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Oxy unit delivers first shipment of CO2-neutral oil to India

02 February 2021 Kevin Adler

Oxy Low Carbon Ventures (OLCV) delivered on 28 January the world's first shipment of carbon-neutral oil to India's Reliance Industries, the company said.

Carbon offset credits displaced the greenhouse gas (GHG) emissions for the 2 million barrels of oil of crude sourced from the Permian Basin in Texas. The credits covered the expected GHG emissions from the entire crude life cycle, about 860,000 metric tons, which starts at the wellhead and ends at combustion, the company said.

The carbon offsets purchase was arranged in conjunction with Macquarie, which structured the bundled offset credits' supply and retirement. Macquarie did not comment on the number of offset credits, cost of credits, or the types of offset projects involved.

OLCV said it expects to be offering "net-zero [carbon] oil" to most or all of its customers in 2024.

The term "net-zero oil" is defined by the company as "Occidental-produced oil through the abatement of atmospheric carbon dioxide in an amount equivalent to the carbon dioxide associated with the production, delivery and refining of the crude oil and the use of the resulting product." International oil company Occidental Petroleum is the parent company of Oxy Low Carbon Ventures.

Demand to reduce GHG emissions in the energy industry could change the competitive framework for oil and natural gas, said Kevin Birn, IHS Markit's vice president of North American crude oil markets. "There is increasing pressure from financials, regulators, and other key stakeholders on oil and gas companies to reduce their emissions and ultimately compete on carbon," Birn said. "This announcement by Oxy is interesting as it may be the first of many as producers seek to differentiate their products by emissions."

OLCV said the credits were sourced from a variety of projects certified under the Verra Verified Carbon Standard (VCS). Since its launch in 2006, the VCS program has registered more than 1,600 projects in 82 countries and generated more than 300 million mt (Mt) of carbon credits.

The project also met the eligibility criteria for the UN's International Civil Aviation Organization's Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA).

"The CORSIA scheme will be one factor driving an increase in demand for offset credits over the next decade," said Helen Bowdren, partner in the London office of international law firm Denton's. "It is clear that offsets sourced from projects registered under voluntary standards will be an important part of delivering on net-zero commitments for many companies and nations. This market will be under increased scrutiny in terms of transparency, and it will be critical to ensure that all market participants can have confidence in the market."

Occidental's carbon commitment

The crude shipment to India is the latest in a series of carbon-reduction ventures and commitments by Occidental Petroleum and OLCV.

In December 2020, Occidental announced targets of net-zero emissions for its own operations by 2040 and for the downstream processing and use of its products by 2050, the latter being known as "Scope 3" emissions. "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," Richard Jackson, OLCV president, said in the 28 January announcement.

The company aims to reach its net-zero target in part through offsets from carbon capture and sequestration (CCS) technologies via industrial-scale direct air capture facilities and geological sequestration. OCLV holds the first two CCS monitoring, reporting, and verification sites that the US Environmental Protection Agency approved for geologic sequestration through enhanced oil recovery production. The company processes, transports, and stores approximately 20 Mt of CO2 annually in its operations.

Also, in December 2020, OLCV was awarded a contract to provide CCS services for Project Tundra, an initiative led by Minnkota Power Cooperative to build the world's largest carbon capture facility at the coal-fired Milton R. Young Station power plant near Center, North Dakota.

"In preparation for the potential start of construction in early 2022, Minnkota is conducting comprehensive front-end engineering and design studies, partly funded with grants from the US Department of Energy and the North Dakota Industrial Commission," OLCV said in a statement. "Oxy Low Carbon Ventures will advise on the CO2 storage portion of the project, including transportation and secure geologic sequestration, in collaboration with the University of North Dakota's Energy and Environmental Research Center."

Based on original reporting by Jeremy Rakes, OPIS.

Posted 02 February 2021 by Kevin Adler, Editor, Climate & Sustainability Group, IHS Markit

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