2019 OU Price College of Business Energy Symposium – Keynote Speaker: Hillary Moffett

>>So I’ll go ahead and introduce Hillary while
everybody finds their way back to their seats. So we put this presentation
in the agenda. I don’t know that everybody
recognizes the efforts that Oxy has put out in the
carbon management space. And so you heard this morning
not only is there an imperative to create wealth
with the activities that you do, but
decarbonization. And so Oxy has really blended
these two together sort of in a short meeting
and long-term framework that I’ll let Hillary describe. She’s another OU graduate. You can read her bio
in the program agenda. But, Hillary, I’ll
turn it over to you.>>All right. Can you guys hear me? All right. Well, thanks for the
opportunity to speak here today about a company that
I certainly love and think is doing some
really incredible work in the carbon capture space. I’m especially excited to be
back because I am from Oklahoma and I currently live
in Washington, D.C. And I don’t get
back home nearly as much as my mother would like. So she’s grateful, too. So I am senior director
of government affairs at Occidental Petroleum,
based in the D.C. office. And I spend most of my
time talking to legislators and regulators and trying to
educate them about what it is that we do in the industry. The easy way to think of it is
they’re going to write laws, they’re going to
write regulations, and I want to make sure that the
people that are doing that are as educated as possible. So that’s part of
what my job is. I want to start the conversation
today with a little bit about who we are as
Occidental, and then we’ll go into more detail with the
carbon capture utilization sequestration and the newly
formed Oxy low carbon ventures. That was all of the
legal jargon. So most people have
never heard of Oxy, maybe before yesterday’s
announcement, because we are not
consumer-facing. So we don’t have gas stations. We don’t have products
on the shelves. We are mainly an exploration
and production company with a small midstream
footprint. And in the U.S. domestically
we only operate in the Permian Basin. We’re only in Texas
and New Mexico. And then overseas
we’re in the UAE, Oman, and Columbia in South America. And then we have our global
headquarters in Houston. We one of the largest
oil and gas companies in the United States producing
about 650,000 BOE per day. And we employ nearly
38,000 employees and contractors globally. We also have a pretty
substantial chemical business, OxyChem. And we are a leading
manufacturer of basic chemicals used
in water treatment, plastics, and pharmaceuticals. So we’re also a unique company because we are the world’s
largest consumer of CO2. There we go. We have over 40 years’
experience in separating, compressing, transporting,
and injecting CO2 for enhanced oil recovery. So when compared against
some of these other oil and gas companies, you can see
that we have more CO2 projects and the higher producing wells. We inject about 2.6 billion
cubic feet a day of CO2 from naturally occurring, anthropogenic, and
recycled sources. So that’s about 50 million
metric tons per year. And of that 50 million
metric tons, about 18 million
metric tons is stored in the geology of the rock. So what does that
mean in real terms? Eighteen million metric
tons is the equivalent of about four million
passenger vehicles on the road. So Tesla last year made
about 250,000 cars. Last year we took off the
equivalent of four million cars. So Permian resources
is the largest focus of all of Oxy’s businesses. As you can see from the slide,
we have a significant presence in the basin totally
around 2.7 million acres. We have 34 active CO2 floods and
another 70 water floods that, given the right market
conditions, could potentially be
developed into CO2 floods. Our net production
related to CO2 is 155 BOE. Additionally, we have
fourteen gas processing plants that can separate CO2
for recycling and reuse, and over 2,500 dedicated
miles of CO2 pipeline. Oh, there we go. So I know that this has been
talked about a little bit, but I want to get a little
bit more into the details about what is EOR with carbon
capture and how does it work. So after primary and secondary
recovery methods stopped producing hydrocarbons
economically we turned to CO2 as a tertiary recovery
method in some of our floods. We looked to a number of factors to indicate whether CO2 EOR
can be effectively applied at a given reservoir. So among other things,
we consider the geology of the reservoir, the physical
characteristics of the oil, the production history,
condition, and accessibility of the field. Using CO2 for enhanced oil
recovery, we can get anywhere from ten to 25% more
oil out of the ground. And that’s oil that otherwise
would not have been recoverable. So we start with compressed CO2. When you take carbon
dioxide and you put in under enormous amounts of
pressure, it changes from a gas to something with more
liquid-like properties so we can transport
it more easily and it doesn’t take
up as much space. Now because it doesn’t
