Vicki Hollub, President & CEO, Occidental Petroleum
Interviewer: Alan Murray, FORTUNE


Impact Initiative 2022 - Realizing The Energy Transition

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Impact Initiative 2022 - Realizing The Energy Transition


oil and gas producers have a central role to play in addressing climate change among them. Occidental Petroleum recently announced a big expansion into its carbon capture program if we're focusing on emissions. A carbon neutral barrel of oil is possible if we're extracting C. 02 from the air and pumping Co two underground as part of the oil recovery process. We'll sit down with the head of Occidental and explore how carbon credits and greater collaboration can help us reach Net Zero. Please welcome Vicky Hello, President and Ceo of Occidental Petroleum for a conversation with Alan Murray. Fortune Ceo. Thank you Vicky. Thank you so much for joining us. I was really eager to have this conversation because as an observer, it seems to me that you're getting hit by everybody, right? The environmentalists don't like the fact that you're drilling oil and feel you're gonna be drilling oil way into the future. Uh, the uh, the the oil industry isn't happy about the fact that you're spending so much time talking about carbon capture and direct air capture and and I think you're alone in the oil industry in endorsing scope three goals in the US oil in the U. S. Uh, so you're getting hit on all sides. Why? Well, I think that we as an industry definitely need to change. We need to evolve and unfortunately we haven't been able to or felt like we weren't able to be as transparent about what we're doing as we would like to be um saying anything in the US usually creates an opportunity for someone to sue you. So we were worried about that, but we get sued anyway. So now we've decided we just need to do the right thing and be as open and transparent about it as we can be. So I talk about a lot and 11 of the things I'm trying to do is help people outside our industry and especially those who, who have a passion about the planet and who are uh really engaged in trying to make sure that we're doing the right thing. I wanna, I wanna help everybody understand exactly what we're doing and why it is the right path for the industry to take and why if we don't take this path that we're on, I don't believe we'll ever be able to cap global warming yet. Um, not only 51.5 degrees, but not even at two degrees. It would be too expensive. It would be almost technically impossible to do, uh, to do it by 2050. So we believe we have the right story, the right strategy, the right pathway to do it. And we're trying to get others to um, to buy into that and to help us with it Past clearly. But let's, let's talk about that story. First on the energy side of it. You see oil, fossil fuels as being part of the energy picture for a long time into the future. Maybe indefinitely into the future. Yeah, I would say that a lot of models are showing that even by 2040, If you tried to do your best in terms of building renewables and other things and alternatives that even by 2040, the demand for oil would still be around 67-70 million barrels were at 100 million today. Um, unfortunately if you don't invest in the oil industry, uh, the by then the supply would be 27. So when we talk about a just transition, we have to remember that there are places around the world that have tremendous oil and gas resources. But if they can't develop those, they're the ones that will get left behind those. They are the ones that will suffer. They're the ones that won't be able to achieve the quality of life that we have today. So we have to figure out how do we continue to develop oil and gas reserves? But doing it stood in a way where we can get everybody focused on the emissions and not the source. For example, only 15% of greenhouse gasses are generated by, By the actual production of oil and gas. That's 15%. The rest is generated by the use of the products. And when I say use of products, there's a lot of things in this room that wouldn't be here today if we didn't have oil and gas. Our company in particular, we produce the products that make the I. V. Bags and tubes for hospitals that make a lot of the medical equipment for hospitals that make the products that go into building cars and building homes and chlorine for water PVC to transport clean water. We do a lot of things that make build a lot of things that make our quality of life a lot better. So it's the it's building those things that causes the basically the rest of the emissions along with the electrical generation. So we've gotta do, we gotta understand what the impact would be too. Is that so hard? I mean you're talking about simple math basically. Why is that so hard to get across the smart people? I happen to have been at the uh Harvard Yale football game and I did not go to either school by the way but I was at the football game where students from both schools sat down in the middle of the field at halftime and said we're not gonna leave until both schools agree to disinvest from any fossil fuel company. Why is it so hard to get smart people to understand that to solve this? Well I think part of it's our fault. Um Part of it is we didn't make the transition start making the transition soon enough. We started, yeah we we should have started years ago and doing what we're doing today and that is trying to find ways to further reduce methane, methane is about 11% of the greenhouse gasses. Um C. 02 80%. So both of those together, the two things that we have to attack the most. Um So trying to completely and dramatically change our industry is something that we're now trying to push and get others to get on board to do uh completely changing the way we we produce it and trying to ensure that it's a closed loop system and um and progressing in terms of ensuring that we do the right things to capture emissions from point sources like from cement plants, steel plants, electrical generation plants. And then we're doing um one thing that Uh that nobody else has done yet and that is to to build a facility that will have the capability to extract one million tons of