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Oxy subsidiary gets $550M boost to form new CCUS joint venture

Oxy, which broke ground on its DAC project Stratos earlier this year, has secured a $550 million commitment from a financial partner. Photo via 1pointfive.com

Occidental Petroleum’s direct air capture (DAC) initiative just got a more than half-a-billion-dollar investment from Blackrock, the world’s largest asset management company.

Houston-based Occidental announced November 7 that on behalf of its investment clients, BlackRock has agreed to pump $550 million into the DAC facility, called Stratos, that Oxy is building in the Midland-Odessa area. The investment will be carried out through a joint venture between BlackRock and Oxy subsidiary 1PointFive, which specializes in carbon capture, utilization, and sequestration (CCUS).

A groundbreaking ceremony for Stratos — being billed as the world’s largest DAC operation — was held in April 2023. Construction is scheduled to be completed in mid-2025. The facility is expected to capture up to 500,000 metric tons of carbon dioxide each year.

Among the organizations that have agreed to buy carbon removal credits from 1Point5 are Amazon, Airbus, All Nippon Airways, TD Bank, the Houston Astros, and the Houston Texans.

Occidental says 1PointFive plans to set up more than 100 DAC facilities worldwide by 2035.

Vicki Hollub, president and CEO of Oxy, says the joint venture with BlackRock demonstrates that DAC is “becoming an investable technology.”

“We believe that BlackRock’s expertise across global markets and industries makes them the ideal partner to help further industrial-scale [DAC],” she says.

DAC removes CO2 from the atmosphere then stores it in underground geological formations.

“Occidental’s technical expertise brings unprecedented scale to this cutting-edge decarbonization technology,” says Larry Fink, chairman and CEO of BlackRock.

He adds that Stratos “represents an incredible investment opportunity for BlackRock’s clients to invest in this unique energy infrastructure project and underscores the critical role of American energy companies in climate technology innovation.”

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A View From HETI

Yara North America is growing its Texas footprint. Photo courtesy Yara International

Yara North America, a subsidiary of Norwegian fertilizer and ammonia producer Yara International, has agreed to buy an ammonia production plant in Texas City for $1.3 billion.

The seller is GCA Holdings, an affiliate of Texas City-based chemical manufacturer Gulf Coast Ammonia, which is owned by private equity firms Lotus Infrastructure Partners and MB Energy.

The Texas City plant, with an eventual annual capacity of 1.3 million metric tons, is expected to start full production by the end of this year. Yara says the ammonia produced by the plant will serve its own fertilizer production system and its key customers.

During a recent call with analysts and investors, Magnus Ankarstrand, executive vice president and CFO of Yara International, said the plant holds the potential to become one of the company’s most profitable plants. The $1.3 billion purchase price, he added, “is a very attractive entry ticket to ammonia production in the U.S. at a very attractive cost.”

The Texas City plant will add to Yara’s holdings in the Lone Star State, as Yara is the majority owner of an ammonia, hydrogen and nitrogen production plant in Freeport.

Construction of the ammonia plant began in 2020, but technical and infrastructure issues delayed the project. On its website, Gulf Coast Ammonia says the plant represented a $600 million investment.

“Gulf Coast Ammonia is a world-class asset that required disciplined execution across development, financing, construction, and commercial structuring,” Philipp Pletka, managing director of Lotus Infrastructure Partners, says in a news release.

Trexlertown, Pennsylvania-based Air Products, which owns and operates the country’s largest hydrogen pipeline network, will continue to supply hydrogen and nitrogen for the plant under a long-term deal with Yara, according to the release.

However, the news comes two days after Yara International announced that it would no longer be purchasing ammonia assets in the Louisiana Clean Energy Complex (LCEC) from Air Products. In a separate release, Yara said it planned to reallocate funds toward "alternative mature U.S. ammonia investment opportunities with more competitive returns."

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