take up as much space, we can store more
of it underground. So we inject the compressed
CO2 into the oil reservoir where the CO2 mixes
with the oil. That changes the oil’s
viscosity so some of that oil that otherwise would be stuck
actually flows more easily. In this depiction you
see the water is blue, CO2 is yellow, and
the oil is red. It’s not a great depiction
but you get the idea. So depending upon
reservoir conditions, you can use the WAG method which is water alternating
gas injection. Because CO2 has this low
viscosity, it can move its way around rock, or it’s called
fingering through the rock. The WAG method makes it so
that the oil and the water, or the oil and the
CO2 mix more easily and then the water can
come through and flush that newly freed oil
to the production well. So, as you can see, first
the pressurized water is used to fracture the rock and
release the hydrocarbons. Then the CO2 either
mixes with the oil, or it displaces the
oil in the pore space. Some of that CO2 is pushed
to the production well and the remaining CO2
is trapped underground. There are a number
of ways for CO2 to actually stay
trapped underground. Dissolution trapping refers to
when the CO2 actually dissolves into some of the water
that’s naturally in the rock. Some of the CO2 gets
stuck in the pore space and this is called
residual trapping. Over time some of the CO2 will
interact with the reservoir rock and actually create
a new mineral and that’s mineral trapping. So any of these methods,
and a few others, are ways that we can tell how
the CO2 stays underground. So after water and CO2
are injected, gas, oil, and water are produced
through the production well. Oil heads to market. The water is treated and
either disposed or reinjected. And the produced gas is
further separated and, if economic, sold on the market. The CO2 is separated,
recompressed, and reinjected for continued hydrocarbon
recovery. Now this is also
critical in ensuring that we’re maintaining a proper
pressure in the reservoir. We have to maintain the proper
withdrawal and injection rate because we want to make sure
that we can continue to monitor and verify how much CO2
is actually sequestered. And by maintaining that
rate of what we put in versus what comes out, and
creating the right pressure, we can be fairly
certain what stays there. So I’ll discuss a little bit
more about how we monitor and verify, but first, I just
want to show this is sort of, this is the full
closed loop system sort of from a big picture
perspective. So, as I mentioned, we have been
doing this for over 40 years. We employ extensive
modeling techniques to understand properties of
CO2 in reservoirs and to ensure that we’re being prudent
and safe operators. We conduct seismic monitoring and we do extensive underground
simulation modeling to map out, characterize, and
understand our reservoirs. That work provides a
basic understanding of how the CO2 will act
underground once it’s injected. Employees on the ground are
also equipped with H2S monitors. So if H2S is detected, we
know to look for CO2 leaks. Because we have gas processing
facilities, that enables us to handle all of
the produced CO2 and create this closed
loop system. So eventually all the CO2 that you inject will
remain underground. Associated storage of CO2 through enhanced oil
recovery has been cited as having huge storage
potential, huge potential for CO2 emissions by many
well regarded organizations. We’ve calculated some 320
million metric tons of storage at just two of our units, the Denver unit, and
the Hobbs fields. We see it as critically
important in decreasing atmospheric
emissions. And we, as Oxy, think this
is the right thing to do. So I’ve told you
that all the CO2 that we use becomes sequestered, and we’ve discussed the way
the carbon stays underground. But how do we know all this? In order to claim credit for
sequestering carbon dioxide, an operator has to
submit a plan to EPA and the EPA has to approve it. Oxy has two MRV plans:
Monitoring, reporting, and verification. These MRV plans employ various
methods to quantify the amount of CO2 being injected and demonstrate secure geologic
storage of the injected CO2. You can see that some of the
criteria includes evaluation of geology, risk assessment, and demonstration of
long-term storage. We worked really
closely with EPA in developing the criteria
needed for plan approval and we think we have
a pretty good system. It protects the public
health and the environment, and it retains public
trust which is a key factor that we think is really
important moving forward. The MRV process is
fully transparent which is also another
important factor in maintaining a public trust. Once a company submits,
there’s a comment period so anyone can submit a comment about the activities
in the reservoir. Anyone can access our MRV plans in case you want some
light reading later. Plus, one of the most
important things about this is when we were doing our
MRV plans, we were able to finalize them without
drilling any new wells, without hiring new employees,
