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CERAWEEK: Petroleum sector looks to build on carbon capture for more ‘carbon-neutral’ oil

The global oil industry aims to lean more on carbon capture, utilization and storage technologies as it seeks to deliver more “carbon-neutral” crude oil shipments in order to emerge as more of an ally within the ongoing energy transition, industry experts said March 1 on the opening day of CERAWeek by IHS Markit 2021.

Major Permian Basin producer Occidental Petroleum is the industry leader in using carbon dioxide for enhanced oil recovery in its wells, and Oxy said on Feb. 1 it made the first “carbon-neutral” major petroleum shipment when it sent 2 million barrels of crude to Reliance Industries in India from the US Gulf Coast. But this is just a first step and much more progress is needed to turn around global carbon emissions, officials said at the conference.

The difference between “carbon neutral” and “net zero” is that carbon neutrality allows for carbon mitigation efforts around the world to offset the emissions caused during the lifecycle of crude, from the wellhead through fuel combustion. Net zero, on the other hand, means emission-free without such third-party mitigation.

The eventual goal for Oxy and others is indeed “net zero” by using technologies such as direct air capture plants that literally suck carbon emissions out of the atmosphere. Oxy and its partners are currently designing the first commercial direct air capture plant within the Permian with the goal of making the technology scalable and deployable worldwide, said Robert Zeller, vice president of technology at Oxy Low Carbon Ventures.

“It was really a first step of what we call climate-differentiated crude oil,” Zeller said of the Feb. 1 shipment, calling the effort a bridge toward truly net-zero oil.

Oxy said it expects to begin delivering net-zero oil from direct air capture to customers in 2024.

Zeller said he sees Oxy and other industry leaders eventually working as carbon capture service providers for companies and sectors worldwide that cannot easily capture and store carbon emissions on their own.

“They can get on the phone and do carbon as a service and focus on doing what they do best,” Zeller said.

The Oxy crude shipment comes just as the White House has reentered the Paris climate accord and the Biden administration is toughening the standards on greenhouse gas emissions.

President Joe Biden on Feb. 26 moved to reestablish the Obama-era price tag on the social cost of greenhouse gas emissions. Biden would put the price back at $51 per ton of carbon emissions, which is the same as during the Obama administration, after former President Trump set the range much lower at a range of just $1 to $7 per ton.

The White House also made it clear the cost is likely to move higher in a year after its new interagency work group makes new recommendations in January 2022 for the economic impact of carbon dioxide pollution.

Easier said than done

Texas, for instance, leads the nation in oil and gas production where more CO2 can be utilized for enhanced oil recovery, and the state is home to petrochemicals and industrial hubs along the USGC that produce massive amounts of carbon and hydrogen that can be stored or turned into valuable commodities.

However, apart from limited EOR use and the ability to produce so-called blue hydrogen for cleaner manufacturing from cement to chemicals, there still is not a huge market for CO2 utilization. And, for the most part, developing CCUS infrastructure is not economical for now.

And the ongoing coronavirus pandemic has cut into the demand for CO2 as a valuable commodity. The only commercially operational carbon capture project attached to a coal plant — NRG Energy’s Petra Nova Project near Houston — suspended operations in May as it failed to turn a profit during the pandemic.

That is why governments and the investment community largely will determine how fast carbon capture technologies develop. Everything is needed from greater, government-backed financial incentives to proper regulatory frameworks to thousands of miles of CO2 pipelines, said Howard Herzog, senior research engineer for the Massachusetts Institute of Technology Energy Initiative. But more governmental incentives have focused on encouraging renewable energy production and less on CCUS.

“We’re going to see a lot more storage than utilization,” Herzog said. “Once we go further down the pathway, utilization may get more interesting.”

CO2 emissions essentially need to drop by 50% to achieve net-zero climate goals by 2030, according to the Paris accord, and the world is falling far short of those aims thus far.

J.R. Rickertsen, BofA Securities managing director for energy, said banks and the ongoing trend of more special purpose acquisition companies, called SPACs, are interested in investing more in energy transition technologies. But he emphasized the proper “risk appetite” is required.

Socially responsible investing still comes down to the axiom, “First, lose no money. Second, try to make some,” he said. So more credit-worthy parties need to address the operational risks before banks come fully onboard.

“At the end of the day, we are looking for that return of capital,” Rickertsen said. “After that, I certainly could see banks taking on more project risks certainly as we’ve seen with wind and solar.”

There is no single technology that will solve everything, so — apart from the necessary governmental incentives — oil producers and services firms must work in concert together to ensure a myriad of solutions are utilized most appropriately, said Michele Fiorentino, Baker Hughes executive vice president for strategy and business development.

“It’s about developing a platform of different types of technologies,” Fiorentino said, arguing Baker Hughes would help to fill that roll.
Global problem

And this is a global problem, not just a North American one.

Nasir Darman, the chief technology officer for Petronas in Malaysia, said national oil companies feel pressured to act as well in order to maintain a “social license to operate.”

If not, “We’re going to be a dinosaur. We have no other options. We are going to get greener and greener,” Darman said.

Still, the biggest problem may be of when, and not if, on the issue of scaling up enough CCUS worldwide.

There is more talk than action thus far, Herzog said. “I’m confident it will happen, but maybe not in the timeframe we’re all hoping for.”

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