Carbon Negative: A Primer On Vertical Integration of CCUS / DAC With Oil & Gas

Accessible version
US Oil and Gas

Carbon negative: a primer on vertical
integration of CCUS / DAC with oil & gas
Primer
Where oil & gas fits: EOR, storage & direct air capture 13 September 2021 Corrected
Global efforts to combat climate change are taking on many disparate and complex Equity
routes. CCUS is seen as a key part of the solution - and an area the IEA sees as a logical United States
vertical for the oil & gas industry to help drive a ~200x increase in scale necessary to Oils
meet targets envisaged in the IPCC’s 6th assessment report. With this backdrop, we Doug Leggate
introduce this primer as a subset of a much larger topic that touches multiple industries Research Analyst
BofAS
but with our focus on where the oil & gas industry fits into the broader picture of +1 713 247 6013
geological carbon storage, enhanced oil recovery and specifically, direct air capture. doug.leggate@bofa.com
Alex Vrabel
Direct Air Capture: XOM/OXY lead private partnerships Research Analyst
BofAS
CCUS is not new - but per the IEA it has never lived up to its promise as the majority of +1 713 247-7751
alexander.vrabel@bofa.com
projects were purposed on securing CO2 for enhance oil recovery in conventional oil &
gas reservoirs. However the technology is evolving, mainly along two parallel paths – Kalei Akamine
Research Analyst
industrial capture targeting permanent geological storage & renewed focus on DAC that BofAS
+1 713 247 7880
has gained acceptance through a series of pilot studies led mostly by a handful of niche kalei.akamine@bofa.com
players partnering with the oil & gas industry - Carbon Engineering (with OXY), Global John H. Abbott
Thermostat (with XOM) and Climeworks (with Norway’s Northern Lights partnership). Research Analyst
BofAS
Tax credits: critical enabler to accelerate CCUS at scale +1 713 247 7144
john.h.abbott@bofa.com
The challenge has been deploying CCUS at a scale necessary to overcome challenging
economics. Legislation designed to support development has helped – principally the
45Q federal tax credit enhanced in 2018 to include EOR and extension of California’s EOR – Enhanced oil recovery
LCFS carbon credit to include DAC. Together, potential to ‘stack’ credits has accelerated
the pace of commercial DAC developments. Most advanced is OXY’s LCV partnership CCUS – Carbon Capture Use and
with Carbon Engineering where FID of its first commercial plant is expected by year end. Sequestration
OXY Case study: DAC has more bragging rights than value DAC – Direct Air Capture
Based on open access papers published by CE we examined the potential materiality to CO2 – Carbon dioxide
OXY’s investment case. Our analysis underlines the role of 45Q & LCFS credits as critical
enablers of DAC economics. But our analysis suggests early economics are marginal with IEA – International Energy Agency
cumulative economics for a multi-phase development that includes capital efficiencies
LCFS – California Low Carbon Fuel
still modest (~$1bn) so that for a series of plants scaled at 500,000t CO2 annually, the
Standard credits
impact may be more on bragging rights than significance for OXY’s valuation.
45Q – Federal Tax Credits for CCSU
CCUS can move the needle for niche players
Within oil & gas CCUS beneficiaries are not necessarily the largest players nor those IPCC – International Panel on Climate
with existing exposure; rather we see the biggest impact on niche players where recent Change
tax incentives can have the biggest incremental impact on their businesses. For example
XOM is the largest industrial CCUS player in the world; OXY is the largest CO2 EOR CS – Carbon Storage
company in the world. Conversely US E&P Denbury is the largest EOR producer by OXY LCV – Occidental Petroleum’s
proportional volume of sourced anthropogenic CO2. California Resources owns of one of Low Carbon Ventures subsidiary
the largest onshore conventional geological ‘tanks’ capable of one billion tons of CO2
storage. Otherwise potential beneficiaries comprise an immature group of private FID – Final Investment Decision
players that have flown under the radar but can benefit from partnering with ‘big oil'.
CE – Carbon Engineering
BofA Securities does and seeks to do business with issuers covered in its research
reports. As a result, investors should be aware that the firm may have a conflict of
interest that could affect the objectivity of this report. Investors should consider this
report as only a single factor in making their investment decision.
Refer to important disclosures on page 45 to 47. 12326287
Timestamp: 13 September 2021 09:30AM EDT

CR
Contents
Why carbon negative technology? 3
Legislative support 5
Advantage DAC 9
Where does the oil & gas industry fit in? 10
Injection Well Permitting 19
Summary 21
Direct Air Capture 23
Technology Overview 24
Summary 32
Case Study 33
1pointfive’s modular DAC proposal: Permian ‘clean’ campus 33
Conceptual project economics 35
Nth model efficiency 39
Summary 41
Fun facts …for climate nerds #1 44
2 US Oil and Gas | 13 September 2021
CR
Why carbon negative technology?
Global efforts to combat climate change are taking on many disparate & complex
legislative & technological routes. While there may be debate between causation and the
correlation with rising CO2 levels, as opined by our commodity team (see report)
(Putting the CO2 genie back in the bottle, Jan 26th 2020), the proverbial genie is out of
the bottle. Carbon capture, utilization and storage (CCUS) is increasingly seen as a
critical part of the solution, spearheading a range of carbon negative technologies. It is
also an area where the IEA has described the oil & gas industry as ‘critical’, noting that
CO2 extraction, processing and use are routinely parts of existing oil and gas operations.
As noted in its 2020 oil & gas industry and energy transitions report1:
‘The resources and skills of the industry can play a central role in helping to tackle
emissions from some of the hardest-to-abate sectors. This includes development of
CCUS … scaling up these technologies & bringing down costs will rely on large-scale
engineering and project management capabilities - qualities that are a good match to oil
and gas companies’
The latest IPCC sixth assessment report underlines the key role CCUS can play in
achieving the aspirational targets increasingly characterized as ‘net zero’ by a number of
countries, states and companies at some forward date (2050). Regardless of the efficacy
of these targets, all pathways to achieve the presumptive 1.5°C limit on temperature rise
require some level of Carbon Dioxide Removal (CDR). For context, the volume of CDR
deployed in 2020 is estimated at ~40Mt; however to achieve the objectives presented
by the IEA in its idealized ‘Net Zero by 2050’ report published in May 2021, carbon
removed by CCUS will have to increase by more than 190x to more than 7Gt of CO2
removal per year.
Exhibit 1: Sources of contribution to 2050 Net Zero target Exhibit 2: Carbon removal to account for 7.6mn Mt CO2 by 2050
Direct air capture to play an important role Application most effective in energy intensive industrial and hydrogen
processes
Source: IEA Source: IEA

BofA GLOBAL RESEARCH BofA GLOBAL RESEARCH
CCUS is not new - but the technology is evolving, mainly along two parallel paths:
CCS is the proven technology but per the IEA it has never lived up to its promise –
mainly as the majority of projects have had a different purpose, primarily securing CO2
as a solvent for enhance oil recovery in conventional oil & gas reservoirs.
DACCS: or direct air capture is the newer technology gaining acceptance through a
series of pilot studies, some of which are expected to move towards commercial scale
within a few years and mostly led by a handful of niche players but often with oil & gas
industry support (Carbon Engineering – Occidental, Global Thermostat – Exxon Mobil,
Climeworks – Northern Lights partnership in Norway).
1
The Oil and Gas Industry in Energy Transitions: Insights from IEA analysis (January
2020)
US Oil and Gas | 13 September 2021 3
CR
The challenge has been that until recently deploying CCUS at the levels needed to
address the capture targets envisioned by the IEA has faced practical challenges, mainly
through cost, technology and scalability. As at year end 2020 there were still only ~20
large scale CCUS projects operating worldwide.
Exhibit 3: CCUS project tracker
20 large scale projects in operation, but many more in early stage development
Source: IEA
BofA GLOBAL RESEARCH
With that said, the pace of new project announcements has become a fast moving
target. With the step change in emphasis on climate change, momentum has started to
shift with multiple new projects and proposals announced in just the past few years.
Per the IEA more than 30 new integrated carbon capture facilities have been announced
since 2017 – improving economics that has seen costs cut in half over the past decade.
Exhibit 4: Key project announcements / Government commitments Exhibit 5: CCUS cost curve
Significant funds are being committed to front end research and pilots Next generation projections have significantly improved economics
Source: IEA Source: Global CCS Institute

The primary costs for CCUS comes from the three necessary steps of CO2 capture,
purification and transportation. Costs vary significantly depending on the source and
according to the Global CCS Institute, can being broadly quantified as follows:
• CCS: for concentrated streams the cost per ton of CO2 is estimated in a range of
$15 - $60 / tCO2; for coal / gas plants this increases to $40 - $80 / tCO2 and to
>$100 / tCO2 for small disparate sources such as industrial furnaces;
CR
• DAC: capturing CO2 directly from the air is universally seen as the most expensive
method, with costs mainly reported from academic papers estimated in a range of
$90-$250 / tCO2. The main delta vs CCUS is much greater required energy input.
Transport of CO2 to the end-user can also be a significant cost, depending on the
distance and mode of transport (pipeline, ship, truck) – highlighting one of the primary
potential benefits of DAC in that it could theoretically be situated anywhere provided
there is an available energy source.
Legislative support
The role of 45Q (and other tax credits)
Legislation designed to support the development of carbon negative technologies has
been around for some time. In 2008, a credit for CO2 sequestration was added to the tax
code in the Energy Improvement and Extension Act of that year, initially targeting coal
and GHG emissions reductions broadly. In 2018 the Bipartisan Budget Act expanded &
extended the 45Q tax credit with changes that included a larger credit amount, a start-
of-construction deadline and 12yr claim period versus replacing what had previously
been a volumetric cap on CO2 sequestered (75mn mt). The 2018 change also allowed
qualified CO2 utilization in Enhanced Oil Recovery (EOR) and Direct Air Capture (DAC) for
the credit, while allowing owners of carbon capture equipment to claim tax credits
instead of the person capturing the CO2. In 2020, the deadline to begin construction
was extended for two years to Jan 1 2026.
The key elements of the 45Q tax credit are described in the table below from the
Congressional Research Service.
CR
Exhibit 6: 45Q Credits explained
Projects must be under construction prior to January 1st 2026
Source: Congressional Research Service

The credit first became effective in Oct 2008 provided eligible corporations with an
income tax liability reduction, depending on whether captured CO2 was stored through
EOR or permanently sequestered. The initial credit of $10/mt and $20/mt applied to
project starts before Feb 9 2018; with the 2018 revision, the tax credit for EOR
increased to $35/mt per ton and to $50 for permanent storage. The tax credit value
ramps up over ten years as shown below:
CR
Exhibit 7: 45Q Tax Credit Sources Exhibit 8: 45Q Tax Credit Sources
Progression of 45Q values differs by carbon uses Dedicated Storage vs Credit values increase over ten year period starting from 2017
Utilization / Enhanced oil recovery
60
EOR Pe rmane nt storage
50
40
Credit Value $/tCO2

30
20
10
0
2017 2018 2019 2020 2021 2022 2023 2024 2025 2026
Source: Internal Revenue Service Source: Internal Revenue Service, BofA Global Research
The SCALE Act

Proposed Senate Bill designed to accelerate CO2 infrastructure
Evolution of the 45Q structure may have further to go: In July 2021 the Senate
Committee on Energy and Natural Resources advanced the ‘Storing CO2 And Lowering
Emissions’ or (SCALE) Act as part of a the larger infrastructure package currently under
consideration. The bill has bi-partisan support and is intended to drive deployment of
CCUS technology and infrastructure, specifically to advance interconnected
CO2 transport systems and overcome cost barriers that the bill suggests needs federal
support to overcome and includes grants for Front-End Engineering Design (FEED)
studies. The bill also proposes support for sharing the cost of commercial-scale saline
geological CO2 storage with the priority given to larger, commercial hubs. Finally the bill
proposes increased funding to EPA for permitting Class VI CO2 storage wells including
for permitting at the state level. The full text of the Bill can be read here.
State Tax credits

The idea of ‘credit stacking’
In addition to Section 45Q credits, several states also offer tax incentives for carbon
capture sequestration projects – introducing the idea of potentially ‘stacking credits’.
The most significant of these is the California LCFS, and is worth some discussion.
• The LCFS has been around since the early 2000’s and is intended to incentivize
lower carbon fuel intensity via a cap and trade system whereby ‘greener’ fuels
producers such as from biodiesel plants generate credits by being below a pre-
defined benchmark level of Carbon Intensity (CI).
• The offset is that fuel producers that are above the threshold CI are forced to buy
credits as compensation for producing less emission friendly fuels.
• While the projects may be located anywhere the only caveat is that produced fuel
must be consumed in California.
As shown in the chart below the CI threshold evolves (lower) over time. As there tends to
be an inverse correlation between CI intensity and cost, the idea is to effectively level
the playing field for more environmentally acceptable alternatives with a sliding
threshold ultimately intended to decarbonize the vehicle fleet.
CR
Exhibit 9: California LCFS carbon intensity targets relative to 1990 for fuels used in state
Targets become increasingly punitive each year with the ultimate goal of 20% CI reduction by 2030 c/w 2019
Source: California Air Resources Board