without buying new equipment, and without reconfiguring
any new equipment. Because we’ve been doing
this for such a long time, we’ve really developed
the expertise over time to do it well, and to
do it very efficiently. But this also speaks
volumes about the flexibility within the MRV plans
and the requirements. One thing that we see as
critically important is that other companies continue
to look at, and develop, and get MRV plans approved. We want other companies to
be able to do the same thing because the success of
long-term storage depends on it. According to the
IEA, carbon capture and utilization technologies
will plan an important part in meeting energy
and climate goals. And I know that there
was mention earlier of the sustainable development
scenario, and CCUS accounts for about seven percent of emissions reductions
needed globally. So this implies, as has been
said today, a rapid scale up in this technology. CO2 EOR is the first
commercially available technology that will bring
down the cost of capture and Oxy’s Low Carbon
Ventures group is working hard to find ways to deploy carbon
capture technology more quickly and more economically. So here’s just sort of a big
picture what the CO2 supply chain looks like. And this in large part
what led to the creation of Oxy Low Carbon Ventures. So in 2018, Oxy Low
Carbon Ventures was created to develop partnerships
with CO2 sources and allow for the purchase and use of
more CO2 in our sequestration. Low Carbon Ventures
serves a dual purpose: To enhance Oxy’s profitability,
and provide shareholder value in the transition to
a low carbon economy, and to reduce our
greenhouse gas footprint, and to help others do the same. Our goal is to lower
the cost of capture so that we can make
more widespread capture and use of CO2. So I’ve spoken a
little bit about our EOR and carbon sequestration,
but Low Carbon Ventures, or LCV, goes beyond that. It’s pursuing innovative low
carbon business solutions via investment in technology
for carbon capture, decarbonizing the
electricity market, and deploying new developments for direct air capture
technology. Low Carbon Ventures is also
looking at opportunities to utilize CO2 as a feedstock
to create products such as CO2 to plastics, or using CO2
as a feedstock for fuels to help decarbonize the
historically difficult transportation sector. Due in part to the work of LCV, just last month Oxy announced a
goal of becoming carbon neutral. We think it’s the right
thing to do long term and we can make a
business out of it. The IEA’s analysis suggests
that using CO2 for EOR, using industrial CO2 for
enhanced oil recovery can result in a 63 net reduction
of CO2 emissions for every barrel
of oil produced. So we’re starting with options
for industrial CO2 capture and we’re working
on ways to make that more commercially viable. Now in 2018, congress passed
edits to the 45Q tax credit and I know that was mentioned
a little bit earlier. That program has directly
and indirectly led to a number of partnerships. I’ll speak a little bit
more about 45Q and the work in congress later, but first
I want to discuss how passage of that legislation led to
really exciting partnerships with some unconventional allies
to increase domestic production and decrease emissions. So Oxy really is an all of
the above energy company. We use natural gas and
coal for electricity. We partner with ethanol. Some of our OxyChem chemical
facilities actually use hydrogen as a co-generation technology. Hydrogen is one of
the byproducts for the chemical process
and we can use that hydrogen to power the chemical process. And we’re expanding into solar. About a third of our costs for enhanced oil recovery
are electric generation. And we are currently installing
a 16 megawatt solar facility at our Goldsmith unit which
will reduce scope on emissions and help with energy efficiency. So this is what I
really love to talk about because most people don’t
expect the oil company to talk about ethanol but we are
actually big fans of ethanol. Last year we announced
a feasibility study with White Energy which
is a biofuels company in Texas and Kansas. The study would outline the
feasibility and the ways that we could take the CO2 from
the ethanol facility and use it in our enhanced oil
recovery operations. That project could potentially
sequester one million tons of CO2 per year. So back to our passenger
vehicle, if each passenger vehicle
is about 4.6 metric tons of carbon dioxide a year, a project like this has
the potential to remove about 200,000 cars a year
from an emissions standpoint. This project is an
important first step in a cross industry
collaboration to make carbon capture economic,
practicable, and scalable. In November, Oxy joined
with Excellon, McDermott, and 8 Rivers to partner
with NetPower. NetPower is a zero atmospheric
emission natural gas power generation facility. It’s located just outside of
Houston in La Porte, Texas. And it is some really, really
exciting new technology. It’s oxy-combustion technology
that’s not typically been employed because
