Carbon Engineering's direct air capture pilot plant is seen in an aerial view, in Squamish, B.C., on January 26, 2023.DARRYL DYCK/The Globe and Mail
Occidental Petroleum Corp. OXY-N is buying Canadian clean-tech developer Carbon Engineering Ltd. for US$1.1-billion, a deal the oil company said will accelerate development of facilities that remove large volumes of carbon dioxide from the atmosphere.
Houston-based Occidental subsidiary 1PointFive is employing Carbon Engineering’s technology at a direct-air-capture (DAC) plant it is building in West Texas, designed to remove one million tonnes a year of CO2. Last week, the partners were awarded U.S. federal funding to embark on their next project, a carbon-capture hub near Corpus Christi, Tex., that could eventually be 30 times the size of the first one.
Rather than stripping climate-warming greenhouse gases from a refinery or power-plant smokestacks, the technology involves extracting ambient air with the aid of fans and isolating the CO2 in a chemical process so it can be injected deep into the ground or used as a feedstock for sustainable fuels.
“We expect the acquisition of Carbon Engineering to deliver our shareholders value through an improved drive for technology innovation and accelerated DAC cost reductions,” Occidental chief executive officer Vicki Hollub said in a statement. “The technology partnership also adds new revenue streams in the form of technology licensing and royalties.”
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Occidental’s acquisition of Squamish, B.C.-based Carbon Engineering represents the latest in a string of acquisitions of Canadian technology and clean-tech companies by U.S. and other foreign players once they show their products and services can make the leap to commerciality. The two companies have been partners since 2019.
Both have touted the attractiveness of U.S. incentives offered by the administration of President Joe Biden, including the Inflation Reduction Act, which offers US$369-billion of incentives for clean energy and other green technology. Their next major project has won financing under the U.S. Infrastructure Act.
Meanwhile, many planned Canadian carbon-capture projects remain in limbo as investors worry that tax credits offered by Ottawa do not address the need for a predictable carbon price in future years.
Carbon Engineering was founded by Ottawa-raised physicist David Keith, who is a professor and faculty director at the University of Chicago, and focuses on climate science. The company won early backing from well-known billionaires including Microsoft co-founder Bill Gates and Canadian energy and sports financier Murray Edwards. Occidental’s Oxy Low-Carbon Ventures invested in the company.
Other investors include Air Canada, Airbus SE, BHP Group, Chevron Corp. and Occidental, as well as Canadian billionaire Peter J. Thomson.
Daniel Friedmann, Carbon Engineering’s CEO, said the transaction represents an expansion of the company’s strategic relationship with Occidental. With revenue still a few years away for Carbon Engineering, Occidental has committed to investing in its technology in Canada to accelerate deployment in the U.S. and around the world, he said.
“This is an important step for our company – which includes approximately 150 employees – as it will enable us to accelerate our mission to lead the world in the large-scale removal of carbon dioxide from the air and help advance our shift to a sustainable, net zero society,” Mr. Friedmann said in a statement. “This transaction will dramatically enhance our ability to continue developing the technology through to widespread commercialization.”
Carbon Engineering is fine-tuning its concept at its research and development facility in Squamish, north of Vancouver. This design allows direct-air-capture plants to be built just about anywhere there’s available land, ample renewable energy to run the gear and geology suited to trapping CO2.
The partners started construction on the first large-scale plant, called Stratos, last year. It is expected to cost at least US$1-billion. Airbus, Thermo Fisher Scientific Inc., Shopify Inc., Bank of Montreal and the NFL’s Houston Texans are among organizations that have purchased carbon removal credits.
Last week, the partners got a major boost when the U.S. Department of Energy awarded US$1.2-billion for two DAC hubs. One is the 1PointFive plan for King Ranch in Kleberg County, Tex. The other is proposed for Louisiana by Swiss-based competitor Climeworks AG.
The 1PointFive project would remove up to 30 million tonnes of CO2 a year and its development cost has been pegged at US$30-billion.
Occidental said its payment to acquire Carbon Engineering will be made in three annual tranches, with the first upon closing of the deal later this year, subject to Canadian court reviews, and regulatory approvals in Canada and the United States.
Upon closing, Carbon Engineering would become a wholly owned subsidiary of Oxy Low Carbon Ventures. Occidental said Carbon Engineering’s employees will keep working on technology development, and the company will maintain its research and innovation facility in Squamish.
Jeffrey Jones