None of this is to say that this process is entirely de-risked. There are of course
parameters around the eligibility of credits, the certification process for eligibility and
maintaining eligibility. But the potential to ‘stack’ credits is potentially significant in
helping bridge the economic threshold of moving early stage projects from pilot to
commercial scale – such as with Direct Air Capture. The graphic below compares some
simple parameters that filter into the assessment of stacking these two credits.
However when considering project returns, an important distinction has to be made

between the effective currency of 45Q and LCFS. In the former, this is a federally
administered tax credit, and thus acts as a one for one match to tax liability; there is no
cap and trade market place. Conversely, LCFS credits can be sold for a cash return in the
market, which in turn becomes the principal revenue stream of any potential partnership.
CR
Exhibit 10: Requirements for CCS projects to secure credits
45Q and LCFS are two key revenue sources. Administrated by two different regimes (45Q = Fed; LCFS = CA
State)
Source: Global CCS Institute

When taken together the potential value of the 45Q and LCFS could be significant – and
is one of the primary justifications for CRC’s assessed economics of its Carbon
Terravault project which happens to be located in California (examined below).
Advantage DAC
LCFS has no locational constraints
One significant change is that in 2018 the California LCFS extended its credit provisions
to include CCS facilities, including Direct Air Capture. Importantly, however, DAC has a
unique distinction in that because it is sequestering atmospheric CO2 - deemed to be
fungible beyond state lines, the facility itself does not have to be in California. When
paired alongside CCS which is deemed to provide efficient, long term storage of
sequestered CO2 whether through dedicated storage or EOR, the partnership is eligible
to apply for an LCFS credit. Quoting from the California Air Resources Board LCFS FAQ
section from Sept 2019.
• ‘Do CCS projects have to be located within California to earn LCFS credits?
No. Projects may be located anywhere, but the innovative crude oil or transportation
fuel produced associated with the CCS project must be consumed in California.
LCFS credits will only be issued for the fuel consumed in California.
• The only exceptions to being issued credits based on fuel consumed in California are
direct air capture (DAC) projects, which store captured carbon dioxide (CO2)
underground. DAC projects may apply for CCS Permanence Certification regardless of
location, and do not need to have a fuel component to be issued credits.
CR
Exhibit 11: LCFS requirements for various Carbon Capture project types
LCFS credits are localized to California; except in the case of Direct Air Carbon Capture

Note this last point is a subtle distinction is that the oil produced from EOR does not
qualify for the LCFS. A DAC facility can still capture the low carbon fuel credit without
producing or selling fuel into California which is a requirement and principle challenge
for the ‘green’ fuel producers.
If Direct Air Capture (DAC) this can be combined with certified Carbon Storage (CS)
approved and permitted by the appropriate regulatory body, the DACCS partnership
could potentially be eligible to capture both the 45Q (whether the $35 EOR credit or $50
permanent sequestration credit) and the LCFS credit. For context, the recent range of
LCFS credit has been ~$200/mt CO2. At that level, a partnership could potentially
capture $235 t/CO2 for an EOR operation and $250 t/CO2 for dedicated storage, while
significantly improving the economics of a DAC facility – particularly during the ‘scaling’
phase for what is still an emerging technology.
Where does the oil & gas industry fit in?

Utilization and Storage
The step change in CCUS focus and Government led incentives for investment is
providing a reset for the oil and gas industry by repositioning the role it can play in
accelerating CCUS developments at scale. Per the IEA:
For CCUS, 75% of CO2 captured today in large-scale facilities is from oil & gas
operations, and the industry accounts for more than 1/3rd of overall spending on CCUS
projects. If the industry can partner with governments and other stakeholders to create
viable business models for large-scale investment, it could provide a major boost to
deployment.’
In our view there are two key areas where the industry can participate – industrial scale
carbon capture & utilization, primarily via Enhanced Oil Recovery (EOR) and geological
storage in depleted reservoirs.
Permanent storage: the critical path to Paris 1.5

CO2 has significant existing commercial uses: currently around 250 Mt of CO2 is used
globally each year across a variety of industries. One of the oldest and most mature is
the use of CO2 by the oil sector as one type of enhanced oil recovery (EOR), second only
to the fertilizer industry for urea manufacturing. Other uses include food & beverage
CR
production, metal fabrication, cooling & fire suppression amongst others but these are
currently much smaller in scale.
Exhibit 12: Commercial uses for CO2
Urea production comprises the majority followed by enhanced oil recovery
Source: IEA
Projections for new and expanded uses for CO2 has benefited from the broader climate
debate with opportunities such as chemical conversion for CO2-derived fuels, chemicals
and aggregates gaining increased acceptance. However a recent study by the IEA 2
cautions that the level of increase in potential usage of CO2 will not likely replace CO2
storage in delivering the scale of emissions reductions believed necessary to meet Paris
Agreement ambitions. To put some numbers around this:
• By the IEA’s estimates, the role of CCUS in achieving the objectives of the Paris
agreement requires that ~115 Gt CO2 is captured over the next 40 years;
• Of that over 90% (107 Gt CO2) needs to be permanently stored, with the balance
used in a variety of industrial processes.
Currently, uses of CO2 in the US are dominated by Enhanced Oil Recovery (70%-80%)
and along with tax credits is expected to remain a significant factor in improving the
economics of geological storage.
Exhibit 13: 2030 Market sizing estimates by sector Exhibit 14: CO2 Market in the US
15,000 metric megatons of potential carbon removal opportunity EOR dominates overall use of CO2
Source: McKinsey Source: DOE NETL

2
IEA 2019 report Putting CO2 to use’
CR
Geological storage (CCS)
Over the past two decades, CCS has been demonstrated as technologically feasible with a
number of pioneering large-scale industrial CCS operations, such as Sleipner & Snohvit
(Norway), Weyburn (Coal Canada), In-Salah (Algeria), and the geographically diverse small-
scale CO2 injection pilots such as in the Netherlands (K12-B), US (Frio), Japan (Nagaokakan),
Germany (Ketzin), Australia (Otway) and Total Energies Lacq-Rousse project in France.
Several high profile non-power CO2 sequestration projects have been designed primarily
to manage the CO2 content of produced gas, but with the produced CO2 sequestered in
deep formations. Some of the better known projects within the industry include:
• Sleipner in Norway is the first commercial scale CO2 storage project designed
primarily to reduce the CO2 content of exported gas from 9% at the wellhead to a
maximum export spec of 2.5%. Its design rate is ~0.9mt/year, the alternative being
to have vented the CO2 to atmosphere, incurring a carbon tax introduced by the
Norwegian Government in 1995. CO2 capture uses amine technology (explained
later in this note) and stores CO2 in the Utsria Formation a 600–750ft sandstone
estimated capable of storing 600Gt. The project cost was estimated by MIT’s CCS
technologies unit at ~$17/tCo2;
• Algeria: the In Salah project was designed to strip 5.5% rich CO2 from produced
gas, and designed to sequester 1-1.2mt/yr into the Krechba sandstone formation via
3 injection wells into the down-dip aquifer leg of the gas reservoir. Injection started
in 2004, but was suspended in June 2011 as a result of seal integrity concerns. The
project cost was estimated by MIT’s CCS technologies department at ~$6/tCo2;
• Gorgon: completed in 2016, the 3-train LNG development produces gas with a CO2
content of ~14%. The CCS project, part funded by a grant from the Australian
Government, is designed to reinject 3.4mt CO2/year via 9 injection wells into the
Dupuy turbidite sand formation, capped by the Barrow marine shale. The CCS
portion of the project cost of ~$2bn is intended to store 120Mt over the projects
life, for an implied cost of $17/mt
Exhibit 15: Illustration of Geologic Storage
Multiple opportunities for storage in offshore aquifers and mature onshore oilfields
Source: IEA
CR
Future capacity for geological storage is significant. The IEA recently conducted a study
in the US, Europe & China – concluding that total global storage capacity could
reasonably lie between 8,000 Gt CO2 and 55,000 Gt CO2 – far in excess of what is
needed under the Paris Agreement. The vast majority of this is onshore, in depleted
conventional oil & gas reservoirs – but significant capacity also exists offshore, with
estimates in the range of 2,000 – 13,000 Gt.
Exhibit 16: Total Storage Assumptions in IEA SDS Scenario
Storage capacity is highly significant and dominated by China, US and Middle East
Source: IEA
The IEA acknowledges that not all of this will be viable – subject to land use, cost of
development and geological features such as the quality of the cap rock (which is what
failed at In Salah). Still, with some 70% of power and industrial emissions estimated to
be within 100 km of potential storage the capacity for CCS is seen as one of the most
practical offsets to global carbon emissions.
Exhibit 17: Capacity to affect carbon emissions by source
Carbon Negative Technologies are viewed as being critical to achieving climate goals
Source: IPCC
What about costs?

Per the IEA, the US is the leader in global CCUS deployment, home to more than 60% of
current CCUS capacity and around 50% of capacity under development. However while
the oil and gas industry has the capability to develop significant geological storage
capacity it still needs the right economics.
CR
The chart below shows the IEA’s estimate of onshore and offshore geological storage
costs derived from a number of sources, and which are shown to vary widely deepening
on scale, location. However the key takeaways in our view are that:
• More than half of onshore storage in the United States is estimated to be below
USD $10/t CO2; note that this excludes the Carbon capture investment and relates
only to storage;
• The costs of offshore versus onshore are typically higher; in both cases repurposing
depleted oil and gas fields using existing wells will pull costs to the lower end of the
curve
Exhibit 18: Indicative storage cost curve for onshore & offshore US
over 60% of onshore storage is seen below $10/mt CO2 or ~$0.5/mmcf CO2
Source: IEA
Geological storage, enabled by existing oil & gas technology is not only the purview of
the oil producers as the service sector is also seeing a resurgence in CCUS technology
deployment. But the experience comes from long standing industrial use of CO2 for
commercial purposes – specifically enhanced oil recovery or EOR. While the
comprehensive data is slightly dated, consider that per the IEA’s 2017 World Energy
Outlook database:
• World oil production derived from CO2 floods was around 475,000 bpd or ~0.5% of
global oil production, of which 65% was in the US Lower 48.
• Within the US the top 3 producers are Occidental Petroleum, Kinder Morgan and
Denbury, collectively accounting for 70% of all EOR in the US (and 46% of
worldwide EOR).
US independent Occidental Petroleum is the largest single user of CO2 for enhanced oil
recovery in the world. Note that from latest data, oil produced from EOR currently
averages ~100 mbpd for OXY, ~30 mbpd for Kinder Morgan and ~34 mbpd (excludes
CCA) for Denbury, only slightly different from 2017 levels.
CR
Exhibit 19: Global EOR production via CO2
EOR globally is dominated by US producers and specifically OXY, KMI and DEN
500
450
400
350
300
EOR Production (thousand barrels / day)
250
200
150
100
50
0
Chevron
Whiting Petroleum
Amplify Energy
ExxonMobil
Apache
World
KinderMorgan
Other
Merit Energy
ConocoPhillips
OXY
George R Brown
Denbury
Pe rdure Petroleum
US
Source: IEA World Energy Outlook, BofA Global Research

From an environmental perspective there is a caveat. Naturally sourced CO2 used for
EOR does not count towards mitigating CO2 emissions as majority of the CO2 used in
the oil & gas industry uses natural sources:
• in the US we estimate > 70% of CO2 used for EOR is from natural sources noting
the three largest are Bravo Dome (Occidental), Jackson Dome (Denbury), McElmo
and St. John’s (Kinder Morgan ); of the balance the largest is Occidental Petroleum’s
Century Gas Plant which strips CO2 from natural gas at a rate of ~8.4mt annually
• together these four natural sources account for ~90% of ~40bcf of discovered CO2
fields in the US, with production in excess of 2.5bcfe/d (47mt/yr; note US CO2e
emissions in 2019 – pre COVID was ~6.6mT of which 80% was CO2).
On the presumption that naturally occurring CO2 could be displaced by captured

anthropogenic CO2, EOR arguably presents a realistic route to carbon negative oil
production while significantly improving the economics versus storage alone.
CR
Exhibit 20: Mapping out CO2 Infrastructure
Current CO2 infrastructure is linked into existing natural sources but provides similar localization to industrial sources
Source: EIA, DEN

The chart below shows examples of how this works in practice across different regions
as estimated by the IEA: with the oil revenues from EOR storage cost3 costs are
effectively negative.
Exhibit 21: Comparing Costs and revenue streams for EOR

EOR revenues can effectively offset capture, transportation and production costs
Source: IEA
3
IEA (2021), The world has vast capacity to store CO2: Net zero means we’ll need it, IEA, Paris
https://www.iea.org/commentar ies/the-world-h as-vas t-capacity-to -store-co2-net-zero-means -we-ll-need-it
CR
Perhaps more about conventional than scale
Despite potentially prohibitive development costs in just the past year momentum has
accelerated with a number of projects focused mainly on storage.
• ExxonMobil already has the largest share of industrial carbon capture in the world,
with ~40%. In Feb 2021, it announced the formation of a new business line,
ExxonMobil Low Carbon Solutions with line of sight for over 20 large scale CCS
projects, including the $100bn, 100mt/yr Houston Ship Channel proposal,
conditioned upon Government and private sector support. Note XOM already has an
equity share in ~20% of global CO2 capture capacity and has captured ~40% of all
the captured anthropogenic CO2 in the world.
• In the UK & Norwegian North Sea, multiple sequestration & storage projects are
progressing, all intended to store CO2 offshore. Most advanced is the Northern
Lights project in Norway, a $700mm project expected to sequester 1.5mt annually
for 25yrs (Equinor, RD/Shell, Total).
• More conceptual is the Acorn partnership (BP operated with RD/Shell, ExxonMobil,
Harbour Energy), intended to repurpose existing natural gas pipelines in Northern
Scotland for subsea capture and the Northern Endurance partnership intended to
serve two zero emissions industrial zones in Northern England.
So far, the major oil companies dominate some of the largest prospective storage
projects, probably as a function of balance sheet capacity given that large upfront capital
costs involved. However a less obvious common denominator is ownership and access to
conventional oil & gas reservoirs capable of storing large quantities of CO2 – and in our
view has the potential to differentiate the strategy of conventional oil and gas producers
that might otherwise be seen as unremarkable within the jungle of the much larger
unconventional US oil sector. Two examples stand out
Denbury: exploiting a legacy infrastructure advantage

