Occidental Petroleum is making a big play on selling Carbon Dioxide Credits to companies and has pre sold such credits to Shopify, Airbus and BMO Financial. As governments step up and implement “climate change” policies companies will be looking for ways to offset their carbon imprint. Occidental Petroleum, (with the largest shareholder being Warren Buffet’s Berkshire Hathaway Fund as the largest shareholder) plans to build 135 plants by 2035 that will utilize Direct Air Capture to pull CO2 out of the air and store carbon underground and to sell the credits to others and to offset their carbon imprint of their operations.
By combining California credits and with credit from the Inflation Reduction Act signed last year, the initial investment of plants will be offset significantly. The Inflation Reduction Act will reward Carbon Capture with a $180 tax credit per metric ton of carbon captured and stored and this will be paid for 12 years. Occidental Petroleum forecasts they can generate $400 to $630 in revenue per metric ton of atmospheric CO2 captured this decade. In the beginning it could cost $400 – $500 to remove a metric ton of CO2 but Occidental suggests that cost to go down to $200 -$250 a ton by the end of the decade due to the number of plants build sharing burden of the expenses.
Occidental Petroleum is investing over $1billion USD to build air capture plants and has already leased 400 square miles to store CO2 underground. One of the big questions remaining is how to power the plants in a climate friendly manner and not contribute more to green house gases CO2 in the process? This remains to be seen.
Currently 18 direct air capture plants exist operated by a Swiss Company called Climeworks. It is noted that they are paid about $1200 per metric ton for the carbon credits to small and medium companies.
Occidental Petroleum expects this carbon credit sector to be a real revenue builder for the company and forecasts it will surpass the chemical division it currently has ($6.5 billion revenue 2022) and by 2050 the company can reach net zero emissions.
This business model suggests that Occidental Petroleum is positioning itself to offset the worry of the political global climate change rules with a way to make money and it could insulate it from being prevented totally from drilling oil by offsetting both carbon credits it can use and can sell to others. Pretty smart idea in my opinion.