co two from the atmosphere annually. And that's critically important because right now 37 billion tons goes into the atmosphere annually so that we need to start the process of reducing CO two from the atmosphere. That that's huge. You and it's a big investment for you. A lot of people say never gonna work just a waste of time. You're just doing that to cover up your fossil fuel story. Uh Tell us why you believe direct air capture because that's a game changer. If you can actually take carbon out of the atmosphere, that's a complete game changer. Tell us why you believe it can work. Well I would say we would not be spending $1.2 billion dollars for a greenwashing campaign. I can assure you that uh but we feel like that we have the unique capability to make it work. And a lot of others have said it won't work. So a lot of others have walked away from it. But what what gives us the confidence to do it is that there are so many synergies between what we're trying to do and what we've always done. We're leveraging our core confidence of using CO two for enhanced oil recovery for almost 50 years, were the largest handler of C. 02 for that in the world. So we've got the experience with CO two and the way we'll extract CO two out of the atmosphere is using a a fluid that are chemicals department of chemical business makes. And it's potassium hydroxide and we're the largest marketer of potassium hydroxide in the U. S. Second largest in the world. So that's the synergy. So we'll we'll take these huge radial fans will pull air uh and push it through a contact tower within that contact tower. The potassium hydroxide will be mixed with the air and um the diffuser in there to make that mixing better is PVC and we're a marketer and maker and marketer PVC as well. So those synergies will put it in the premium basin where we already have the infrastructure to put it in a pipeline, get it uh to question either in a saline reservoir or in our enhanced oil recovery uh projects. So if there's anybody that can do this and if there's any then make it commercial, it's it's occidental because of all that experience and all those synergies. And so the way we look at it is it's not something that that we have the choice to do or not, it's something that we feel like we should do and need to do to help the world advances technology and then share it with others. Some of the critics say, oh, but it's a it's a very energy intensive technology, so you just burning up a lot of energy in order to do this. Is that true? That's that's one of the reasons we have now invested in another technology which could which could be game changing for the power industry. And it's called Net Power. It was developed by a company called 88 rivers. And they're a bunch of guys from Duke who are really smart and developed a process that will combust hydrocarbon gasses with oxygen instead of air. And by doing that, you you eliminate all the volatile organic emissions and you capture the CO two as a part of the process because it's actually what drives the turban and to generate the electricity. So some of that CO two is recirculated to drive the turbine, some of it comes off as a pure stream of CO two that we get can then convert to products or saline reservoirs and put in the O. R. So that according to some of the power industry people, I've talked to former Ceo of Nrg told me he believes this is the game changing technology for the industry. So that will be the technology that we use to use our hydrocarbon gasses from the Permian to generate that electricity for our direct air capture facilities. And we'll use solar as a part of it as well. I want to go back to this scope three issue because every I think everybody in this room to some degree is wrestling with scope three. You know, am I how how do I become responsible for my consumers use of my product or for all of my suppliers? Why did you and Occidental alone in the U. S. Petroleum industry agree to take on this responsibility because we think we're going to have the capability to do it, others um you can't have that capability to do it unless you have a way to provide the users of your product and opportunity to get CO two offsets. And we believe that with the technology that we're using will be able to do that. And and the problem with that the world is facing that many of you are probably going to face to is there there won't be enough um biomass to um to offset the emissions that we have today. There's just not enough, there's not enough trees, there's not enough natural sinks. Um And the trees are some of the trees are shorter term but we need that to happen anyway because we've got to have something to help us get to 2050. So we have to have everything happen. We have to have E. V. S. Um solar wind, nuclear uh carbon capture and the by biomass projects to work to make this happen. But there's just not gonna be enough biomass. So our process is like a mechanical tree. It's pulling CO two out of the atmosphere. We're just having to build it to make it do it. The good thing about it it will never decay. So it'll it'll always be it will be able to sequester that Co two permanently. I want to open it up to anybody who has questions or or comments. Please raise your hand and we'll get a microphone to you. Um And I will say I I so appreciate being here because I've never talked to a group like this before and so please don't worry if you about offending me. I really want to know what you think and I really want to know what about what we're doing? You might not like or you might think I should talk about differently. Go ahead right here. Hello. Ben jorgensen from combatant boards. Just a question how much does the board actually discussing this and what's the discussion that you're having with the board? Well the our board has come along on this it's um what their concern was. How do we make sure our shareholders are on board with it. And so you ultimately to to make it work for everybody. We have to make a business out of it too. So we have to at some point uh generate cash for some of the CO two credits that will that will sell to those industries that are hard to to carbon eyes. For example, we already