Denbury (DEN), a Gulf Coast / Rockies focused EOR producer is also exploring
opportunities for storage as a complement to its existing tertiary operations. Note that
while DEN may be 3rd after OXY & KMI in terms of the scale of its EOR production, EOR
represents ~70% of current oil production making it the largest company whose
operations are predominantly from CO2 floods.
Where it is differentiated is that around 30% of its CO2 comes from industrial sources –
a current run rate of some ~3mt of CO2/yr.
On this basis alone, DEN is the only E&P in the US that is CO2 emissions
negative on a Scope 1&2 basis.
If Scope 3 is included 25% of DEN’s oil production is emissions negative, with a target
to increase this to 100% by 2030.
Critically, DEN owns and operates >1,000 miles of existing CO2 pipelines, around 1/6th
of all CO2 infrastructure in US. Notable is that of some 2.6Gt/yr of CO2 emissions in the
US, around 10% is with 30 miles of DEN infrastructure on the US Gulf Coast. Per
management’s latest presentation, it is current in negotiations with 15 separate
emitters that collectively represent 50Mt/yr.
CR
Exhibit 22: Green Pipeline Relative to Major Emissions Sources Exhibit 23: CRC Storage Capacity
DEN’s Green pipeline provides a pathway towards CCS for many emitters CRC leverages storage capacity given an attractive ‘stacked’ revenue stream
Source: DEN Source: CRC

California Resources: exploiting a conventional resource advantage

Most recently in the US, California Resources (CRC) announced plans to explore CCS
development in depleted reservoirs underneath its conventional Elk Hills oilfield, with
permitting already submitted for the first of a series of projects (Carbon Terravault) with
capacity to store up to 40mt of CO2. The annual injection rate is targeted at 1mt of CO2
annually (potentially 40 years). Earlier this year CRC filed its first Class VI well permits
with the EPA for permanent CO2 sequestration into the A1 and A2 depleted reservoirs at
Elk Hills. In addition, CRC plans to file an additional permit for sequestration into the
26R Reservoir by November 1st.
Exhibit 24: CRC’s Carbon TerraVault project status
Additional permitting, credit certification and customer negotiations in progress
Source: George Peridas, Permitting Carbon Capture & Storage Projects in California, February, 2021, Lawrence Livermore National
Laboratory, LLNL-TR-817425
There is no question that the enabler for CRC’s proposal is the potential for stacked
environmental credits discussed earlier. The graphic below shows how CRC management
sees the potential uplift on economics by stacking credits on its CCS proposal
underlining a unique, locational advantage of a production base dominated by
conventional reservoirs. having produced for over 100 yrs Elk Hills has significant
CR
capacity to permanently sequester CO2. While CRC is initially targeting a 40 million mt
project, ultimate CO2 storage is estimated at up to 1bn mt.
CRC anticipates bringing the first Carbon TerraVault project online by 2025, and
subsequent phases shortly thereafter. CRC will also pursue its CalCapture project in
parallel.
Exhibit 25: CRC Revenue Stream for Storage Exhibit 26: CRC Paths to Develop TerraVault
Positive margin is a function of a series of stacked credits, notably California CRC's Carbon TerraVault currently in the permitting phase on track for initial
LCFS start up in 2025 with subsequent projects behind it
Source: CRC
BofA GLOBAL RESEARCH Source: CRC
In parallel with its Terravault, CRC is also pursuing the Elk Hills CalCapture project,
supported by the Oil & Gas Climate Initiative’s $1bn climate investment fund (OGCI)4.
Per CRC the project has also received funding from the US Department of Energy.
CalCapture is designed to sequester carbon from Elk Hills Power LLC which operates a
550 MW natural gas combined-cycle power plant that supplies electricity to the Elk Hills
field and gas processing facilities with a combined capacity of 520 MMcf/day of gas.
Note CRC regained 100% equity interest in the power plant as part a settlement
agreement with a prior joint venture partner, Ares, as part of its emergence from
bankruptcy. The projects proposes the capture of 1.4mmt/yr of CO2 which would affect
EOR with startup in 2024. All CO2 captured would 45Q eligible, with the permanently
stored qualifying for LCFS. FEED was completed in 3Q21 although projects costs have
not yet been disclosed.
Injection Well Permitting

Permitting could be challenging. A carbon capture project will involve three kinds of
activity, storage, transport and permitting, where each individual phase is a complex and
technically involved process, but also subject to a patchwork of state and federal
agencies who claim jurisdiction over some phase. Navigating these waters will not be
easy or quick. The table below divvy’s authorizations into 14 separate categories and
rates their turnaround time, technical complexity and political sensitivity. There are four
categories that have at check at least 8 of 9 boxes, implying the hardest level of
attainment. These include local land use, CO2 pipelines, rights to the reservoir and air
quality. Investors should be familiar with these regulatory areas, but Class VI permits are
nearly as difficult to obtain, and will be a new term to add to the oil and gas investor
lexicon.
4
The OGCI is a CEO led organization that pursues gals aligned with the Paris Agreement comprising twelve major IOCs and NOCs
including Saudi Aramco, BP, Chevron, ExxonMobil, RD/Shell and Total. Its Climate Investment fund is ?$1bn; Elk Hills was the fund's 16th
investment and the sixth CCUS investment.
CR
Exhibit 27: Ranking of Permitting difficulty related to CCUS
Class VI well permits can take up to 3 years to obtain
Source: George Peridas, Permitting Carbon Capture & Storage Projects in California, February, 2021, Lawrence Livermore National
Laboratory, LLNL-TR-817425
Class VI wells
A bit of background is needed to understand the regulatory framework and the level of
scrutiny involved here. In 1974, congress passed the Safe Water Drinking Act, which
aims to protect all sources of drinking water from contamination. This includes
underground aquafers. Here, the EPA is tasked with regulation, which it enforces through
the Underground Injection Control program (UIC), which oversees the permitting of all
injection wells. There are six classes.
• Class I: Industrial and municipal waste disposal wells
• Class II: Oil and gas related injection wells (such as for water flood, steam flood ops)
• Class III: Injection wells for solution mining
• Class IV: Shallow Hazardous and radioactive injection wells
• Class V: Wells for injection of non-hazardous fluids into or above underground

sources of drinking water
• Class VI: Wells used for geologic sequestration of CO2
CR
Class II wells are rather common place. Many operators from California Resources to
Kinder Morgan to Occidental Petroleum utilize steam or water injection wells to affect
enhanced oil recovery. There are hundreds of thousands of these wells across the US.
Permitting is rather routine.
Class VI was created in 2010, to oversee the sequestration of CO2. The permit process
is understood to be complex and technically involved. To date only three Class VI wells
have ever been permitted. Archer Daniels Midland secured the latest permit for an
underground reservoir located in Illinois, which has become the storage tank in the
Valero Carbon Capture transportation project. This permit took three years to secure,
and is being used as the precedent to think about the timeline for future permitting
requests.
Summary
There is a long list of other potential geological storage opportunities projects both in
the US and internationally. As a footnote one of the best sources to monitor progress is
the Global CCS Institute (its latest assessment depicted in the graphic below.) Similarly,
there are a long list of fanciful ‘uses’ of CO2 not all of which have the practical
technology to be meaningful at any predictable level on a timeline we believe the market
may be prepared to discount.
Exhibit 28: Locations of CCS projects in operation and under development
Concentration around oil and gas producing basins and industrial hubs

With this backdrop we believe the examples of ExxonMobil, as the largest CCUS player in
the industry today, Occidental as the largest CO2 EOR company in the world – with
vertical integration into one of the leading emerging technologies in DAC as the largest
owner of privately held Carbon Engineering - Denbury as the largest producer of EOR
production sourced from anthropogenic CO2 and California Resources as owner of one
of the largest onshore conventional geological ‘tanks’ capable of multiple billion barrel
sequestration projects we can start to frame where strategies ultimately designed to
improve ESG standings for fossil fuel companies can have the greatest impact, that fits
strategically and is compatible with existing industry capabilities. In our view, where the
oil and gas industry can accelerate, expand and participate in accelerating the role of
CCUS as part of broader climate goals, we see two areas that has caught the attention
of the industry and has the potential to have the greatest impact on individual producer
company ESG objectives:
CR
• CCUS in partnership with Enhanced Oil recovery (CRC, DEN, OXY) and
• Direct Air Capture (OXY, XOM) as a flexible innovation unconstrained by location.
Not included here is of course ‘point source’ carbon capture innovations across power
plants that are evolving equally as rapidly or the role ultimately played by US oil service
providers such as Baker Hughes, Schlumberger and Haliburton amongst others (and a
myriad of European companies). For now our focus is on the proven technology of
Enhanced Oil Recovery, and the potential enabler for step change in CO2 availability that
is the onset of Direct Air Carbon capture.
The balance of this report examines these two ‘old’ and ‘new’ technologies in greater
detail.
CR
Direct Air Capture
The promise of Direct Air Capture (DAC) for carbon sequestration has been around for
some time. What has been challenging is demonstrable proof of concept at an
acceptable cost necessary to drive commercial development to a meaningful scale. With
increased focus on carbon negative technologies and greater legislative support,
momentum behind DAC has accelerated in recent years bringing the very real probability
that the 2020’s will see idea evolve from concept to reality.
In the US two companies in particular have played a key role increasing the profile of
DAC with their respective partners – Occidental Petroleum and ExxonMobil. The latter
has the largest share of anthropogenic carbon sequestration in the world.
• Occidental’s Low Carbon Ventures subsidiary has partnered with Canadian company
Carbon Engineering (CE) to commercialize CE’s Direct Air Capture technology
through a joint venture corporation called 1pointfive, a reference to the challenge of
the Paris Agreement
• Following a twelve month period of technical evaluation originally signed in 2019

ExxonMobil recently signed a joint venture with Global Thermostat enabled by
XOM’s engineering, scale and balance sheet capacity
These two joint ventures offer perhaps the highest profile examples of the two most
advanced technologies seen capable of commercial scale DAC – high temperature
aqueous solution and low temperature solid absorbent systems, respectively HT DAC and
LT DAC. Along with Swiss private company Climeworks, all three aim to use large air
collectors to pass over chemically saturated large surface areas to overcome the low
concentration of CO2 in ambient air (~0.04%) – introducing power as one of the biggest
cost headwinds to commercial development.
Exhibit 29: Direct Air Capture technologies
Companies are progressing three separate technologies, which are differentiated by chemical sorbent and energy requirements
Source: Techno-economic assessment of CO2 direct air capture plants Mahdi Fasihi*, Olga Efimova, Christian Breyer
There are innumerable academic and technical papers that explore the technology,
history and current state of DAC. Drawing on a handful of these we endeavor to
synthesize the topic into a manageable summary of the current state of play.
On Sept 9th , Climeworks launched its first commercial DAC plant in Iceland – ORCA -
overcoming the energy challenge using thermally sourced energy, but scaled at just
4000mt/yr. However the technology and project most advanced towards large scale
commercial realization is the OXY / CE joint venture, which as noted earlier could see its
CR
first 1 million mt/year CO2 plant in operation within five years. Given the potential
significance to Occidental, we anchor our discussion on Carbon Engineering, where we
believe OXY has significant synergies both from its experience translating pilot plants to
commercial scale across its chemical business, as well as its role as one of the largest
producers of chemical absorbents (Sodium and Potassium Hydroxide) and plant
components (PVC) necessary for the DAC process.
Technology Overview
As seen in the graphic from ‘A Techno-economic assessment of CO2 direct air capture
plants5 DAC process technology can be broadly grouped into two buckets - aqueous
hydroxide solutions and solid amine absorbents. However there are multiple
industry proxies such as from the paper pulp and cement industries. The critical
requirement is to bring high volumes of air into contact with chemicals capable of
chemically binding with CO2.
Aqueous hydroxide solutions

