11/01/2024

A Houston Oil Giant Is Pioneering a New Climate Technology. It’s a Costly Gamble

Houston Chronicle | Amanda Drane | Oct. 29, 2024

A Houston Oil Giant Is Pioneering a New Climate Technology. It’s a Costly Gamble

Houston Chronicle | Amanda Drane | Oct. 29, 2024

A first of its kind facility is taking shape in West Texas, as Houston-based Occidental Petroleum puts the finishing touches on “Stratos,” a project which aims to start sucking climate-warming carbon dioxide from the air and storing it underground next spring.

The project is part of a global race to engineer a way out of a climate crisis by removing carbon dioxide from the atmosphere. Driving the effort are tax credits included in the Biden administration’s Inflation Reduction Act, as well as growing demand from big tech companies such as Google and Microsoft, which are searching for ways to offset their growing carbon footprints. 

Stratos would be the first large-scale facility to remove carbon dioxide directly from the air, taking technology proven in pilot plants and expanding it into a facility that aims to capture 500,000 metric tons of carbon dioxide from the West Texas air per year. The oil giant, a leader in the emerging industry, says it aims to build dozens of such facilities in the coming years.

Oxy is first in line to receive permits for a new class of disposal well designed for long-term storage of the carbon dioxide in underground rock formations.

A lot is riding on the company's success, as it aims to prove that the technology works, that the company can make money from it and that it’s safe.

Richard Jackson, Oxy’s president of onshore resources and carbon management operations, said the company has decades of experience handling carbon dioxide, which helped inform the Environmental Protection Agency’s regulations for the new industry. Oxy’s experience injecting carbon dioxide to stimulate oil production also helped it recognize and seize the opportunity in the carbon capture space, he said. 

“We probably had a unique view early on what this could be, so that helped give us confidence to move quickly,” Jackson said.

Stratos aims to tap a new federal tax credit of $180 per metric ton of carbon dioxide that is captured and stored. Tech and utility companies such as Microsoft and AT&T are also supporting the project by buying carbon removal credits from Stratos — private-sector credits that help buyers offset their own emissions and achieve their net-zero goals by supporting carbon removal.

Microsoft agreed in July to buy 500,000 metric tons’ worth of credits from the facility. The financial terms of the deal were not disclosed. 

Carbon dioxide removal credits are typically worth between $500 and $1,100 per metric ton, said Brad Johnston, a geologist and research analyst for Enverus. This market “is really what’s driving” direct air capture projects like Stratos, he said. 

A 'first mover'

It pays to be a pioneer, said Mhairidh Evans, who leads Wood Mackenzie’s research on the emerging carbon capture industry. Oxy has “a real first mover advantage,” as big tech companies grow more interested in buying removal credits.

“Stratos, as a project, will have a lot of eyes on it, because it really is that first large-scale, commercial scale, direct air capture project,” said Evans. “It's one of those technologies that people are watching because of the promise.”

The budding industry is an opportunity for Houston, too, as the oil and gas industry employs fewer and fewer people in the region, said Jane Stricker, the Greater Houston Partnership's senior vice president of energy transition and executive director of the Houston Energy Transition Initiative. Carbon capture projects require electricians, engineers, pipe fitters and welders that have traditionally worked in the oil and gas industry.

“The growth of these new industries like direct air capture, like carbon capture, like hydrogen and others, allow us to pivot really great engineering talent and workforce talent into new roles,” she said, “and really creates a more seamless transition impact here in the Houston market.”

Oxy’s finished facility in Ector County would employ about 120 people after it launches, but Stricker said the potential for years-long construction of a series of projects could have a larger impact on the region’s workforce. 

Equipment hummed during a site tour earlier this month, as 1,200 builders from around the Gulf Coast worked on the facility.

Onsite safety manager Paul “PJ” Jolicoeur said he’s spent his career working to build oil and gas projects. This is different, he said,” because “this is going to clean the air and make it better.”

Making it work

While much of the carbon capture work being done involves capturing climate-warming gas coming from smokestacks — avoiding industrial emissions at their source — Stratos is different because it would remove the climate-warming gas that is already in the air, making it appealing for Microsoft and other big companies looking for removal technologies that can offset their own carbon footprints. 

But Oxy faces an uphill battle with the high cost associated with the process.The concentration of carbon dioxide in the air is so low and the power needed to run these facilities is so high that it raises questions about the facility’s financial feasibility.

“That's why only a relatively small handful of players are actually developing out these projects,” Evans said.

Evans said it helps that Oxy is partnering with Worley, the engineering and construction firm building the facility, to share the risk and focus on bringing costs down. 

Worley is not only working side by side with Oxy on construction, but also is working with Oxy on its technology team, the companies said. That team is looking for “low-hanging fruit” that could help bring the capture costs down at future facilities, said Christine Irvin, Oxy’s director of low carbon ventures.

“The opportunity to bring the unit cost down as we scale and go forward – that's where there's real opportunity,” said Worley CEO Chris Ashton.

There are risks, too, with ensuring the gas will stay in place once injected underground and that it won’t migrate underground, as it did recently during one of the first carbon storage wells in Illinois. The Oxy project is also being built in West Texas at a time when the region faces a rash of earthquakes and saltwater blowouts related to the injection of oil field wastewater, raising questions about whether carbon dioxide could similarly find pathways to the surface. 

For this reason, Virginia Palacios, executive director of the regulatory advocacy nonprofit Commission Shift, said the effort to store more waste underground “seems like more risk than reward.”