it’s been expensive. But by capturing and reusing
the CO2 into the combustor, NetPower has created a
cheaper, cleaner alternative to traditional natural
gas power. It combines an oxygen methane
combustion technology with CO2 as a high temperature
working fluid and inherently captures
all the carbon dioxide. This technology, known
as the Allam cycle, generates zero atmospheric
emissions. The byproducts are
water, nitrogen, argon, and pipeline ready CO2. Oxy sees potential for a pure
stream of CO2 to be utilized in our enhanced oil
recovery operations. NetPower’s power
generation technology with inherent carbon capture
really complements Occidental’s leadership in CO2 utilization and sequestration
making us ideal partners to tackle carbon
emissions worldwide. And I know that there’s
been a little mentioned about direct air
capture technology. Just earlier this year actually
in, I think, it was January, Oxy announced a partnership in British Columbia based Carbon
Engineering which is a company that does direct air
capture technology. This technology pulls CO2
directly from the atmosphere, uses a complex chemical
process to separate out that CO2 from other gases. That CO2 can then
be used for a number of purposes including
enhanced oil recovery. The direct air capture plants
are location independent and can be co-located
with an oil field for enhanced oil recovery. Using atmospheric CO2 for EOR
operations greatly reduces the carbon footprint of your
traditional barrel of oil and opens a pathway to
producing a fully carbon neutral or even a carbon
negative barrel of oil. We believe we can find enough
commercial applications to economically source
CO2 directly from the air. And that’s really
exciting stuff. So now I want to talk a
little bit about 45Q and some of the tax incentives
for carbon capture. Many of these opportunities and these partnerships
would not have been possible without changes to the tax code that incentivized
carbon capture. The FUTURE Act passed
last year as part of the bipartisan budget
bill and it included language to extend and make some changes
to an existing tax credit under 45Q for those who
capture carbon emissions and show permanent geologic
storage or beneficial use. In large part, the credit works
to offset the upfront costs of the carbon capture equipment. The language also
expanded credit to allow for direct air capture
like the technology from Carbon Engineering. In order to claim 45Q, a company
must have an EPA plan approved outlining the requirements
for the MRV. Oxy encourages peer
regulators and the public who are interested in this space
to read them, as I mentioned. The more companies
that have MRV, the more people utilize 45Q. Then it’s a lot easier to go
back and work with congress on some of these other
issues that we’ll talk about. So we worked closely with the
bipartisan members of the House and Senate to gather
support for, and ultimately to pass this legislation. And what’s really exciting
is the breadth of interest that we saw from both sides of the aisle all
across the country. We had Senator Whitehouse, who
is a Democrat from Rhode Island, co-sponsoring this legislation
with Senator Barrasso, who is a Republican
from Wyoming. And just for context, Senator
Whitehouse is known for going to the floor of the Senate
every single day and talking about climate change and talking about the challenges
of climate change. So when you have
these two people that are really working toward
the same cause, that says a lot, especially in Washington
where no one agrees on anything right now. So congress and the
administration have played an important role in our expansion
into Low Carbon Ventures, but there’s certainly more
that can be accomplished. Now apart from the
members of congress, 45Q brought together all
sorts of nontraditional allies to form a broad coalition
supporting carbon capture and sequestration. We worked through the
Carbon Capture Coalition, which is a group of 60
companies, organizations, and associations, to gather
support for the legislation. So we continue to work with
the Carbon Capture Coalition and you can see that there
are some really interesting bedfellows here: Labor,
coal, oil and gas, renewables, environmental NGO’s. We’re all working together for
policies to advance this issue. And we have been
really successful. Oxy is especially proud to
work with such a diverse group, and we think has great potential
to move the needle on deployment of carbon capture technology. The things that we’re
continuing to think about. What are the next steps
for the Coalition? We talked about transport
and infrastructure of CO2. Are there ways to get
more capture equipment on more industrial sources? How can carbon capture
become part of the solution to climate change and how can
we talk about it in those terms? I also want to talk about the
Oil and Gas Climate Initiative. So in addition to these
nontraditional allies that I just discussed, we
continue to work with other oil and gas companies on
climate solutions. Last fall we announced that
we would join OBCI as one of the first U.S.
