BlackRock Inc. has announced a $550 million investment in Occidental Petroleum’s STRATOS, the world’s largest Direct Air Capture (DAC) plant currently being constructed in Ector County, Texas. Through a joint venture with Occidental’s subsidiary 1PointFive, BlackRock will own a stake in STRATOS, signaling increasing investor confidence in the emerging DAC technology. Occidental CEO Vicki Hollub stated that this partnership demonstrates that direct air capture is becoming an investable technology, emphasizing the importance and potential of DAC for the world. Following the announcement, Occidental shares rose by 1.7%.
This significant investment by BlackRock follows recent developments in the field and Occidental’s acquisition of DAC company Carbon Engineering for over $1 billion. The investment accounts for approximately 40% of the total cost of the $1.3 billion DAC project, making it one of the largest investments in carbon capture technology to date. By reducing Occidental’s share of the cost, the company can allocate more capital to its oil and gas operations. DAC technology involves extracting carbon dioxide from the air and either storing it underground or utilizing it in the production of various products such as concrete and aviation fuel. Both Occidental and ExxonMobil anticipate that DAC could become a multi-trillion-dollar market by 2050 as costs decrease with scale. STRATOS has the capacity to capture 500,000 tons of carbon dioxide annually, equivalent to the carbon emissions produced by 1 million barrels of oil. This makes the project eligible for generating carbon removal credits, which are in high demand as the world aims to achieve net-zero emissions by 2050.
Numerous corporate buyers, including Amazon and Airbus SE, have already committed to purchasing carbon removal credits from 1PointFive to offset their emissions. Recently, TD Bank Group made a historic deal in the finance industry by purchasing 27,500 carbon removal credits from 1PointFive. The STRATOS plant is expected to begin operations in 2025 and is currently 30% complete. As the first large-scale DAC plant of its kind, it serves as a test for a technology that will play a crucial role in decarbonizing global industries, according to the International Energy Agency. The U.S. government has also recognized DAC as a solution to reduce carbon emissions and has allocated $1.2 billion in funding for two DAC projects, including STRATOS. Occidental aims to generate revenue from the project by selling captured CO2 at a price ranging from $580 to $810 per ton, with $180 coming from tax incentives provided by the Inflation Reduction Act. Although project costs currently range from $400 to $500 per ton, they are expected to decrease as more DAC facilities become operational. Occidental also anticipates a rise in demand for carbon removal credits, particularly from airline operators seeking to neutralize their emissions, as they are considered more cost-effective than sustainable aviation fuels (SAF).
The joint venture between 1PointFive and BlackRock represents a significant investment by the latter in Texas. BlackRock, the world’s largest asset manager, has faced criticism in recent years for its support of environmental, social, and governance (ESG) and sustainable investment funds. Lawmakers in the state have accused the company of boycotting the oil and gas industry and have taken measures to limit investments in BlackRock shares and funds by state and local agencies. However, BlackRock has emphasized that its clients have invested over $300 billion in Texas. The company expressed its appreciation for working with Occidental to develop the world’s largest DAC facility, with CEO Larry Fink noting that Occidental’s expertise can greatly scale decarbonization technology. The construction and operation of the DAC facility will create employment opportunities for over 1,000 people, highlighting the role of energy companies in climate technology innovation, according to Fink. While opponents have raised concerns about the potential use of DAC technology to increase crude oil production in old reservoirs, BlackRock believes that companies investing in technologies like Occidental’s DAC will succeed in the coming decades. The substantial investment in STRATOS reflects the growing confidence in DAC technology and its potential to revolutionize carbon capture and contribute to global decarbonization efforts.