AHS is one of the more researched DAC processes, partly as it has readily comparable
proxies drawing broadly from the paper/pulp industry in what’s known as a ‘Kraft’
process that uses a hot water mix of of caustic soda (NaOH) to convert wood to wood
pulp.
Early methods of direct air capture envisaged a relatively simple cyclic process such as
in the cement industry that starts with slaked lime and subsequent calcination that
releases CO2. Accordingly, calcium hydroxide [(Ca(OH)2) } was initially proposed as a
sorbent material for direct air capture. For reference the cyclical process is shown in the
equations below with the calcination step and cyclical input & output steps highlighted.
Ca(OH)2 + CO2  CaCO3 + H2O; CaCO3  CaO + CO2; CaO + H2O  Ca(OH)2
In fact calcium hydroxide [(Ca(OH)2) } was initially proposed as a sorbent material for
direct air capture given a relatively high binding energy with CO2 essential facet when
considering CO2 in air is ~400ppm vs flue gas that is ~10% CO2. However, using calcium
hydroxide is relatively insoluble in water while the release of CO2 from calcium carbonate
is a heavily energy intensive (requiring heating above 900 °C), thereby having a
significant energy penalty
While the energy intensive needs of the calcination step remains a challenge of any DAC
methods that employ an aqueous hydroxide solution, the solubility challenge is readily
remedied by switching the sorbent material to an alkaline or base salt which dissolves
easily in water. This is where lessons from the paper and pulp industry have come in to
play with the Kraft process offering a commercially viable proof of concept for well over
100 years and which uses sodium hydroxide (NaOH) – or caustic soda, one of OXY
Chem’s primary products. However, another alternative – suggested by OXY as a more
optimum CO2 ‘binder’ is potassium hydroxide (KOH) or Caustic Potash where OXY
happens to be the largest producer in the world.
For reference, two process diagrams are shown below, 1) from the American Chemical
Society that uses sodium and 2) from a 2018 Carbon Engineering paper that proposes
KOH. As is clearly evident, the processes are nearly similar and both with the energy
intensive demands of the overall process occurring during the calcination step.
CR
Exhibit 30: Sodium Hydroxide process Exhibit 31: Potassium Hydroxide process
Process scheme for DAC based on Kraft process and NaOH absorption Process scheme for DAC based on Carbon Engineering’s design that
material substitutes KOH
Source: Direct Air Capture of CO2 from Ambient Air. Sanz-Perez et al Source: Carbon Engineering
From an emissions perspective, the concern around the energy intensity of the
calcination step remains a primary structural concern of liquid based air capture
methods.
As this step is most likely fueled by fossil fuels adding an additional emissions penalty
unless energy can be sourced from renewables. Viewed on this simplified basis, the use
of fossil fuel to power negative emissions technologies opens up a new challenge with
intrinsic emissions as a result of combustion acting as a material offset to the entire
point of Direct Air Capture.
Exhibit 32: Energy cost estimates
Estimated breakdown of energy costs by process within liquid DAC, look at calcination
Source: National Academy of Science

For reference the National Academy of Science points to roughly 2/3rds of overall
energy demands of liquid based carbon capture occurring during the calcination step.
CR
Exhibit 33: Energy demand estimates for calcination
Calcination makes up 2/3rds of energy demand of liquid solution DAC processes

When all this is viewed in a vacuum this seemingly validates existing concerns around
liquid carbon capture as both a high cost and emissions intensive means of CO2 removal.
However, this is before considering the second major advantage of liquid based
direct air capture methods: modularity and locational flexibility.
But just because direct air capture designs can theoretically be deployed anywhere
doesn’t mean that everywhere is optimal. On this point we return back to our prior
discussion of the innate energy intensity of calcination in the aqueous hydroxide solution
method and which is most economically funded by fossil fuels. As such direct air capture
means that employ this process should consider the locational benefits of operating
near low cost, and lower carbon intensity fossil fuel sources at advantaged pricing.
While coal would be a plausible means of onsite power generation for this purpose,
natural gas screens better from an emissions standpoint and also due to ample basin
level supply near existing opportunities for geologic sequestration in mature oilfields.
An additional consideration may also be to deploy DAC systems in areas where natural
gas has very low value – for example in countries where there may be no obvious
regional natural gas market, and perhaps even plentiful supply of renewable energy.
Consider Climeworks’ pilots in Iceland (geothermal) or Morocco.
For now, OXY’s target market for its first commercial plant is the US Permian
Basin – plentiful natural gas and a raft of initiatives underway to reduce
methane emissions.
Note preliminary plans for the partnership are for a 1Mt CO2e design and consistent with
prior small scale mockups by Carbon Engineering that are currently operating. But the
shift to wide scale commercialization of CE’s technologies looks mutually enabled by
OXY’s unique partnership with an ample land position to accelerate deployment,
significant availability of associated gas supply and its leading position in EOR.
CR
Exhibit 34: DAC design concept Exhibit 35: DAC’s relative advantage is location and footprint
Mock-up of a commercial DAC facility from Carbon Engineering Massive advantage of DAC over BECCS is relative footprint and location,
orders of magnitude less
Source: Carbon Engineering Source: Royal Society of Chemistry

In our view, Carbon Engineering has disrupted conventional thinking on Direct Air
Capture by resetting lower, in multiple, the costs - at its most optimistic estimates
below $100 t- CO2 captured. Note prior estimates from a 2011 study conducted by the
American Physics Society have been widely accepted at near 6x this level and again
remain a primary reason for DAC being overlooked as economically viable.
CE has presented a variety of configurations that assume both a compressed and

uncompressed output stream for CO2 and as well as both a pure natural gas powered
and split powered system. Based on the below and after converting GJ to MMBtu,
• natural gas costs account for $32/t CO2 and $19/t CO2 in ‘best’ cases B and D or
between 20-25% of overall cost per sequestered ton.
• However, important to this analysis is that CE is using an assumed cost of natural

gas of $3.50/ MMBtu – prescient given recent rally in natural gas.
Still, at that level Carbon Engineering’s estimate of DAC levelized cost is between $100 -
$170/t CO2 still far below prior estimates.
Exhibit 36: Levelized cost estimates below $100t/CO2e captured

Carbon Engineering’s assumptions of levelized cost, assuming $3.50 MMBtu power costs
Source: Carbon Engineering

CR
An important nuance in Carbon Engineering’s design is the use of methane as fuel in an
oxygen fuel fired calciner – turning the emissions penalty into a net sequestration
benefit by recovering a pure CO2 stream post combustion. For chemistry nerds this
compares with combustion in air (which is largely nitrogen) and provides for a much
more concentrated exit stream. The base reaction occurring in the O2 fired calciner is
shown below.
CH4 + 2O2  2H2O + CO2
The output, is that instead of the commercial plant sequestering 1Mt of CO2 per its
nameplate, it’s actually recovering between 1.3 and 1.48 Mt depending on the
configuration
Moreover, if the CO2 is used for EOR, as is intended by Occidental then the actual costs
are further advantaged by tax credit based subsidies via the IRS 45Q credit (which will
scale to $35 tCO2 in 2026 as examined earlier). Rolling this all together and considering
long term gas prices are still ~$3, we believe it is reasonable that the cost / ton CO2
could be well below Carbon Engineering’s estimate of $100 / mt – and relatively
competitive with other forms of industrially sourced carbon from both CCS which can
range from $25-100/tCO2. Additionally, this is before the impacts of storage and
transport to areas where utilization or sequestration can occur.
What about transport?

...and the scaling advantage of direct air capture
As mentioned above, the secondary advantage of DAC is modularity – enabling locational
ambivalence avoiding the need for pipeline build out to connect perceivably ‘cheaper’
forms of CCS to geologically advantaged basins for utilization and storage.
Indeed, adding in some of the steeper transportation costs shown below either of the
above mentioned methods stand to reach cost parity but which also assumes that
there’s currently a dedicated set of CO2 piping infrastructure. The problem is there isn’t.
Exhibit 37: EIA assumed costs of CO2 Exhibit 38: …and associated transportation costs
Wide range of cost depending on location and source Highest cost to transport to the West Coast
Gulf Rocky West N Great

Northeast Coast Midcon Southwest Mtns Coast Plains.
East Cost $7.20 $14.40 $14.40 $28.80 $28.80 $43.20 $21.60
Gulf Coast $14.40 $7.20 $14.40 $14.40 $28.80 $36.00 $28.80
Midcon $14.40 $14.40 $7.20 $14.40 $14.40 $28.80 $14.40
Southwest $28.80 $14.40 $14.40 $7.20 $14.40 $28.80 $28.80
Rocky Mtns $28.80 $28.80 $14.40 $14.40 $7.20 $14.40 $14.40
West Coast $43.20 $36.00 $28.80 $28.80 $14.40 $7.20 $21.60
N Great Plains. $21.60 $28.80 $14.40 $28.80 $14.40 $21.60 $7.20
Source: EIA Source: EIA
Importantly, most CO2 used in EOR is generally sourced naturally, namely from dedicated
existing geologic sources but which would not meet the criterion of sequestration as
this source is essentially produced to be used. Looking to major operators that employ
EOR at scale, this also has the effect of lowering source costs but also does not act as a
catalyst to turn the industry towards a more a carbon neutral position. The problem is, in
order for industrial source CCUS to overcome natural sources, the economics still have
to make sense. While at the plant level, it may be justifiable, the cost of getting captured
CO2 to existing EOR sites often does not and in many cases remains a largely theoretical
input as there’s simply no pipe to get it there.
CR
This is the catch 22 of the Mid West ethanol plants which when ignoring transportation
needs, screen as the largest, low cost, and largely unexplored source of CCS. However, as
can be seen in the right graphic, are unfortunately geographically stranded from
advantaged basins for EOR and with no dedicated pipelines between. Another valid
assumption would be that at scale, these transportation costs could be risked higher and
leaving direct air means at an even greater distinct advantage as both would be
equivalently qualified for the 45Q Credit.
Exhibit 39: Natural sources of CO2 and existing infrastructure Exhibit 40: not near industrial sources, requiring significant buildout
Natural sources primarily around Rockies and Permian oil basins Industrial carbon emissions wide spread
Source: DOE NETL Source: Infrastructure to enable deployment of carbon capture, utilization and storage in the
BofA GLOBAL RESEARCH United States. Ryan W. J. Edwards and Michael A. Celia
Solid Amine Adsorbents

Solid supported amine adsorbents are the most researched means of carbon capture
with proven operational success in conventional flue gas carbon capture. Until recently,
applications employed for the use of atmospheric capture have been largely academic in
nature but with two companies, Climeworks and Global Thermostat both stepping into
commercial development in the last decade. Procedurally, this form of CO2 capture is
even more straight-forward than an aqueous solution method, with essentially just two
steps 1) CO2 adsorption onto oxide supported amines and 2) low temperature desorption
with the latter accomplished by vacuum or temperature swing methods.
But as is often the case, the devil is in the details with this method, with a range of
possible amine choices, sorbent classifications and desorption options that can
significantly shift design efficiencies and by consequence, economic costs.
At a high level, the process consists of ambient air that is passed over an air contactor
and fanned through the solid supported sorbent material. The term solid supported
comes from the sorbent being engrained within the pore space of an oxide molecule,
generally SiO2 (quartz) which natural forms a tetrahedral network structure. The CO2-
philic amine adsorbent loaded within the pore space can vary widely as can the link
between it and the solid support which encompasses a range of design permutations.
CR
Exhibit 41: Basic process flow diagram for solid sorbent DAC Exhibit 42: Enabled by oxide supported “molecular basket”
Ambient air is essentially filtered through a sorbent material Cyclic amine aborbent capture has been common in flue gasses for some
time
Source: National Academy of Sciences Source: Solid adsorbents for low-temperature CO2 capture with low-energy penalties leading to
BofA GLOBAL RESEARCH more effective integrated solutions for power generation and industrial processes. Sun et al.
A principle advantage of this method over an aqueous hydroxide sorbent is the capacity
for CO2 desorption at relatively low temperatures and which means that renewables,
photovoltaics or even waste heat from a contiguously located plant can be used as a
means of power. With that said, design optimization and particularly with respect to
material choice is the principle driver behind different efficiencies.
Conceptually, this process is already well employed in conventional CCUS dealing with
flue gas streams and involves a dual tower system, one in an absorption state while the
other is undergoing desorption and sorbent regeneration via steam injection. But here’s
where the nuances of the designs come in and identify a broad range of capture
efficiency, cycle timing and ultimate cost per captured molecule. Principle differences
between solid sorbent designs largely reflect choice of amines and classes, which is
largely a design optimization problem with each choice offering both operational perks
and disadvantages.
Exhibit 43: Dual tower system used in flue gas carbon capture Exhibit 44: Amine−Oxide Hybrid Materials for CO2 Capture from
One tower in absorbtion; the other tower in desorption Ambient Air
Amine choice is largely a design optimization problem
Source: DOE Source: Amine−Oxide Hybrid Materials for CO2 Capture from Ambient Air. Didas et al
Typically the trade-off is adsorption efficiency vs. sorbent degradation with chemically
bonded support structures (Class II) offering more protection against leaching during cyclical
operation but similarly limiting amine loading vs physically impregnated sorbents (Class I).
In any case the primary advantage of solid sorbents remains the lower thermal minimum
energy requirement and which means steam power requirements can be funded by lower
quality energy sources such as waste heat. Similarly, the lower thermal demands
make for readily available heat exchange opportunities to lower overall energy
demand. The diagrams below demonstrate just two possible configurations for a DAC
solid sorbent system to make use of waste heat from power generation and which
avoids needs for independent thermal components.
CR
The principle output of this is to say at least on a theoretical basis, capture costs form
solid sorbent means at least stand to undercut those estimated for aqueous
solution capture, however, scale and deployment remain less clear. As stated in
the prior discussion around liquid capture methods, a principle advantage was
considered as the capacity for scale from commercial proxies in other industries
(paper/pulp) with advantaged opportunities for locational benefits near low cost power
sources. Because of the assumption that thermal requirements for solid sorbent capture
are most efficiently provided by waste heat, these plants are more likely more readily
deployable alongside the power generation sector and which could be additive to
conventional CCUS from the flue gas stream.
Exhibit 45: Solid sorbent DAC paired with geothermal power Exhibit 46: Solid sorbent DAC paired with nuclear power
Low energy DAC can be run on Geothermal …as well as Nuclear power
Source: Cost Analysis of Direct Air Capture and Storage Coupled to Low-Carbon Thermal Energy in
Source: Cost Analysis of Direct Air Capture and Storage Coupled to Low-Carbon Thermal Energy in
the U.S.; MQueen et al
the U.S.; MQueen et al
The problem, however, remains that the addressable demand market in the US for
commercially captured CO2 still remains largely in favor of geologic sequestration and
with the currently most efficient means as EOR due to the output of a marginable
product in further hydrocarbon recovery. On the other hand, the prospect for a more
modular design retrofit in theory next to viable sources of waste heat is perhaps why
companies in this space have more readily taken up partnerships with oil majors
The below compares energy and thermal costs both methods, alongside estimated
capture costs which includes the uplift from a captured flue gas stream.
CR
Exhibit 47: Energy and efficiency comparisions between technologies and energy sources
Liquid solvent systems are generally higher cost per ton of CO2 captured
Source: National Academy of Sciences

