By Sabrina Valle and Ruhi Soni
HOUSTON (Reuters) -U.S. oil producer Occidental Petroleum Corp increased by about 22% the estimated investment for the world’s largest direct air capture project due to inflation, Chief Executive Officer Vicki Hollub said on Wednesday.
The Houston-based company expects to spend $1.1 billion in the project, from $800 million and $1 billion before, “given the inflationary pressures felt across the economy, especially for construction materials and labor,” Hollub told analysts in a webcast to discuss the company’s third-quarter results.
The project, whose construction started in Ector County, Texas, in September, has been suffering delays. Start-up is now planned for late 2024.
Occidental is aiming to build a profitable business from providing services and technologies that pull CO2 out of the air and burying it underground to advance government and business climate mitigation goals.
The company bets the world will need oil for decades to come and that climate goals will only be achieved if CO2 emissions are not only reduced, but also actively removed from the air.
But the project will be a cash drain for investors until the technology gains commerciality – and the time estimate for it is unclear.
Occidental’s DAC plant progress is closely watched by the oil industry for its scale. It has a goal of removing up to 1 million tonnes of CO2 from the atmosphere per year – 100 times more than all 18 DAC plants currently operating worldwide combined, according to the International Energy Agency.
It plans a total of 70 DAC facilities worldwide by 2035.
“It’s not as well recognized yet. But when the world realizes how much the transition will cost, I do believe that this will become the preferred option to ensure that we can continue the production of low carbon fuel for those that need it,” Hollub said.
Shares plumbed as much as 9% following the call to discuss its quarterly results, which slightly missed Wall Street estimates. Shares of energy firms were down across the industry.
Occidental’s shares have more than doubled this year. It attracted the interest of Warren Buffett’s Berkshire Hathaway Inc, now Occidental’s largest shareholder, with a 20.9% stake.
The company has been using the cash from high oil prices <CLc1> to pay down debt and plans to reduce it to $18 billion until the end of the year, exceeding its previous target by $2 billion.
Starting next year, the company will “have significantly more capital available” which Hollub said “will be allocated mostly” to shares buybacks.
(Reporting by Sabrina Valle in Houston, and Ruhi Soni in Bengaluru; Editing by Chris Reese and Lisa Shumaker)
