Oxy Acquires Carbon Engineering for $1.1B
US energy giant Occidental has bought DAC carbon removal tech provider Carbon Engineering for USD 1.1 billion.
Occidental Petroleum, a U.S. oil and gas producer, recently agreed to pay $1.1 billion to technology provider Carbon Engineering Ltd to assist it in the development of a number of carbon-capture sites it expects will benefit from combating climate change.
The American oil company plans to construct roughly 100 units utilising direct air capture (DAC) technology, which removes carbon dioxide (CO2) from the atmosphere for burying underground or use in the production of goods like concrete and jet fuel.
The DAC technology is still in the early phases of commercialisation and will need billions of dollars in investments to demonstrate its viability and ability to make money.
"This is not a huge deal for Occidental, but we think it adds to near-term leverage and heightens concerns over cash burn at (Occidental's) Low Carbon Ventures division," Roth MKM brokerage firm said in a note.
The payments will be made in three roughly similar annual instalments, the first of which is due at closing, which is anticipated to occur by the end of 2023, according to the firm.
It is a greenhouse gas, carbon dioxide. In the event that DAC technology can be made commercially viable and used on an industrial scale, the administration of President Joe Biden sees it as a tool to help achieve the objective of neutralising emissions by 2050.
While DAC actively removes CO2 from the air, carbon capture is used to treat pollutants produced by industrial sites.
The U.S. Department of Energy announced last Friday that locations in Texas and Louisiana will receive more than $1 billion in government awards. Some of that cash will go towards the 30 DAC plants that Occidental plans to build in Kleberg Country, Texas.
The two locations will get the first $3.5 billion in funding from a bipartisan infrastructure plan authorised by Congress for regional DAC centres. According to Occidental, Carbon Engineering has been collaborating on DAC implementation since 2019.
"The acquisition enables Occidental to catalyze broader development partnerships for DAC deployment in the most capital-efficient and valuable way," said Occidental CEO Vicki Hollub.
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