Summary
The range of technologies both for modular DAC and even small industrial CCS appears
to be moving at a rapid pace. Our assessment is by no means intended to be
comprehensive but to illustrate the starting point on how greater focus by legislators, an
oil and gas industry under the spotlight on emissions and the vertical, industrial logic and
large project capability suggested by the IEA can come together to accelerate the pace
of innovation and ‘scalability’ of CCUS.
Whether this is through traditional means or emerging direct air capture technologies,
we see the common denominators of enhanced oil recovery, geological storage and as is
the case with Occidental and ExxonMobil, unique industrial synergies, one critical enabler
has been the greater availability of tax credits – including what is still, the relatively
recent adjustment to the California Low Carbon Fuel Standard which now makes credits
available to CCS projects (in state) and Direct Air Capture.
In our view, this stands as perhaps the single biggest issue to reset the prospective
economics of DAC – with Occidental, for now perhaps one of the biggest beneficiaries
within the broader US oil and gas sector. Below we explore the technology and
associated cost analysis through a case study of the process simulation presented
presented by Carbon Engineering in its 2018 Joule paper, which has been licensed by
Occidental through its subsidiary Low Carbon Ventures joint venture, 1pointfive.
CR
Case Study
1pointfive’s modular DAC proposal: Permian ‘clean’
campus
In an open access paper published in the June 2018 edition of the ‘Joule’ Journal ‘A
Process for Capturing CO2 from the Atmosphere’ Carbon Engineering presented a
hypothetical cost analysis, material balance and economic assessment for a range of
energy inputs (natural gas v grid power) based on actual materials, equipment costs and
FEED analysis. The assessment highlights where the use of existing process plant
available ‘off the shelf’ from other industries has been adapted by CE over the course of
a decade of process optimization to improve the efficiency of its technology6. The
analysis is based on a pilot CO2 capture plant scaled at T/day CO2 that has been running
since 2015 at its research headquarters in Squamish British Colombia in Canada.
Process simulation and basic organic chemistry are staples of oil and gas processes and
fundamental to reservoir engineering, refinery optimization and design and
petrochemical plant design. We recognize some of the concepts while interesting for
specialists may be unnecessarily complex for generalists and so we will endeavor to
simplify and spell out some of the more nuanced aspects of the process so as not to
presume a required minimal level of background our knowledge of particular issues.
CE’s simplified process schematic is shown below. Scaling to a proposed 1mmt/CO2 per
year plant was assessed using Aspen process simulation.
Aspen process simulation is one of may software packages commonly used in

industry to replicate and combine process and plant models in a digital environment.
Process inputs & outputs, plant sensitivities etc. can be manipulated before significant
capital is invested, to provide iterative design optimization.
Exhibit 48: Flow Diagram for DAC via aqueous solution
Simplified process flow diagram for CE’s process is shown below

CE’s business model is to license its technology to financial and industrial partners
around the world to enable rapid & widespread global deployment of DAC technology. In
Jan 2019, CE announced that it has received equity investments from two oil companies
- Chevron, via its Chevron Technology venture capital arm and Occidental Petroleum’s
Low Carbon Ventures (OLCV) subsidiary. The relationship with OLCV has since moved
quickly, cementing partnership with the largest CO2 EOR Company in the world:
• In May 2019 CE announced that it was jointly proceeding with engineering and
design of what would be the world’s largest DAC & sequestration facility in the
world, scaled at 500,000 t / year;
• In Aug 2020 CE announced its first license agreement with 1pointfive a newly
formed development company between OXY’s LCV subsidiary and PE firm Rusheen
Capital Management.
6
CE has been dev eloping DAC technology since 2009 and capturing CO₂ f rom the atmosphere at its pilot plant in
Squamish, B.C. since 2015.
CR
• In Feb 2021 1pointfive announced that the front end engineering and design (FEED)
contract had been awarded to Australian engineering firm, Worley – targeting
1mmtCO2/yr, but scaled as two 500,000tCO2 /yr plants (DAC 1 & 2).
In Aug 2020, 1pointfive released its first look at the design graphic below – noting the
scale of the plant vs its human cartoon! Our understanding is that plant is intended to be
collocated with OXY’s EOR operations in the Permian on a new 100 acre ‘Permian Clean
Campus’. Note that in Worley’s press release announcing the FEED award, it suggested
the initial collaboration was targeting ‘DAC 1 through 4’, suggesting that when
completed the Permian facility will be scaled closer to 2mmt CO2/yr.
Exhibit 49: Illustrative Representation of Direct Air Capture Facility
Initial plans suggest plants 1-4, sized at 500,000 tCO2/yr implies 2MMt CO2/yr gross once all are operating
Source: 1pointfive
From 1pointfive’s website the joint venture / license agreement is intended to

‘jumpstart the Direct Air Capture industry around the world’s showcase the critical role
this technology can play in reducing the global carbon footprint’. Notable is that CE
highlights that what will be the partnership’s first commercial facility is enabled by
effective market-based policies in the U.S., such as the California Low Carbon Fuel
Standard and Federal 45Q tax credit, underlining the critical role of enabling legislative
support.
OXY CEO Vicky Hollub recently confirmed that Front-End Engineering Design (FEED)
started in early 2021 with a view to proceed to a final investment decision around the
turn of the year, and construction start by end-2022.
CR
When operational, the first plant is expected to be the largest DAC facility in the world,
noting Climeworks Iceland plant is 4,000t CO2/yr.
Storegga’s ‘Dreamcatcher’ project

OXY LCV’s contribution to its partnership with CE includes ‘engineering, project
development and other technology performance assistance that will provide support for
the development and financing of the DAC plant. But while its initial focus is vertical
integration with EOR in the Permian, it will also participate in CE’s other licensing
endeavors through its equity ownership: for example, in June 2021 CE announced pre-
FEED had commenced in the ‘Dreamcatcher’ project operated by UK based Storegga
Dreamcatcher is a DAC facility located in NE Scotland, intended to permanently remove

500,000 – 1mm t/CO2 annually and the first large-scale facility of its kind in Europe.
Startup is targeted for 2026 with Scotland chosen for abundant renewable power source
(its windy up there !!), a skilled workforce associated with the North Sea oil and gas
industry and significant offshore storage potential to permanently sequester CO2 deep
below the seabed in partnership with the Acorn project mentioned earlier. As with the
enabling 45Q & LFCS credits in the US, funding for the initial Storegga study is
benefiting from a ~$325,000 grant from the UK Government’s Department for Business,
Energy and Industrial Strategy (BEIS) under the Direct Air Capture and Greenhouse Gas
Removal Technology Innovation Programme Award.
While Storegga may benefit from renewable power and permanent storage, we review
the potential economics of the 1pointfive developments, drawing from CE’s Joule paper
utilizing natural gas, with the US 45-Q / LCFS credits and augmented by BofA
assumptions
Conceptual project economics

Direct Air Carbon plant #1 has break even economics
CE’s Joule paper examined the potential costs for four conceptual direct air capture plant
configurations, the principal differences being the energy source to power the large
intake fans necessary for air flow and the 900oC temperatures required for the calciner.
Given that the initial 1pointfive plant will be located in the Permian we believe it is
appropriate to consider 100% of the energy from field sourced natural gas.
While significant gas has been flared in basin as part of the rapid development of
unconventional oil growth, the recent build out of infrastructure and focus by industry to
reduce emissions means assumed cost if gas is market based as opposed to assuming
‘free’ gas where a primary benefit is the ‘use’ of the gas. For the analysis below we
assume the current long-dated gas price which stands around $3/MMcf. Other
considerations are as follows:
• In its Joule paper, CE provided plant economics for a 1mmt CO2/yr plant, shown in
the table below. However the cost basis was 2016 dollars. Including inflation and
assuming contingency we present our analysis with a ~25% uplift in capital costs
and 10% for operating costs for the initial plant.
• The costs are presented as the initial plant, which Occidental describes as ‘serial
number 1.0’. With assumed efficiencies of development, CE suggests incremental
costs can drop by ~30% for the ‘Nth ’ plant; we assume similar progression arbitrarily
assumed over 4-5 years, so that capital costs drop below ~$500mm (500kt plant).
Finally, one critical difference versus the hypothetical 1mm tCO2/yr plant is that per
disclosure from Occidental Low Carbon Venture’s company 1pointfive, the initial plant
will comprise two 500,000t trains. All economics, including capital based on the ‘Joule’
paper, have therefore been pro-rated accordingly in our analysis.
CR
Exhibit 50: CE’s Detailed Capital Cost Assessment
Costs from fist plant to ‘Nth’ plant design drop by roughly 70%
Source: Carbon Engineering

Our analysis is based on ‘Scenario A’ presented earlier – a baseline, gas fired initial plant.
Other assumptions and related explanations are as follows:
• For Scenario A, CE suggests the required natural gas energy required is 8.81 GJ/t-
CO2; to convert to mmcf/t-CO2 divide by 0.9478 (GJ/mcf); at our $3.00/mcf flat
nominal price assumption, the cost per mm tonne CO2 is 8.81 x $3.00 / 0.9478 =
$28mm; remember this is for the 1mmt plant, for 500,000t, gas use is $14mm;
• CO2 capture from air is suggested at ~98%; however gas supplied also provides a
CO2 stream when burned, at a ratio of 0.48; therefore the CO2 stream output is
0.98 + 0.48 or 1.46t/CO2.
• Operating costs are assumed in CE’s example at $42mm for its scenario ‘A’ 100%
gas fueled plant. Assuming 10% inflation from its 2016 base case, annual opex
increases to $46mm for the 1mmt-CO2 plant, and half that for DAC1.
• We assume maintenance capital at $15mm annually, assuming a 50 year plant life

and have assumed a double-declining balance depreciation which reduces the tax
burden in the early years. Our understanding is that CCS facilities are covered under
IRS Asset Class #28, ‘Manufacture of Chemicals and Allied Products’. Corporate and
state taxes are assumed combined at 23%.
The table below summarizes the adjusted assumptions for our base case economics are
summarized in the table below.
CR
Exhibit 51: Converting CE’s Assumptions to BofA
We start with CE’s base assumptions on cost and covert to our assumed variables for actual Permian application
Provided by CE CE CE CE IRS LCFS DD&A Ta x NPV
Capital $mm Opex Gas Input Electricity 45Q (EOR) LFCS
Given 1,127 42 8.81 0 $35/tCO2 Floating N
Units $mm $/tCO2 GJ/tCO2 kWh/tCO2 $/tCO2
Conversion *1 Mt/yr MMBtu/t CO2 * 1.46 Mt/yr *1.0 Mt/yr
CE Base
Assumptions 0.5Mt plant $3.5/ GJ $60/Mwh
Contingency
Modifications / Added, maint 8% to 5yr Double
Notes cap assumed at 45-Q valid for Buffer Declining
$15mm/yr $3.00 / mmcf 0 12 years Assumed Oil Px Acct Balance Assumed $mm
Inputs ($mm / yr) (704) (46) (28) - 52 200 56.5 5 23% (16)
Source: BofA Global Research Estimates, Carbon Engineering
This last point assumes the plant makes the majority of its revenue from the sale of CO2
production to Occidental therefore making it eligible for five-year accelerated
depreciation. For now we assume CO2 cost at 2.4% of WTI on an Mcf basis and long-
term WTI oil price of $56.5 / bbl, consistent with BofA’s long term oil deck. However,
CO2 revenue is only one revenue bucket – we also have LCFS credits and the 45-Q
credit itself. There are caveats to each that we list out below.
First, one of the conditions of the LCFS is that 8-16% of generated credits must be
stored in a ‘buffer’ account. For our purposes and given that the preliminary commercial
opportunities are associated with mature EOR operations, we assume that the low end
of this range is appropriate but means $200/tCO2 is treated as $184/tCO2 for income
and cash flow purposes. We assume $200/tCO2 for LCFS here-forward though this will
fluctuate.
We assume 45-Q is eligible to be applied to both atmospheric (0.98Mt/yr) and point

