Oil giant quietly ditches the world’s biggest carbon capture plant

Century’s struggles show the risk of underwriting the cost of carbon capture with fossil fuel revenues. — Bloomberg

LONDON: The world wants to master the process of corralling carbon, and Occidental Petroleum Corp is building a futuristic machine on the dusty plains of Texas designed to do just that.

The billion-dollar complex, called Stratos, will suck carbon dioxide out of the atmosphere and bury it deep underground.

Amazon.com Inc, Shopify Inc, Airbus SE and the Houston Texans football team are among the businesses signed up to pay by the tonne for captured carbon long before the site is operational.

US President Joe Biden is putting hundreds of millions of dollars behind the technology.

Occidental chief executive officer Vicki Hollub has spent US$1.1bil buying the startup behind Stratos and, after successfully lobbying for government support, intends to build 100 plants just like it. Warren Buffett, Occidental’s biggest investor, has given his tacit blessing.

This is not the first time Occidental has bet big on technology to manage carbon.

A mega-plant for carbon capture and storage, a facility named Century located about 160km from Stratos, was built by the oil giant in 2010.

At the time, it was set to become the biggest-ever example of carbon capture, representing more than 20% of global capacity.

Unlike the newer technology used in Stratos, known as direct air capture (DAC), Century pulls CO2 from a dedicated source of emissions. It’s built into a natural gas processing plant.

That older process is both better established and much cheaper than the newer machines built to suck CO2 from the air.

There’s also the added advantage of a more direct business application, with Oxy deploying recovered CO2 from the gas plant as a tool to produce even more oil.

But that older facility, with simpler technology and a production-linked incentive, has consistently failed to deliver results.

A Bloomberg Green investigation has revealed that Century never operated at more than a third of its capacity in the 13 years it’s been running.

The technology worked, but the economics didn’t hold up because of the limited gas supplied from a nearby field, leading to disuse and eventual divestment.

Oxy quietly sold off the project last year for a fraction of the build cost.

It was a far cry from the fanfare the company made in the plant’s early years and the anticipation that’s been building for Stratos.

Occidental shares fell as much as 4.7% on Monday, making it the second-worst performer in the S&P 500 index.

Occidental said the Century plant “continues to operate as designed”.

A spokesperson said that it would be a “mischaracterisation” and “false narrative” to use the plant as an example of a carbon capture storage (CCS) project performance.

Shortcomings have marred virtually all of carbon capture’s previous generation used for climate purposes, an assortment of a few dozen facilities around the world grouped under the acronym CCS.

Century’s struggles show the risk of underwriting the cost of carbon capture with fossil fuel revenues. Even if the technology works, projects frequently fail when commodity prices drop.

This legacy of underperformance is a warning about relying on the next wave of carbon-wrangling technology, both newer DAC projects like Stratos and an anticipated build-out of CCS facilities like Century on a vast scale, to play the role of climate savior.

Both technologies, new and old, are now being presented as ready-to-go climate solutions, in particular by the oil sector, which is eyeing them as a licence to operate.

The path forward from here, according to the International Energy Agency, requires rapidly scaling up CCS worldwide.

That means adding more than one Century-sized plant each month through the end of the decade because it’s cheaper than using newer carbon-removal technologies and stops emissions from entering the atmosphere in the first place.

Focusing attention on CCS and enlisting the global oil industry’s support has become an emphasis of the upcoming COP28 climate summit, with oil exporter the United Arab Emirates playing host.

As mid-century net-zero goals get closer, researchers anticipate vastly expanding DAC projects to draw down CO2 and keep temperatures in line with the Paris Agreement.

Malte Meinshausen, professor in climate science at the University of Melbourne and author of a landmark report on the topic from the United Nations-backed Intergovernmental Panel on Climate Change, is among those who believe we “absolutely need” carbon capture “in order to get to the lower levels of climate change we want to get to”.

Like many climate-focused observers, he’s worried about just who has been empowered to handle much of the deployment.

“The problem,” Meinshausen said, “is that it has the wrong bedfellow in the fossil-fuel industry.”

The oil sector’s obsession with carbon capture has deep roots that long precede the current climate crossroads.

Technology to separate CO2 from other gases dates back to the 1930s, and since the 1970s, it’s been a tool in the production of oil. — Bloomberg

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