Two years ago, Occidental, an oil and gas company, acquired Carbon Engineering, a startup focused on carbon capture. This transaction was seen as mutually beneficial: the climate tech company achieved a significant exit, while the fossil fuel company entered a sector projected to be worth up to $150 billion by 2050.
Occidental’s interest in this costly technology has become clearer—to use it to increase oil production. Initially, the company stated it would employ the technology to eliminate its climate impact. However, during Occidental’s recent earnings call, CEO Vicki Hollub indicated a shift, emphasizing the necessity of injecting CO2 into wells to enhance oil extraction.
Hollub expressed the importance of CO2 removal technology for the United States, acknowledging former President Trump’s understanding of the business implications. The Verge initially reported these remarks. Hollub likened the use of CO2 in enhanced oil recovery to fracking, which significantly boosted U.S. oil and gas production.
Despite its potential, direct air capture technology remains costly, priced between $600 to $1,000 per metric ton. The Inflation Reduction Act, however, offers incentives for using captured CO2 in enhanced oil recovery, providing up to $130 per metric ton in 2026 if the gas is permanently stored underground. While these incentives alone are insufficient to make the practice appealing, Occidental anticipates profitability by the end of the decade when combined with carbon credit sales.
The Trump administration worked to dismantle climate-related incentives, including the Inflation Reduction Act. Nonetheless, support from companies like Occidental and ExxonMobil suggests the possibility of the tax credits’ survival.
Carbon capture has a longstanding association with fossil fuel companies, beginning in the 1970s with oil pumped into depleted wells using CO2 sourced from underground. The 1980s saw the expansion of pipelines from Texas, but low oil prices hindered widespread adoption of the technique.
Approximately a decade ago, NRG Energy capitalized on rising oil prices by constructing the nation’s first carbon capture facility, Petra Nova, linked to a coal-fired power plant. This facility aimed to capture a third of one boiler’s carbon dioxide to enhance production at an oilfield near Houston. Although successful, its production increase of around 6,000 barrels per day fell short of forecasts. NRG shuttered Petra Nova in 2020 due to pandemic-related oil price drops and later sold it to JX Nippon.
While oil prices have rebounded, using CO2 in enhanced oil recovery remains unattractive, partly due to the insufficient availability of the gas necessary to achieve the 50 billion to 70 billion barrels in production projected by Hollub. Direct air capture could provide the needed CO2, as human activities over the last century and a half have emitted significant quantities into the atmosphere. There is potential for making oil carbon negative by using air-captured CO2, though this idea requires further investigation.
The future of federal incentives for direct air capture remains uncertain over the next few years. However, given the oil companies’ interest in maintaining their current operations, these incentives might have a solid chance of persisting.