source (0.46 Mt/yr from calcination) equating to $26mm and $37mm per year assuming
$35/t and $50/t on a nominal basis for EOR and dedicated geologic storage respectively.
As 45-Q acts as a one-for-one tax credit, not a deduction, (meaning the value is
inherently not taxable) for modeling purposes, we add the value of the credit back to
cash flow for the twelve years of eligibility and do not assume this credit is taken
against plant level income. The output is shown in the table below.
Assuming a nominal discount rate of ~8%, we see the value of a serial number
1.0 CE plant, scaled at 500,000t-CO2/yr, we see the potential project value at
essentially break even.
Exhibit 52: Demystifying the economics of CE’s design, value dependent on project financing, and capital cost assumptions
Based on our assessments, the economics of the the first plant is effectively breakeven on NPV basis
Costs Revenue Cash Flow
Sold Implied Free Cash Flow +
Date Capex Opex Gas Electricity Cost 45Q (EOR) LCFS CO2 Revenue Depreciation PBT Tax Income 45-Q (EOR)
1/22 (235) - - - - - - - - - - (235)
1/23 (235) - - - - - - - - - - (235)
1/24 (235) - - - - - - - - - - (235)
1/25 (15) (23) (14) - 26 100 20 112 (282) (207) - (207) 86
1/26 (15) (23) (14) - 26 100 20 112 (169) (94) - (94) 86
1/27 (15) (23) (14) - 26 100 20 112 (101) (27) - (27) 86
1/28 (15) (23) (14) - 26 100 20 112 (61) 14 3 11 83
1/29 (15) (23) (14) - 26 100 20 112 (37) 38 9 29 77
1/30 (15) (23) (14) - 26 100 20 112 (55) 20 5 15 81
1/31 (15) (23) (14) - 26 100 20 112 - 75 17 58 69
1/32 (15) (23) (14) - 26 100 20 112 - 75 17 58 69
1/33 (15) (23) (14) - 26 100 20 112 - 75 17 58 69
1/34 (15) (23) (14) - 26 100 20 112 - 75 17 58 69
1/35 (15) (23) (14) - 26 100 20 112 - 75 17 58 69
1/36 (15) (23) (14) - 26 100 20 112 - 75 17 58 69
CR
Exhibit 52: Demystifying the economics of CE’s design, value dependent on project financing, and capital cost assumptions
Based on our assessments, the economics of the the first plant is effectively breakeven on NPV basis
Costs Revenue Cash Flow
1/37 (15) (23) (14) - - 100 20 112 - 75 17 58 43
1/38 (15) (23) (14) - - 100 20 112 - 75 17 58 43
1/39 (15) (23) (14) - - 100 20 112 - 75 17 58 43
1/40 (15) (23) (14) - - 100 20 112 - 75 17 58 43
1/41 (15) (23) (14) - - 100 20 112 - 75 17 58 43
1/42 (15) (23) (14) - - 100 20 112 - 75 17 58 43
1/43 (15) (23) (14) - - 100 20 112 - 75 17 58 43
1/44 (15) (23) (14) - - 100 20 112 - 75 17 58 43
1/45 (15) (23) (14) - - 100 20 112 - 75 17 58 43
1/46 (15) (23) (14) - - 100 20 112 - 75 17 58 43
1/47 (15) (23) (14) - - 100 20 112 - 75 17 58 43
1/48 (15) (23) (14) - - 100 20 112 - 75 17 58 43
1/49 (15) (23) (14) - - 100 20 112 - 75 17 58 43
1/50 (15) (23) (14) - - 100 20 112 - 75 17 58 43
Source: BofA Global Research estimates
Sensitivity analysis
The tables below shows three dimensions of sensitivities that can drive wide swings in
NPV - capital costs, cost of capital of a project and LCFS credits (note we are using an
average cost over the life of the facility).
• LCFS vs Capex: our base case assumes $200/t-CO2 and puts plant #1 right around
break-even; currently LCFS is closer to $182,
Exhibit 53: Comparing Capital Costs and LCFS Credit

Current LCFS credit levels would suggest breakeven economics for a first-of-kind plant
LCFS Credit ($/t CO2 sequestered)
(16) 150 175 200 225 250 275 300 325
(829) (315) (221) (128) (37) 55 146 237 326
(804) (292) (198) (106) (14) 77 168 259 348
(779) (269) (175) (83) 8 99 191 281 370
Capital Cost ($mm)
(754) (246) (152) (61) 31 122 213 303 392

(729) (223) (129) (38) 53 144 235 324 414
(704) (200) (107) (16) 76 167 257 346 436
(679) (177) (84) 7 98 189 279 368 458
(654) (154) (62) 29 121 211 301 390 480
(629) (131) (40) 52 143 233 323 412 502
(604) (108) (17) 74 165 255 344 434 523
(579) (86) 5 97 187 277 366 456 545
(554) (63) 28 119 209 299 388 478 567
• WACC vs LCFS: our base case assumes an 8% weighted average cost of capital;
however LCFS sensitivity is still dominant.
CR
Exhibit 54: Comparing Cost of Capital and LCFS Credit
Our base case assumes an 8% wtd average cost of capital, but LCFS remains a dominant economic driver
LCFS Credit ($/t CO2 sequestered)
(16) 150 175 200 225 250 275 300 325
7.0% (161) (58) 44 146 248 349 449 549
7.5% (181) (83) 13 109 206 301 396 490
8.0% (200) (107) (16) 76 167 257 346 436
8.5% (217) (129) (42) 44 131 216 301 386
Discount Rate
9.0% (233) (149) (67) 15 98 179 259 339

9.5% (247) (168) (89) (11) 67 144 220 297
10.0% (261) (185) (110) (36) 38 112 184 257
10.5% (273) (201) (130) (59) 12 82 151 220
11.0% (285) (216) (148) (80) (13) 54 120 186
11.5% (296) (230) (165) (100) (36) 28 91 154
12.0% (306) (243) (181) (119) (57) 4 64 125
12.5% (315) (255) (195) (136) (77) (19) 39 97
Nth model efficiency

Recall the CE assessment assumed Nth plant capital efficiency of around 30%. Reflecting
on recent commentary by Occidental CEO Vicky Hollub, this is one area where it believes
incremental plant development synergies with its chemicals business comes into play.
Taking that notion into account, we extrapolated our analysis from a single 500,000
tCO2/yr plant to reflect what a 10 plant model could look like, as a base case aligned
with OXY CEO’s suggestion that it could see one DAC plant development per year.
We assume the Nth plant efficiency kicks in 50% for plant 2 and stepping in gradually
over the period, and shown in the chart below.
Exhibit 55: Assumed Capital Efficiency Gains to ‘Nth’ Plant Design
We assume efficiency gains step in gradually but has diminishing impact over time
0 16%
-100 14%
-200 12%
-300 10%
-400 8%
-500 6%
-600 4%
-700 2%
-800 0%
CR
The below shows our outputs for project level post tax earnings with capital efficiency
reflected in depreciation.
Exhibit 56: Full Project Model for 10 Plant Design
Rolling our assumed capital efficiency gains and pacing guided by 1pointfive, our theoretical 10 plant project model is shown below
No. 1 2 3 4 5 6 7 8 9 10 NPV
Capital Improvement (%) 0.0% 14.0% 8.4% 5.0% 3.0% 1.8% 1.1% 0.7% 0.4% 0.2% 947
Capex (704) (606) (555) (527) (511) (502) (496) (493) (491) (490) Free cash flow
PV (12) 73 108 121 123 120 114 107 100 93
Capture Cost - DAC (CRF 12.5%) 265 241 228 221 217 215 213 212 212 212
Avoided Cost - DAC (CRF 12.5%) 237 213 200 193 189 187 185 184 184 184
Capture Cost - DAC (CRF 7.5%) 195 180 172 168 166 164 164 163 163 163
Avoided Cost - DAC (CRF 7.5%) 133 123 118 115 114 113 112 112 111 111
1/1/2022 (235) - - - - - - - - - (235)

1/1/2023 (235) (202) - - - - - - - - (437)
1/1/2024 (235) (202) (185) - - - - - - - (622)
1/1/2025 86 (202) (185) (176) - - - - - - (477)
1/1/2026 86 86 (185) (176) (170) - - - - - (359)
1/1/2027 86 86 86 (176) (170) (167) - - - - (256)
1/1/2028 83 86 86 86 (170) (167) (165) - - - (163)
1/1/2029 77 83 86 86 86 (167) (165) (164) - - (80)
1/1/2030 81 77 83 86 86 86 (165) (164) (164) - 5
1/1/2031 69 81 77 83 86 86 86 (164) (164) (163) 76
1/1/2032 69 69 81 77 83 86 86 86 (164) (163) 309
1/1/2033 69 69 69 81 77 83 86 86 86 (163) 541
1/1/2034 69 69 69 69 81 77 83 86 86 86 773
1/1/2035 69 69 69 69 69 81 77 83 86 86 756
1/1/2036 69 69 69 69 69 69 81 77 83 86 739
1/1/2037 43 69 69 69 69 69 69 81 77 83 696
1/1/2038 43 43 69 69 69 69 69 69 81 77 656
1/1/2039 43 43 43 69 69 69 69 69 69 81 621
1/1/2040 43 43 43 43 69 69 69 69 69 69 582
1/1/2041 43 43 43 43 43 69 69 69 69 69 556
1/1/2042 43 43 43 43 43 43 69 69 69 69 530
1/1/2043 43 43 43 43 43 43 43 69 69 69 504
1/1/2044 43 43 43 43 43 43 43 43 69 69 478
1/1/2045 43 43 43 43 43 43 43 43 43 69 452
1/1/2046 43 43 43 43 43 43 43 43 43 43 426
1/1/2047 43 43 43 43 43 43 43 43 43 43 426
1/1/2048 43 43 43 43 43 43 43 43 43 43 426
1/1/2049 43 43 43 43 43 43 43 43 43 43 426
1/1/2050 43 43 43 43 43 43 43 43 43 43 426
1/1/2051 43 43 43 43 43 43 43 43 43 43 426
1/1/2052 43 43 43 43 43 43 43 43 43 43 426
1/1/2053 43 43 43 43 43 43 43 43 43 43 426
1/1/2054 43 43 43 43 43 43 43 43 43 43 426
1/1/2055 43 43 43 43 43 43 43 43 43 43 426
1/1/2056 - 43 43 43 43 43 43 43 43 43 383
1/1/2057 - - 43 43 43 43 43 43 43 43 341
1/1/2058 - - - 43 43 43 43 43 43 43 298
Source: BofA Global Research estimates, *Note: Levelized cost assessments include assumed maintenance capex
At a project level, net spending peaks after three plants, while total project spending is
net free cash neutral after year 7. Absolute free cash flow peaks at around $800mm
after 10 years. Note, all plants are assumed to capture CO2 with Enhanced Oil Recovery
(and hence received the 45Q credit of $35/t).
CR
Exhibit 57: Illustrative Cash Flow Profile
Free cash peaks at around $800mm for our assumed 10 plant model
1,500
1,000
500
(500)
(1,000)
Pl a nt 1
Pl a nt 2
Pl a nt 3
Pl a nt 4
Pl a nt 5
Pl a nt 6
Pl a nt 7
Pl a nt 8
Pl a nt 9
Pl a nt 10
Pl a nt 11
Pl a nt 12
Pl a nt 13
Pl a nt 14
Pl a nt 15
Pl a nt 16
Pl a nt 17
Pl a nt 18
Pl a nt 19
Pl a nt 20
Source: BofA Global Research estimatesm company dat
Summary
Our analysis is clearly based on inputs that have a wide range of potential variability. It
also shows the significance of 45Q and LCFS tax credits as a critical enabler of DAC
economics. Occidental is taking a leading position as an enabling partner to move
forward the first commercial DAC plant. But on our analysis, the economics are marginal
– and even with capital efficiencies assumed on future plant, cumulative economics are
similarly modest. In absolute terms, for a company of OXY’s size, the stand alone
cumulative value of ~$1bn is relatively small. From recent discussions with OXY CEO
Vicky Hollub, the suggestion is that plant costs may ‘positively surprise’; still, on an
incremental plant scaled at 500,000t-CO2 annually, the impact may be more on bragging
rights than a material impact on OXY’s size.
Footnote: Project financing

…and the tax-equity arrangement
Throughout this discussion, we have predicated our assumptions with the backdrop that
follows on a view that Direct Air Capture project financing hinges on a tax equity
arrangement. What does this mean?
While the latest iteration of 45-Q was enacted in 2018, the IRS has only recently
clarified some of the outstanding questions in Feb 2020, namely around requirements
for project eligibility and how and when credits are administered. But from a financing
standpoint what we find to be more impactful is further clarification around transferring
and effectively monetizing 45-Q credits via the IRS 2020-12 revenue procedure.
The problem stems from the inherent challenge of the usability of the federal credit to
the capturer that according to the 45-Q is the legal recipient. As we mentioned in our
modelling assumptions, this is not a real cash flow but rather a direct offset to federal
income tax liability. However, in an early stage DAC partnerships, it’s unlikely that the
partners will hold any significant tax liability and thus have limited use for federal tax
subsidies. Wind, solar and other renewable projects have faced similar challenges but
have found favor from investors via the use of a ‘tax equity arrangement’ wherein an
investment partner looking to offset some of its tax liability, buys into the partnership to
gain access to the credit and in turn provides up front project financing.
CR
In Revenue Procedure 2020-12 the IRS has laid out the ground rules for a similar
arrangement in 45-Q that allows for a ‘partnership flip’ structure, largely similar to the
Investment Tax Credit (ITC) and Production Tax Credit (PTC) that have helped spur the
proliferation of wind and solar. The way this works in layman’s terms is as follows:
• A developer owns and operates carbon capture equipment. For the purposes of
credit transfer, the IRS specifies that the developer must set up a project company
that captures CO2 and stores it thus effectively ring-fencing the project.
• An investor can then put up capital in exchange for a dedicated equity allocation in
the partnership in the project company. 50% of the total capital must be offered up
front. The balance can be deferred and contingent on the payment of credits and is
defined as PAYGO (‘Pay As You Go’). This is already an advantage over wind ITC’s
which only offer 25% PAYGO.
• The partnership begins to generate credits. From here we refer to the table
provided below:
In Period 1: The developer is in a cost recovery mode, claiming 100% of the cash flow
while the investor lays claim to 99% of the generated 45-Q credits. Period 1 continues
until a fixed date or until the developer has reached an agreed return. What’s important
to note is that credits follow associated allocations of P&L but not necessarily cash flow,
meaning that a developer can be recouping 100% of the cash while reporting just 1% of
gross income. It is also for this reason that we assume accelerated depreciation in our
model which would be beneficial to the investor as an additional offset to tax liability
beyond the credit itself.
In Period 2: P&L allocations remain the same but the investor enters into a cost
recovery mode, continuing to claim 100% of the cash until an agreed return has been
met, commonly referred to as a ‘target yield’. On top of this, the investor continues to
own the majority of P&L as well as the tax credits which follow. After the target yield
has been met, the partnership enters Period 3.
In Period 3: The partnership allocations ‘flip’ back to the developer both on a P&L and
cash basis allowing the developer to own the majority of the annuity cash flow stream.
Exhibit 58: The ‘partnership flip’ structure defined by the IRS for 45-Q
The IRS defines a template tax equity arrangement for 45-Q
Source: IRS Rev Proc 2020-12