companies to get involved. There are thirteen member
companies led by CEO’s who are active in promoting
emissions reductions. OGCI members make up about
30% of production globally and we’re present
in 130 countries. We collectively invested
about six billion dollars to lower emissions
in our operations. And as part of the
membership, we contribute funds for the Climate Investment
Fund of OGCI to invest in new technology that
avoids emissions all together and it uses emissions as a
feedstock in other processes. So I want to end with
this map of CO2 sources and discuss the potential
for increased use of CO2 sequestration
and storage. Oklahoma, according to
EPA’s data from 2018, Oklahoma releases 55
million metric tons of CO2 equivalent per year. Thirty-seven million
of those tons come from power plants
and refineries. Additionally, Oklahoma already
has smaller CO2 pipeline infrastructure that connects
industrial sources of CO2. Last year, Governor
Fallon joined a group of other governors from
Wyoming, and Montana, and some other states to
consider ways to support and encourage carbon
capture at home. There’s a lot of potential here
in Oklahoma to act on emissions in a way that continues to support the fossil
fuel industry. So I would encourage anyone
who’s interested in this space to take a look at Oxy Low
Carbon Ventures website and if you’re feeling
adventurous, our MRV plans. But actually, the MRV plans,
they’re about 50 pages. They’re very readable and I actually think
they’re quite interesting. And if you just google
EPA MRV plan and Oxy, they’ll be the first
things to come up. At Oxy we want to make
CCUS technology economic and feasible across the globe. But we think that we can
start with opportunities here in Texas, and New
Mexico, and Oklahoma. I’m thrilled to be a part
of a company that’s working to decrease emissions
and increase production of reliable domestic
sources of energy. At Oxy we want to
enhance profitability and shareholder value
in the transition to a low carbon economy. We think it’s the right thing
to do and we certainly hope that the industry
thinks so, too. So if anyone has any questions,
I’m happy to take those. Yes. [ Inaudible ] Yeah. So we saw the bipartisan
budget bill passed in March of 2018, so just
over a year ago. We’re still waiting on
guidance from the IRS which has been frustrating. But we are continuing
to work with them. They have to put out
some guidance on things like what does it mean
to commence construction. So once they get that out, we’ll have a lot more
certainty moving forward with what our timeframes
look like. And then, from a production
standpoint from CO2, so we are 650,000 BOE per day
and about 155,000 of that is from enhanced oil recovery. [ Inaudible ] I mean is that the percentage? I’m not great at math. Right around there. Yes, yes, 155 of 650. [ Inaudible ] So right now it’s just in the
Permian Basin but we’re looking at international
opportunities, too. Mm-hmm. [ Inaudible ] Equivalent, CO2 equivalent. Mm-hmm. [ Inaudible ] We would think so. And, you know, especially if you
look at the map and you can kind of see where Oklahoma is
and what it looks like, there’s certain concentrations
there which make it a lot easier if you’re looking at it
from a pipeline perspective. [ Inaudible ] I’m sorry, we put it
into a liquid form — . [ Inaudible ] Correct. [ Inaudible ] Yeah. Yeah. So we compress it so that it
has, I mean, I don’t think, it never actually
turns into a liquid, but it becomes super
critical CO2 so it has liquid-like
properties. [ Inaudible ] I’m sorry, I’m having a
hard time hearing you. [ Inaudible ]>>Came to structure of this. If we look at a chemical
structure of it, are part of the end
product of liquefied, let me call it liquefied carbon
dioxide, with the hydrogen, what happens to that
hydrogen during that process? Because if you look at it, if
you draw the chemistry of it, I mean chemical symbol
for it — .>>Mm-hmm.>>Hydrogen will be one
of the end products. What happened to that hydrogen?>>You know, I don’t
know the answer to that. I’m sure we could figure it out
but I don’t know the answer. Yeah.>>Okay, Hillary, I’m
going to switch gears here.>>Okay [laughs].>>So you’ve been on the
Hill for eight years. What is like the biggest
challenge for you to try to get the Republicans, the
Democrats, when it comes to energy policy, to
work across the aisle.>>Yeah. The rhetoric. The rhetoric is the
hardest thing. I find that going in and talking
to Republicans, everyone says, “We have to find a
solution to climate change. Can you help us?” And, of course, we talk
about carbon capture and people are thrilled. We actually just had a meeting
with Mr. Conaway who is a member of congress from Texas. And we talked a lot
about our partnerships with White Energy and ethanol. And so people are really
excited to hear that work. And the same thing
on the Democrat side because while you do have
people that want to talk about the Green New
Deal, you have a lot of really reasonable
Democrats that recognize that that’s never
going to happen. And in fact, I don’t know if anyone actually read the
Green New Deal besides me, but only eighteen percent of
that legislation had anything to do with climate or energy. So you have people on both
sides that really want solutions and we talk a lot about
how you can find those in reasonable ways with
things like carbon capture. But it’s really difficult
when you have rhetoric from both sides that are
pushing people farther outside. Yeah.>>Hi. What is your break even
oil price on these projects and how will this tax
credit impact that?>>So our overall break
even is about $40.00. Really the tax credit goes to the emission source,
the point source. So really what that does is it’s
incentivized people to build and maintain capture equipment that otherwise wouldn’t have
an incentive to do that. It’s creating more CO2 available
for us so hopefully what that will do is increase our
production down the line. But the tax credit
which is $35.00 for a ton that’s ultimately
going to be sequestered via CO2, or $50.00 via a ton that’s
going to go to saline storage. That goes directly
to the capture point. [ Inaudible ] Okay.>>This was great.>>Good. Well, thank
you, guys, so much. I appreciate it. [ Applause ]

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