BlackRock’s Investing $550 Million In Occidental’s Carbon-Capture Project

BlackRock’s Investing $550 Million In Occidental’s Carbon-Capture Project
Stéphane Renevier, CFA

4 months ago2 mins

Mentioned in story

What’s going on here?

BlackRock announced plans to invest $550 million in Occidental Petroleum's controversial carbon-capture project.

What does this mean?

Occidental’s ambitious Stratos project is one for the science buffs, aiming to become the world’s go-to facility for “direct air capture” (DAC). That’s a revolutionary technology that extracts carbon dioxide from the atmosphere, before using it to make building materials, agricultural products, and fuel. Stratos should start operating commercially in 2025, and has already attracted buy-ins from heavyweights Amazon and Airbus. And with goals to neutralize the carbon equivalent of one million barrels of oil a year, the project could play a part in the International Energy Agency’s net-zero plans. But here’s the catch: environmentalists have criticized the project’s plans to pump captured carbon dioxide into old oil reservoirs to make more dirty crude oil. BlackRock’s already sold, though, because the firm’s $550 million investment makes up 40% of the project’s total cost, and is one of the biggest financial commitments to DAC technology so far.

DAC capture vs energy consumption

Why should I care?

For markets: Mining for silver linings.

There’s turning lemons into lemonade, and then there’s turning climate threats into money-making opportunities. BlackRock’s clearly out to squeeze some lemons, with the firm’s CEO saying the future’s “multibillion-dollar success stories” will be energy companies that invest in tech like DAC. And it’s not the only believer: Occidental was the S&P 500’s top performer last year, and counts Warren Buffett as its biggest shareholder.

DAC deployment vs demand

The bigger picture: The gang’s all here.

Carbon capture technology is still in its infancy, with few major success stories and plenty of project failures in its history. But BlackRock’s support is a nod to the tech’s mounting credibility. The US government’s on board too, granting carbon capture companies major tax breaks and over $1 billion in investments. No wonder fashion retailer H&M, JPMorgan Chase, UBS, and SwissRe have started spending in the space as well.

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