What can be seen above is that the developer benefits by reaping the majority of the
annuity cash flow stream without having to fund a significant portion of the upfront
capital. Similarly, the investor benefits by reaping the value of the tax credits and
associated depreciation in the project and then ultimately receiving a cash return on
investment before the partnership flips back to the developer. In many ways, this
operates similar to a bond.
But what makes Direct Air Capture and tax equity all the more interesting is the idea
that there’s an intangible benefit to the investor, the possibility to claim a reduction in
CR
emissions via equity ownership in the partnership without adjusting its own behaviors.
Put differently, this becomes a very interesting prospect for ‘hard to abate’ sectors, i.e.
those that have limited opportunities to lower emissions via simple material switching
or energy use. This offers a distinct advantage over other tax equity arrangements and is
one that we fully expect to play out in the proliferation of CCUS as investor confidence
in IRS protocol gains momentum. We have taken this idea into our model and have
considered 45-Q as cash flow benefit from the facility itself, which assumes it is claimed
by an investor as a direct offset to federal tax liability or rather a direct uplift to
corporate cash flow.
As it relates to Occidental, the 1pointfive partnership essentially achieves this outcome.
CR
Fun facts …for climate nerds #1
A background in engineering doesn’t qualify as climate science; but it does qualify one to
question, probe and present research as we find it. So here are some fun facts to keep
the discussion going ….. recall the starting point for consideration on the effectiveness
of removing CO2 is that industrial streams have a concentration of 1:10 vs 1:2500 for
atmospheric air – or 0.04%. key questions we are interested in:
What’s the sensitivity of the earth’s temperature change to changes in CO2?

The IPCC 6th assessment report has wide range of estimates for the impact on global
temperatures from a doubling of CO2 concentrations - from 1.5 to 4.5°C, drawn from a
variety of scientific papers. The most recent paper we have found on the topic is from
the international Journal of Atmospheric & Oceanic Sciences examining ‘The Impact of
CO2, H2O & Other Greenhouse Gases on Equilibrium Earth Temperatures7’. Interesting
and no doubt controversial observations include:
• It is of some interest to calculate the increase in temperature due to the increase in
atmospheric CO2 levels from 280ppm prior at the start of the industrial revolution
to the current 420ppm registered at the Mauna Loa Observatory… the estimated
temperature change associated with the increase of 140ppm in CO2 concentration
is 0.24K and is the full extent of anthropogenic global warming to date.
• H2O is by far the dominant greenhouse gas; an increase in average Relative Humidity
of 1% will result in a temperature increase of 0.03 Kelvin; by comparison CO2 is a big
player … the climate sensitivity to a doubling of CO2 from 400ppm to 800ppm is
calculated to be 0.45–0.5 K - significantly lower than the IPCC claim of 1.5-4.5K.
The report goes on to conclude: ‘The earth’s atmosphere is a near perfect example of a
stable system … The atmosphere, mainly due to the beneficial characteristics and impact
of H2O absorption spectra, proves to be a highly stable moderator of global
temperatures. There is no impending climate emergency and CO2 is not the control
parameter of global temperatures - that accolade falls to H2O. CO2 is simply the
supporter of life on this planet as a result of the miracle of photosynthesis.
Exhibit 59: Changes in temperature x doubling in CO2 concentration Exhibit 60: Temperature changes x CO2 concentration
Climate sensitivity to CO2 may be lower than is widely accepted The impact of CO2 on temperature is not linear
Source: 1 David Coe, Walter Fabinski, Gerhard Wiegleb. The Impact of CO2 , H2O and Other Source: 1 David Coe, Walter Fabinski, Gerhard Wiegleb. The Impact of CO2 , H2O and Other
“Greenhouse Gases” on Equilibrium Earth Temperatures. Int’l Journal of Atmospheric and Oceanic “Greenhouse Gases” on Equilibrium Earth Temperatures. Int’l Journal of Atmospheric and Oceanic
Sciences Sciences
7
David Coe, Walter Fabinski, Gerhard Wiegleb. The Impact of CO2 , H2O and Other “Greenhouse Gases” on Equilibrium
Earth Temperatures. Int’l Journal of Atmospheric and Oceanic Sciences. Vol. 5, No. 2, 2021, pp. 29-40. doi: 10.11648 /
j.ijaos.20210502.12
CR
Disclosures
Important Disclosures
FUNDAMENTAL EQUITY OPINION KEY: Opinions include a Volatility Risk Rating, an Investment Rating and an Income Rating. VOLATILITY RISK RATINGS, indicators
of potential price fluctuation, are: A - Low, B - Medium and C - High. INVESTMENT RATINGS reflect the analyst’s assessment of both a stock’s: absolute total return
potential as well as its attractiveness for investment relative to other stocks within its Coverage Cluster (defined below). There are three investment ratings: 1 - Buy
stocks are expected to have a total return of at least 10% and are the most attractive stocks in the coverage cluster; 2 - Neutral stocks are expected to remain flat or
increase in value and are less attractive than Buy rated stocks and 3 - Underperform stocks are the least attractive stocks in a coverage cluster. Analysts assign
investment ratings considering, among other things, the 0-12 month total return expectation for a stock and the firm’s guidelines for ratings dispersions (shown in
the table below). The current price objective for a stock should be referenced to better understand the total return expectation at any given time. The price objective
reflects the analyst’s view of the potential price appreciation (depreciation).
Investment rating Total return expectation (within 12-month period of date of initial Ratings dispersion guidelines for coverage cluster*
rating)
Buy ≥ 10% ≤ 70%
Neutral ≥ 0% ≤ 30%
Underperform N/A ≥ 20%
* Ratings dispersions may vary from time to time where BofA Global Research believes it better reflects the investment prospects of stocks in a Coverage Cluster.
INCOME RATINGS, indicators of potential cash dividends, are: 7 - same/higher (dividend considered to be secure), 8 - same/lower (dividend not considered to be secure)
and 9 - pays no cash dividend. Coverage Cluster is comprised of stocks covered by a single analyst or two or more analysts sharing a common industry, sector,
region or other classification(s). A stock’s coverage cluster is included in the most recent BofA Global Research report referencing the stock.
BofA Global Research personnel (including the analyst(s) responsible for this report) receive compensation based upon, among other factors, the overall profitability of Bank of America
Corporation, including profits derived from investment banking. The analyst(s) responsible for this report may also receive compensation based upon, among other factors, the overall
profitability of the Bank’s sales and trading businesses relating to the class of securities or financial instruments for which such analyst is responsible.
Other Important Disclosures

