LOS ANGELES: Direct air capture startup Spiritus was founded to remove carbon dioxide (CO2) from the atmosphere and bury it underground. Now, it’s pivoting to selling that CO2 to help extract oil, as the clean-tech industry recalibrates following US federal funding cuts and a corporate climate retreat.
The Los Alamos, New Mexico-based company has signed letters of intent with three US oil and gas producers across the Rockies, Midwest and Gulf Coast. It plans to supply more than three million tonnes of CO2 annually for enhanced oil recovery (EOR), a technique that injects CO2 into ageing oil wells to extract residual crude.
The deal could support the production of more than 70 million additional barrels of oil, said Spiritus chief executive officer Charles Cadieu in an interview.
“There’s no way to get around it. The removal market is challenged right now,” Cadieu said. “The pull is just great in the EOR space and that’s part of what it is to be a company: to go where the commercial traction is.” He declined to name the producers that signed the letters.
The shift follows a rocky stretch for Spiritus and other companies attempting to commercialise direct air capture, a largely unproven technology that uses giant fans and chemical processes to suck CO2 directly out of the ambient air.
Last year, the Trump administration cancelled Energy Department funding for roughly half of the 21 direct air capture hub projects it inherited from the Biden administration.
And the carbon removal sector’s largest corporate buyer, Microsoft Corp, cut its purchases by about 80% in the first half of this year as it increased spending on artificial intelligence or AI.
As a result, businesses that banked on large corporate purchases of carbon removal credits and federal scale-up support have been forced to rethink their plans.
Startup Noya shut down entirely, while CarbonCapture Inc subsidiary True North Carbon relocated its first commercial pilot project to Canada. In Europe, companies have consolidated as market conditions shift.
A lot of carbon removal companies “have now begun to see the United States as a potentially unreliable place to deploy and are looking abroad in other geographies where there is more policy and regulatory certainty,” said Giana Amador, the executive director of non-partisan advocacy group Carbon Removal Alliance, during a Climate Week NYC panel on Monday.
Spiritus expects to bring its first commercial plant online within the next two years at one of the fossil fuel operators’ sites.
Currently, the company operates a pilot set-up outside Santa Fe, New Mexico, although it has yet to deliver any carbon removal credits to customers.
Cadieu declined to say how much its oil and gas customers will pay for its captured CO2, but said the price will be competitive with what oil companies currently pay for the gas. Overall, though, direct air capture remains a stubbornly expensive and energy-intensive technology.
At a Climate Week NYC panel on Wednesday, Cadieu suggested that local communities that have seen declines in tax revenues could benefit from his company’s technology. Some states “are looking to finance projects that can hold supply, capture CO2, and use it for advanced oil recovery”, he said.
Scientists estimate that the world will need to remove several billion tonnes of CO2 from the atmosphere annually by mid-century in order to meet global climate targets, a scale that the carbon removal industry remains far from reaching.
Redirecting that technology towards oil extraction prolongs the life of fossil fuels, according to some researchers. “I recognise some are going to want to end fossil fuels,” Cadieu said. “We just disagree with that.”
While some direct air capture companies like Climeworks AG have said selling their captured CO2 for oil recovery is a red line they won’t cross, Spiritus is not alone in leaning into oil field revenue. — Bloomberg