have in place to contract with Airbus. Airbus is going to buy 100,000 tons per year from our first direct air capture facility. They've committed for four years and now we haven't recently announced a contract because right now people are starting to realize that there is a deficiency of CO two credits. So now the prices are starting to go up on C. 02 credits. And so we uh we believe that we can generate value for our shareholders and doing this as well. It's it's pretty amazing to think of an oil company selling uh selling C. 02 credits. Other questions or comments. Peter so peter Peter van executive editor. I just want to know, do you have any fans at this point you're talking about for the director capture. We have the radial fans that will use are used in other industries supporters know those kind of not the big one. Actually I do. We we do. We've had recent endorsements. I will say uh Warren Buffett recently came into our in our stock in March in a big way and and um Berkshire now owns more than 20%. I like to call him a fan. I'm not sure if he would view that to be a correct assessment, but he he's investing in us, he um he's investing in us because we're also really good operator. We have great people and we have amazing people that got us through the the pandemic the transition and all of that to uh to never lose focus on our technical excellence and our ability to make things happen. Hey, it's Kathleen Mclaughlin from walmart. Thank you so much for being here. Um I think the scenario that you've laid out is really interesting and I'm wondering if you've had a collaboration with some of the organizations who specialize in climate scenarios and new climate economy and so on. So like World Resources Institute or Environmental Defense Fund to to put that together with their scientists. Well, we have with the carbon capture coalition with the Clean Air Task Force with the Environmental Defense Fund. We're working with a lot of those agencies who support what we're doing and understand what we're doing and and to to help them become supporters and collaborate with us. We do have to let them in and see the data and we have to be transparent with them and we have them uh and we've worked with the D. F. Two on methane regulations because we believe that um we believe that we've just helped with with their help put together the most stringent, uh, methane regulations that were adopted by new Mexico actually in the, in the US. And so we're trying to do everything we can with with those uh, kinds of agencies that have their expertise to ensure that we're advancing forward. And we have and we have some certification from others on what, on what our plan. Is there another question over there? Yeah, Go ahead. Quick question, Jeremy Hansen from hydrogen struggles. How do you, you have to collaborate across, collaborate and compete across the energy sector. How are you managing that? Uh, you know, across your traditional hydrocarbon, competitors, renewables, the whole sector because it really takes an integrated whole to get where we're going. Yeah, well, we've, we've gained a lot of ground, I would say over the past, um, a couple of years, I'm now the first, um, us chair of the world Economic forum, oil and Gas governors community. And so we, that's a, that's an organization working with West where we're able to collaborate beyond our, our peers, um, here in the US and, and with the Europeans who act quite frankly have been ahead of us for a few years, but they're doing things a little differently. They're buying and selling or buying um, solar and wind companies and, and building that. And what we felt like is we, we didn't want to deviate and get away from our core confidence. and so we're using our core confidence in our strategy, I proud what they're doing, they're pouring capital more capital into the building of solar and wind and we're just leveraging our core confidence to to do a different kind of strategy. But somebody's got to pull the CO two out of the atmosphere because right now we have 50% more C. 02 in the atmosphere than in pre industrial times. Even if we shut down all emissions today, we would still need to reduce CO two from the atmosphere. Vicki last last quick question. Uh you feel the political polarization around all these issues more than most people do, but everybody's feeling it to some degree. Uh you know, as I said, you're getting it from, from both sides, you've got democrats who think you shouldn't exist. You know, the President has been particularly kind of oil companies on on the, on the other side, you've got people who think you're, you're awoke oil uh Baron, what's your advice to people on how to deal with the political situation in the United States in particular. It's the most challenging that I've ever seen in my career. But I would say take the best from all that you can get. I love President biden's commitment to try to reduce emissions and to try to get us in a better place with respect to climate. So that part of it we're talking with the Republic with democrats and we're trying to work with them and the I. R. A. Bill that was pushed through um you know, by Senator Manchin, that was amazing for us. It's gonna be very helpful to to advance our technologies. Um and then we work with the republicans on on other things around making sure that we don't shut down the industry in the United States because we don't want to become your uh we want to ensure that we not only maintain the quality of life here in the United States, but that we maintain our energy security and that's critically important. Remember we're the largest producer of oil in the world and to lose that status, makes us lose leverage. And if you recall, you know, losing, not only do you have the european case study, but in World War Two, part of what happened to uh to end that war was that the evil aggressive back then ran out of fuel and that wasn't the complete reason they lost. But it helped accelerate the end of that war. And if you don't have oil or fuel then in this world, then you're putting yourself at risk. Vicky, thank you. Great to hear someone telling it straight, thank you for being here and speaking