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Occidental Petroleum Corp.’s direct air capture plant in the Permian Basin has been attracting attention ever since it was announced, and one of the world’s largest investment firms is the latest to take note.
1PointFive, a subsidiary of Occidental (NYSE: OXY), and BlackRock Inc. (NYSE: BLK) signed an agreement to form a joint venture that will own the Stratos direct air capture plant in Ector County, Texas. Through its diversified infrastructure business, BlackRock will invest over $550 million on behalf of clients for the development of Stratos, which Oxy has billed as the largest DAC plant in the world.
“This joint venture demonstrates that direct air capture is becoming an investable technology and BlackRock’s commitment in Stratos underscores its importance and potential for the world,” Vicki Hollub, president and CEO of Oxy, in the Nov. 8 news release. “We believe that BlackRock’s expertise across global markets and industries makes them the ideal partner to help further industrial-scale direct air capture.”
The companies did not list their advisers on the deal, but Kirkland & Ellis said it advised BlackRock, while White & Case LLP said it advised Oxy.
Stratos, which is set to go online in 2025, broke ground earlier this year, and construction is now approximately 30% complete. The project is expected to create 1,000 jobs during the construction phase and employ 75 people when complete.
Oxy has already lined up commercial clients to purchase carbon dioxide removal credits that would be facilitated by Stratos, with the latest being Canada-based TD Bank Group (NYSE: TD). In October, TD Securities agreed to purchase 27,500 metric tons of credits over four years, representing one of the largest such purchases by a financial institution. Other carbon removal clients for Stratos include Amazon.com Inc. and the Houston Texans.
Direct air capture is a decarbonization technology that pulls carbon dioxide out of the atmosphere and stores it underground. Stratos is designed to capture 500,000 tonnes of CO2 per year.
1PointFive is developing several DAC projects, including Stratos, across Texas with the British Columbia-based Carbon Engineering Ltd. Another Oxy subsidiary, Oxy Low Carbon Ventures, reached a $1.1 billion deal to acquire Carbon Engineering in August.
While Stratos continues construction, Oxy has already secured major funding for one of its other major DAC plants. In August, the Department of Energy named Oxy’s planned King Ranch DAC hub in Kleberg County, Texas, as one of two recipients of up to $1.2 billion in funding for DAC.
Oxy is also taking the DAC technology worldwide. Last month, the company announced a feasibility study for a potential DAC plant in the United Arab Emirates through a partnership with the Abu Dhabi National Oil Co. That plant is expected to capture 1 million tonnes of CO2 per year, and its announcement follows a memorandum of understanding the two companies signed in August, which could also lead to ADNOC participating in Oxy's U.S. carbon capture operations.
Many of the Houston area’s major energy companies have invested into carbon capture projects or acquired companies working in the space. Spring-based Exxon Mobil Corp. (NYSE: XOM) acquired Plano, Texas-based Denbury Inc. in a deal valued at $4.9 billion earlier this year, and Exxon Low Carbon Solutions president Dan Amman said the combination of the companies' assets and capabilities could help Exxon reduce emissions by more than 100 million metric tons per year.
A recent report from Deloitte LLP, however, found that only 33% of institutional investors believe that oil and gas companies can be potential leaders in the long-term energy transition sector, compared to 50% of industry executives. The report highlighted executives’ tendencies to prioritize technology that decarbonizes core operations such as natural gas production, compared to investors' focus on battery storage and electrification.
Occidental is No. 7 on the Houston Business Journal's 2023 Largest Houston-Area Public Companies List, based on its 2022 total revenue of $36.63 billion.