Why Persian Gulf exporters are well positioned to drive carbon-negative oil
How can extracting a barrel of oil be good for the environment? We are hearing more and more about net zero carbon oil production. But integrating oil production into an atmospheric carbon dioxide reduction system seems somewhere between miracle, alchemy and fraud.
CO2 gas, the main contributor to climate change, is a hero when it comes to improving oil recovery. When injected into underground reservoirs, under the right conditions, it mixes with oil and releases molecules that were stuck in tiny pores in the rock.
This increases the share of oil in the ground that can be recovered from around 40% to 60%, which in a country like the United Arab Emirates could amount to tens of billions of additional barrels.
One ton of injected carbon dioxide can release about three barrels of oil. When burned, this oil will produce approximately 1.2 tons of carbon dioxide. It’s already better than conventional oil, but if the process is optimized to store more CO2, it could become net negative.
This process is widely used in North America and in operating projects in Abu Dhabi and Saudi Arabia. So far, most of them use natural CO2 from underground reservoirs or, as in the case of Adnoc’s Al Reyadah plant, CO2 captured from industrial facilities.
In early October, America’s largest oil company, ExxonMobil, is reportedly in talks to buy Denbury Resources, a Texas-based specialist in using CO2 for enhanced oil recovery, whose current market value is around $4.9 billion. dollars.
Using CO2 that would otherwise be released into the atmosphere is a good start. But for net negative oil production, we have to take the CO2 straight out of the atmosphere and inject it underground.
The most ambitious plan of this type is that of Occidental Petroleum (Oxy), the American company which also operates in the United Arab Emirates, Qatar and Oman, and its managing director Vicki Hollub.
On Nov. 29, Oxy will begin construction of the world’s largest direct air capture plant, in the Permian Basin of Texas, at a cost of $1 billion, and will be partially solar-powered.
This will use Carbon Engineering technology to extract CO2 from the atmosphere and inject it underground, partly to improve oil recovery, partly for permanent storage.
Eventually, the company intends to build 75 such facilities. Their economic attractiveness has improved significantly recently, partly due to rising oil prices, partly due to the emergence of buyers willing to pay a premium for carbon-neutral oil or storage to offset their emissions, and partly because of new financial incentives.
The US Inflation Reduction Act, passed in August, offers a tax credit of $60 per tonne of CO2 sequestered in oilfields and a more generous credit of $130 per tonne for the use of CO2 captured from the atmosphere . California’s low-carbon fuel standard currently pays about $200 a ton, which is in addition to other credits.
Today, direct air capture costs are estimated at $250-600 per ton, but there are reasonable medium-term aspirations to bring them down to $150-200 per ton as technology and experience improve. Public figures released on Oxy’s project suggest it’s doable.
So why do we need carbon negative oil?
The oil industry will continue to be necessary and important for decades to come. In the outlook just released by the International Energy Agency (IEA), oil demand in 2050 ranges from 57 million barrels per day based on current government commitments to 22.8 million bpd in a net zero scenario.
The Adipec conference, which opened today in Abu Dhabi, sees carbon capture and removal as crucial elements of a smooth energy and climate transition.
Yet oil companies are struggling with their carbon footprint. So-called Scope 1 and Scope 2 emissions come from the oil extraction process itself – such as the energy needed to run pumps and drilling rigs and to refine crude oil into useful products. The industry has plans to eliminate its operational emissions, with several large companies having set a target for 2050.
But reducing Scope 3 emissions – those released when oil or gas is burned – is much more difficult. Many oil companies simply say that it is not their responsibility, but that of their customers.
Yet some companies are realizing that marketing net zero or even net negative oil and gas can be a winning proposition.
Microsoft, CocaCola, Apple, BMW and a host of other big companies have carbon neutral or even carbon negative goals.
Early last month, the International Civil Aviation Organization adopted a net-zero goal for 2050, but zero-carbon fuels or long-range electric jetliners are unlikely to exist in sufficient volumes, even by then.
Even in the IEA’s global net zero scenario, production from existing fields without new investment will decline faster than demand. This will lead to a growing gap.
“The countries that will make up for this difference should be Saudi Arabia, the United Arab Emirates and the United States,” Ms Hollub said.
Indeed, the open, sunny, windy, and oil-rich deserts of the Middle East offer tremendous opportunities for large-scale deployment of such direct air capture and enhanced oil recovery systems. This allows them to fully and responsibly use their hydrocarbons, facilitate the transition to a new energy system and become a central pillar of climate action.
Oxy believes its carbon capture revenues will match those of oil and gas – a plausible ambition for Persian Gulf oil exporters as well. With such perks and benefits, the $1 billion cost for something like the Texas plant looks like a cheap investment. It’s time for carbon negative oil to get out of the Gulf.
Robin M. Mills is CEO of Qamar Energy and author of The myth of the oil crisis
Updated: October 31, 2022, 3:30 a.m.