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Occidental to buy direct air capture startup Carbon Engineering for $1.1B

Illustration of a cardboard box full of carbon molecule with more falling from above.

Illustration: Aïda Amer/Axios

Occidental agreed to acquire direct air capture startup Carbon Engineering for $1.1 billion, in a deal announced late yesterday.

Why it's the BFD: The move is a major validation for the direct air capture industry and shows how oil companies see value in removing and capturing carbon dioxide.

Details: Occidental said that the cash payments deal would be delivered in three equivalent annual amounts. The transaction is supposed to close before the end of 2023.

  • Upon closing, Carbon Engineering, based in British Columbia, will be a wholly owned subsidiary of Occidental's investing subsidiary — Oxy Low Carbon Ventures.

Catch up fast: Carbon Engineering, founded by Harvard Professor David Keith in 2009, has developed a system that uses a series of chemical reactions to extract carbon dioxide directly from atmospheric air.

  • The company has been working with Occidental since 2019 and is working with Occidental's project developer subsidiary, 1PointFive, on deploying projects.
  • Occidental has been the most aggressive oil company when it comes to DAC.
  • Last week the Department of Energy announced $1.2 billion in funding for two consortiums to build commercial-scale DAC "hubs." Occidental leads one of them and Battelle, in coordination with Climeworks and Heirloom Carbon Technologies, leads the other.

Big picture: Despite the emerging nature of direct air capture technology, big oil is becoming increasingly DAC-curious.

  • Chevron is receiving $3 million to help explore feasibility of a DAC project in California. Chevron's venture arm was also an investor in Carbon Engineering.
  • Shell is building a DAC demo facility in Houston, with planned startup in 2025.

Of note: Exxon said last month that it plans to acquire Denbury, which captures industrial carbon and operates CO2 pipelines, in a $4.9 billion deal.

  • Oil companies are starting to see a growing value in managing carbon dioxide. CO2 can also be used for enhanced oil recovery, making building materials, and even a sustainable aviation fuel.

Yes, but: DAC is still an emerging sector and its costs need to come down significantly for it to be scaled up economically.

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