4. Bloomberg. "Occidental to Buy Canadian Startup Carbon Engineering for $1.1 Billion."

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