Oxy Low Carbon Ventures (OLCV), a division of Occidental announced the delivery of two million barrels of carbon-neutral oil to Reliance Industries in India. This transaction, which was arranged in conjunction with Macquarie Group’s Commodities and Global Markets group (Macquarie), is the energy industry’s first major petroleum shipment for which greenhouse gas (GHG) emissions associated with the entire crude lifecycle, well head through combustion of end products, have been offset.
The term “carbon-neutral oil” indicates that Oxy Low Carbon Ventures and Macquarie have engaged in a structured transaction that results in the offset of an amount of carbon dioxide equivalent to that associated with the production, delivery and refining of the crude oil and the use of the resulting product through the retirement of carbon offset credits.
This transaction is a first step in the creation of a new market for climate-differentiated crude oil. It is also a bridge to the development of a further differentiated petroleum product, net-zero oil, which Occidental intends to eventually produce through the capture and sequestration of atmospheric CO2 via industrial-scale direct air capture (DAC) facilities and geological sequestration. The transaction is an example of Macquarie’s commitment to innovation in the environmental products space and to being a leader in energy transition.
The oil was produced in the U.S. Permian Basin by Occidental and delivered to Reliance in India. Macquarie arranged and structured the bundled offset supply and retirement. The offsets were sourced from a variety of projects verified under the Verra Verified Carbon Standard meeting eligibility criteria for the UN’s International Civil Aviation Organization’s Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA). The volume of offsets applied against the cargo are sufficient to cover the expected GHG emissions from the entire crude lifecycle including oil extraction, transport, storage, shipping, refining, subsequent use, and combustion.
This type of transaction, which involves the bundling of high-quality carbon offsets with crude oil, is an immediate executable solution that helps promote investments in longer-term, industrial-scale decarbonization strategies. It is also a step in the furtherance of Occidental’s net-zero ambitions and commitment to addressing climate change today.
Occidental, the first U.S. based international energy company to announce an ambition to achieve net-zero GHG emissions associated with the use of its products by 2050, has been using carbon-dioxide in its enhanced oil recovery operations in the Permian for over 40 years. During this time, it has developed market-leading expertise in carbon capture, utilization and storage (CCUS). In 2019, OLCV made an investment in Carbon Engineering’s Direct Air Capture (DAC) technology and announced plans, through its development company 1PointFive, to proceed with engineering the world’s largest DAC and sequestration plant. This project will utilize Occidental’s existing Permian Basin enhanced oil recovery infrastructure and its market-leading carbon management expertise to permanently sequester captured atmospheric carbon-dioxide. OLCV expects net-zero oil from DAC to be available to customers in 2024.
The two companies also recognize that technology will play an important role in decarbonization of the industry. Occidental and Macquarie both invested last year in Xpansiv, a technology-based environmental commodities platform and exchange, which was leveraged in this transaction. At the same time, Occidental is working with Carbon Finance Labs who has supported this transaction and is developing a differentiated, distributed ledger-based carbon accounting platform for tracking end-to-end lifecycle carbon emissions through commodities supply chains.
“We are taking important initial steps to work with our customers in hard-to-decarbonize industries to offer carbon-neutral and other low-carbon products that will leverage our expertise in carbon management to lower their total carbon impact and address Scope 3 emissions,” said Richard Jackson, President Oxy Low Carbon Ventures.
“Macquarie is delighted to have worked with Occidental in developing this innovative solution. We look forward to continued collaboration with the company on realizing their ambitious carbon-neutral goals.” said Ozzie Pagan, Senior Managing Director for Macquarie in the Americas. “Macquarie is working to lead the energy transition through innovation and investments focused on advancing de-carbonization. We seek to develop, along with our clients, actionable strategies today and sustainable innovations for the future.”