Buffett-backed Occidental Petroleum buys carbon air capture tech firm for $1.5 billion

NEW YORK – Warren Buffett-backed Occidental Petroleum Corp agreed to buy Canadian start-up Carbon Engineering Ltd for US$1.1 billion (S$1.5 billion) as the oil producer expands its position as a leader in removing carbon dioxide from the atmosphere. 

Occidental will pay in cash and expects the deal to close before the end of 2023, pending regulatory approvals, the Houston-based company said on Tuesday. The US oil producer aims to build about 100 plants using direct air capture (DAC) technology. It has partnered with Carbon Engineering for the last four years, using its technology for its West Texas-based Stratos project, set to be the world’s largest DAC plant by 2025. 

“We expect the acquisition of Carbon Engineering to deliver our shareholders value through an improved drive for technology innovation and accelerated DAC cost reductions,” chief executive officer Vicki Hollub said in the statement. 

Mr Buffett praised Ms Hollub for her stewardship of Occidental earlier in 2023 and recently raised his firm’s stake to 25 per cent, making Berkshire Hathaway the company’s largest shareholder.

Real momentum is now building behind carbon capture and sequestration, one of Big Oil’s favoured climate solutions, after the companies posted record profits in 2022 and won generous tax incentives for the technology through the Inflation Reduction Act. The buyout is the second Big Oil carbon capture and sequestration deal in recent weeks. Exxon Mobil Corp agreed to buy CO2 pipeline operator Denbury Inc in July for US$4.9 billion. 

In addition to Stratos, Occidental plans to use Carbon Engineering’s technology in its King Ranch DAC hub planned for south Texas, which last week won financial backing from the Department of Energy. 

Last Friday, the Department of Energy announced sites in Texas and Louisiana will get over US$1 billion in federal grants. Some of that money will fund Occidental’s 30 proposed DAC plants in Kleberg Country, Texas.

The two sites will be the first funded by a US$3.5 billion authorisation for regional DAC hubs funded by Congress from the bipartisan infrastructure Bill.

Carbon Engineering was founded in Calgary by Harvard University Professor David Keith, who pioneered methods of removing large volumes of CO2 directly from the air, allowing it to be either buried underground or used for a variety of industrial purposes. Early investors included Bill Gates, Chevron Corp, BHP Group Ltd, Occidental and several family offices. BLOOMBERG, REUTERS