From time to time research analysts conduct site visits of covered issuers. BofA Global Research policies prohibit research analysts from accepting payment or reimbursement for travel
expenses from the issuer for such visits.
Prices are indicative and for information purposes only. Except as otherwise stated in the report, for the purpose of any recommendation in relation to: 1) an equity security, the price referenced
is the publicly traded price of the security as of close of business on the day prior to the date of the report or, if the report is published during intraday trading, the price referenced is indicative
of the traded price as of the date and time of the report; or 2) a debt security (including equity preferred and CDS), prices are indicative as of the date and time of the report and are from various
sources including BofA Securities trading desks.
The date and time of completion of the production of any recommendation in this report shall be the date and time of dissemination of this report as recorded in the report timestamp.
Recipients who are not institutional investors or market professionals should seek the advice of their independent financial advisor before considering information in this report in connection
with any investment decision, or for a necessary explanation of its contents.
Officers of BofAS or one or more of its affiliates (other than research analysts) may have a financial interest in securities of the issuer(s) or in related investments.
Refer to BofA Global Research policies relating to conflicts of interest.
"BofA Securities" includes BofA Securities, Inc. ("BofAS") and its affiliates. Investors should contact their BofA Securities representative or Merrill Global Wealth Management
financial advisor if they have questions concerning this report or concerning the appropriateness of any investment idea described herein for such investor. "BofA Securities" is a
global brand for BofA Global Research.
Information relating to Non-US affiliates of BofA Securities and Distribution of Affiliate Research Reports:
BofAS and/or Merrill Lynch, Pierce, Fenner & Smith Incorporated ("MLPF&S") may in the future distribute, information of the following non-US affiliates in the US (short name: legal name,
regulator): Merrill Lynch (South Africa): Merrill Lynch South Africa (Pty) Ltd., regulated by The Financial Service Board; MLI (UK): Merrill Lynch International, regulated by the Financial Conduct
Authority (FCA) and the Prudential Regulation Authority (PRA); BofASE (France): BofA Securities Europe SA is authorized by the Autorité de Contrôle Prudentiel et de Résolution (ACPR) and
regulated by the ACPR and the Autorité des Marchés Financiers (AMF). Note that BofA Securities Europe SA has registered address at 51 rue la Boétie, 75008 Paris, is registered under no. 842
602 690 RCS Paris, and its share capital can be found on BofASE's disclaimer webpage; BofA Europe (Milan): Bank of America Europe Designated Activity Company, Milan Branch, regulated by
the Bank of Italy, the European Central Bank (ECB) and the Central Bank of Ireland (CBI); BofA Europe (Frankfurt): Bank of America Europe Designated Activity Company, Frankfurt Branch
regulated by BaFin, the ECB and the CBI; BofA Europe (Madrid): Bank of America Europe Designated Activity Company, Sucursal en España, regulated by the Bank of Spain, the ECB and the CBI;
Merrill Lynch (Australia): Merrill Lynch Equities (Australia) Limited, regulated by the Australian Securities and Investments Commission; Merrill Lynch (Hong Kong): Merrill Lynch (Asia Pacific)
Limited, regulated by the Hong Kong Securities and Futures Commission (HKSFC); Merrill Lynch (Singapore): Merrill Lynch (Singapore) Pte Ltd, regulated by the Monetary Authority of Singapore
(MAS); Merrill Lynch (Canada): Merrill Lynch Canada Inc, regulated by the Investment Industry Regulatory Organization of Canada; Merrill Lynch (Mexico): Merrill Lynch Mexico, SA de CV, Casa de
Bolsa, regulated by the Comisión Nacional Bancaria y de Valores; Merrill Lynch (Argentina): Merrill Lynch Argentina SA, regulated by Comisión Nacional de Valores; BofAS Japan: BofA Securities
Japan Co., Ltd., regulated by the Financial Services Agency; Merrill Lynch (Seoul): Merrill Lynch International, LLC Seoul Branch, regulated by the Financial Supervisory Service; Merrill Lynch
(Taiwan): Merrill Lynch Securities (Taiwan) Ltd., regulated by the Securities and Futures Bureau; BofAS India: BofA Securities India Limited, regulated by the Securities and Exchange Board of
India (SEBI); Merrill Lynch (Indonesia): PT Merrill Lynch Sekuritas Indonesia, regulated by Otoritas Jasa Keuangan (OJK); Merrill Lynch (Israel): Merrill Lynch Israel Limited, regulated by Israel
Securities Authority; Merrill Lynch (Russia): OOO Merrill Lynch Securities, Moscow, regulated by the Central Bank of the Russian Federation; Merrill Lynch (DIFC): Merrill Lynch International (DIFC
Branch), regulated by the Dubai Financial Services Authority (DFSA); Merrill Lynch (Brazil): Merrill Lynch S.A. Corretora de Títulos e Valores Mobiliários, regulated by Comissão de Valores
Mobiliários; Merrill Lynch KSA Company: Merrill Lynch Kingdom of Saudi Arabia Company, regulated by the Capital Market Authority.
This information: has been approved for publication and is distributed in the United Kingdom (UK) to professional clients and eligible counterparties (as each is defined in the rules of the FCA
and the PRA) by MLI (UK), which is authorized by the PRA and regulated by the FCA and the PRA - details about the extent of our regulation by the FCA and PRA are available from us on request;
has been approved for publication and is distributed in the European Economic Area (EEA) by BofASE (France), which is authorized by the ACPR and regulated by the ACPR and the AMF; has
been considered and distributed in Japan by BofAS Japan, a registered securities dealer under the Financial Instruments and Exchange Act in Japan, or its permitted affiliates; is issued and
distributed in Hong Kong by Merrill Lynch (Hong Kong) which is regulated by HKSFC; is issued and distributed in Taiwan by Merrill Lynch (Taiwan); is issued and distributed in India by BofAS
India; and is issued and distributed in Singapore to institutional investors and/or accredited investors (each as defined under the Financial Advisers Regulations) by Merrill Lynch (Singapore)
(Company Registration No 198602883D). Merrill Lynch (Singapore) is regulated by MAS. Merrill Lynch Equities (Australia) Limited (ABN 65 006 276 795), AFS License 235132 (MLEA) distributes
this information in Australia only to 'Wholesale' clients as defined by s.761G of the Corporations Act 2001. With the exception of Bank of America N.A., Australia Branch, neither MLEA nor any of
its affiliates involved in preparing this information is an Authorised Deposit-Taking Institution under the Banking Act 1959 nor regulated by the Australian Prudential Regulation Authority. No
approval is required for publication or distribution of this information in Brazil and its local distribution is by Merrill Lynch (Brazil) in accordance with applicable regulations. Merrill Lynch (DIFC) is
CR
authorized and regulated by the DFSA. Information prepared and issued by Merrill Lynch (DIFC) is done so in accordance with the requirements of the DFSA conduct of business rules. BofA
Europe (Frankfurt) distributes this information in Germany and is regulated by BaFin, the ECB and the CBI. BofA Securities entities, including BofA Europe and BofASE (France), may
outsource/delegate the marketing and/or provision of certain research services or aspects of research services to other branches or members of the BofA Securities group. You may be contacted
by a different BofA Securities entity acting for and on behalf of your service provider where permitted by applicable law. This does not change your service provider. Please refer to the Electronic
Communications Disclaimers for further information.
This information has been prepared and issued by BofAS and/or one or more of its non-US affiliates. The author(s) of this information may not be licensed to carry on regulated activities in your
jurisdiction and, if not licensed, do not hold themselves out as being able to do so. BofAS and/or MLPF&S is the distributor of this information in the US and accepts full responsibility for
information distributed to BofAS and/or MLPF&S clients in the US by its non-US affiliates. Any US person receiving this information and wishing to effect any transaction in any security
discussed herein should do so through BofAS and/or MLPF&S and not such foreign affiliates. Hong Kong recipients of this information should contact Merrill Lynch (Asia Pacific) Limited in
respect of any matters relating to dealing in securities or provision of specific advice on securities or any other matters arising from, or in connection with, this information. Singapore recipients
of this information should contact Merrill Lynch (Singapore) Pte Ltd in respect of any matters arising from, or in connection with, this information. For clients that are not accredited investors,
expert investors or institutional investors Merrill Lynch (Singapore) Pte Ltd accepts full responsibility for the contents of this information distributed to such clients in Singapore.
General Investment Related Disclosures:
Taiwan Readers: Neither the information nor any opinion expressed herein constitutes an offer or a solicitation of an offer to transact in any securities or other financial instrument. No part of
this report may be used or reproduced or quoted in any manner whatsoever in Taiwan by the press or any other person without the express written consent of BofA Securities.
This document provides general information only, and has been prepared for, and is intended for general distribution to, BofA Securities clients. Neither the information nor any opinion
expressed constitutes an offer or an invitation to make an offer, to buy or sell any securities or other financial instrument or any derivative related to such securities or instruments (e.g., options,
futures, warrants, and contracts for differences). This document is not intended to provide personal investment advice and it does not take into account the specific investment objectives,
financial situation and the particular needs of, and is not directed to, any specific person(s). This document and its content do not constitute, and should not be considered to constitute,
investment advice for purposes of ERISA, the US tax code, the Investment Advisers Act or otherwise. Investors should seek financial advice regarding the appropriateness of investing in financial
instruments and implementing investment strategies discussed or recommended in this document and should understand that statements regarding future prospects may not be realized. Any
decision to purchase or subscribe for securities in any offering must be based solely on existing public information on such security or the information in the prospectus or other offering
document issued in connection with such offering, and not on this document.
Securities and other financial instruments referred to herein, or recommended, offered or sold by BofA Securities, are not insured by the Federal Deposit Insurance Corporation and are not
deposits or other obligations of any insured depository institution (including, Bank of America, N.A.). Investments in general and, derivatives, in particular, involve numerous risks, including,
among others, market risk, counterparty default risk and liquidity risk. No security, financial instrument or derivative is suitable for all investors. Digital assets are extremely speculative, volatile
and are largely unregulated. In some cases, securities and other financial instruments may be difficult to value or sell and reliable information about the value or risks related to the security or
financial instrument may be difficult to obtain. Investors should note that income from such securities and other financial instruments, if any, may fluctuate and that price or value of such
securities and instruments may rise or fall and, in some cases, investors may lose their entire principal investment. Past performance is not necessarily a guide to future performance. Levels and
basis for taxation may change.
This report may contain a short-term trading idea or recommendation, which highlights a specific near-term catalyst or event impacting the issuer or the market that is anticipated to have a
short-term price impact on the equity securities of the issuer. Short-term trading ideas and recommendations are different from and do not affect a stock's fundamental equity rating, which
reflects both a longer term total return expectation and attractiveness for investment relative to other stocks within its Coverage Cluster. Short-term trading ideas and recommendations may
be more or less positive than a stock's fundamental equity rating.
BofA Securities is aware that the implementation of the ideas expressed in this report may depend upon an investor's ability to "short" securities or other financial instruments and that such
action may be limited by regulations prohibiting or restricting "shortselling" in many jurisdictions. Investors are urged to seek advice regarding the applicability of such regulations prior to
executing any short idea contained in this report.
Foreign currency rates of exchange may adversely affect the value, price or income of any security or financial instrument mentioned herein. Investors in such securities and instruments,
including ADRs, effectively assume currency risk.
UK Readers: The protections provided by the U.K. regulatory regime, including the Financial Services Scheme, do not apply in general to business coordinated by BofA Securities entities located
outside of the United Kingdom.
BofAS or one of its affiliates is a regular issuer of traded financial instruments linked to securities that may have been recommended in this report. BofAS or one of its affiliates may, at any time,
hold a trading position (long or short) in the securities and financial instruments discussed in this report.
BofA Securities, through business units other than BofA Global Research, may have issued and may in the future issue trading ideas or recommendations that are inconsistent with, and reach
different conclusions from, the information presented herein. Such ideas or recommendations may reflect different time frames, assumptions, views and analytical methods of the persons who
prepared them, and BofA Securities is under no obligation to ensure that such other trading ideas or recommendations are brought to the attention of any recipient of this information.
In the event that the recipient received this information pursuant to a contract between the recipient and BofAS for the provision of research services for a separate fee, and in connection
therewith BofAS may be deemed to be acting as an investment adviser, such status relates, if at all, solely to the person with whom BofAS has contracted directly and does not extend beyond
the delivery of this report (unless otherwise agreed specifically in writing by BofAS). If such recipient uses the services of BofAS in connection with the sale or purchase of a security referred to
herein, BofAS may act as principal for its own account or as agent for another person. BofAS is and continues to act solely as a broker-dealer in connection with the execution of any transactions,
including transactions in any securities referred to herein.
Copyright and General Information:
Copyright 2021 Bank of America Corporation. All rights reserved. iQprofile℠,iQ m ethod℠are service m arks ofBank ofAm erica Corporation. iQdatabase® is a registered service mark of Bank of
America Corporation. This information is prepared for the use of BofA Securities clients and may not be redistributed, retransmitted or disclosed, in whole or in part, or in any form or manner,
without the express written consent of BofA Securities. BofA Global Research information is distributed simultaneously to internal and client websites and other portals by BofA Securities and
is not publicly-available material. Any unauthorized use or disclosure is prohibited. Receipt and review of this information constitutes your agreement not to redistribute, retransmit, or disclose
to others the contents, opinions, conclusion, or information contained herein (including any investment recommendations, estimates or price targets) without first obtaining express
permission from an authorized officer of BofA Securities.
Materials prepared by BofA Global Research personnel are based on public information. Facts and views presented in this material have not been reviewed by, and may not reflect information
known to, professionals in other business areas of BofA Securities, including investment banking personnel. BofA Securities has established information barriers between BofA Global Research
and certain business groups. As a result, BofA Securities does not disclose certain client relationships with, or compensation received from, such issuers. To the extent this material discusses
any legal proceeding or issues, it has not been prepared as nor is it intended to express any legal conclusion, opinion or advice. Investors should consult their own legal advisers as to issues of
law relating to the subject matter of this material. BofA Global Research personnel’s knowledge of legal proceedings in which any BofA Securities entity and/or its directors, officers and
employees may be plaintiffs, defendants, co-defendants or co-plaintiffs with or involving issuers mentioned in this material is based on public information. Facts and views presented in this
material that relate to any such proceedings have not been reviewed by, discussed with, and may not reflect information known to, professionals in other business areas of BofA Securities in
connection with the legal proceedings or matters relevant to such proceedings.
This information has been prepared independently of any issuer of securities mentioned herein and not in connection with any proposed offering of securities or as agent of any issuer of any
securities. None of BofAS any of its affiliates or their research analysts has any authority whatsoever to make any representation or warranty on behalf of the issuer(s). BofA Global Research
policy prohibits research personnel from disclosing a recommendation, investment rating, or investment thesis for review by an issuer prior to the publication of a research report containing
such rating, recommendation or investment thesis.
Any information relating to the tax status of financial instruments discussed herein is not intended to provide tax advice or to be used by anyone to provide tax advice. Investors are urged to
seek tax advice based on their particular circumstances from an independent tax professional.
The information herein (other than disclosure information relating to BofA Securities and its affiliates) was obtained from various sources and we do not guarantee its accuracy. This information
may contain links to third-party websites. BofA Securities is not responsible for the content of any third-party website or any linked content contained in a third-party website. Content
contained on such third-party websites is not part of this information and is not incorporated by reference. The inclusion of a link does not imply any endorsement by or any affiliation with BofA
Securities. Access to any third-party website is at your own risk, and you should always review the terms and privacy policies at third-party websites before submitting any personal information
CR
to them. BofA Securities is not responsible for such terms and privacy policies and expressly disclaims any liability for them.
All opinions, projections and estimates constitute the judgment of the author as of the date of publication and are subject to change without notice. Prices also are subject to change without
notice. BofA Securities is under no obligation to update this information and BofA Securities ability to publish information on the subject issuer(s) in the future is subject to applicable quiet
periods. You should therefore assume that BofA Securities will not update any fact, circumstance or opinion contained herein.
Certain outstanding reports or investment opinions relating to securities, financial instruments and/or issuers may no longer be current. Always refer to the most recent research report relating
to an issuer prior to making an investment decision.
In some cases, an issuer may be classified as Restricted or may be Under Review or Extended Review. In each case, investors should consider any investment opinion relating to such issuer (or
its security and/or financial instruments) to be suspended or withdrawn and should not rely on the analyses and investment opinion(s) pertaining to such issuer (or its securities and/or financial
instruments) nor should the analyses or opinion(s) be considered a solicitation of any kind. Sales persons and financial advisors affiliated with BofAS or any of its affiliates may not solicit
purchases of securities or financial instruments that are Restricted or Under Review and may only solicit securities under Extended Review in accordance with firm policies.
Neither BofA Securities nor any officer or employee of BofA Securities accepts any liability whatsoever for any direct, indirect or consequential damages or losses arising from any use of this
information.
CR

Carbon Negative: A Primer On Vertical Integration of CCUS / DAC With Oil & Gas

Uploaded by

Copyright:

Available Formats

You might also like

Carbon Negative: A Primer On Vertical Integration of CCUS / DAC With Oil & Gas

Uploaded by

Document Information

Original Description:

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Carbon Negative: A Primer On Vertical Integration of CCUS / DAC With Oil & Gas

Uploaded by

Copyright:

Available Formats

Accessible version

US Oil and Gas

Timestamp: 13 September 2021 09:30AM EDT

2 US Oil and Gas | 13 September 2021

Source: IEA Source: IEA

US Oil and Gas | 13 September 2021 3

Source: IEA Source: Global CCS Institute

4 US Oil and Gas | 13 September 2021

US Oil and Gas | 13 September 2021 5

Source: Congressional Research Service

6 US Oil and Gas | 13 September 2021

Credit Value $/tCO2

The SCALE Act

State Tax credits

US Oil and Gas | 13 September 2021 7

Source: California Air Resources Board

However when considering project returns, an important distinction has to be made

8 US Oil and Gas | 13 September 2021

Source: Global CCS Institute

US Oil and Gas | 13 September 2021 9

Source: Global CCS Institute

Where does the oil & gas industry fit in?

Permanent storage: the critical path to Paris 1.5

10 US Oil and Gas | 13 September 2021

Source: McKinsey Source: DOE NETL

US Oil and Gas | 13 September 2021 11

12 US Oil and Gas | 13 September 2021

What about costs?

US Oil and Gas | 13 September 2021 13

14 US Oil and Gas | 13 September 2021

Source: IEA World Energy Outlook, BofA Global Research

On the presumption that naturally occurring CO2 could be displaced by captured

US Oil and Gas | 13 September 2021 15

Source: EIA, DEN

Exhibit 21: Comparing Costs and revenue streams for EOR

16 US Oil and Gas | 13 September 2021

Denbury: exploiting a legacy infrastructure advantage

US Oil and Gas | 13 September 2021 17

Source: DEN Source: CRC

California Resources: exploiting a conventional resource advantage

18 US Oil and Gas | 13 September 2021

Injection Well Permitting

US Oil and Gas | 13 September 2021 19

• Class III: Injection wells for solution mining

• Class IV: Shallow Hazardous and radioactive injection wells

• Class V: Wells for injection of non-hazardous fluids into or above underground

• Class VI: Wells used for geologic sequestration of CO2

20 US Oil and Gas | 13 September 2021

Source: Global CCS Institute

US Oil and Gas | 13 September 2021 21

• Direct Air Capture (OXY, XOM) as a flexible innovation unconstrained by location.

22 US Oil and Gas | 13 September 2021

• Following a twelve month period of technical evaluation originally signed in 2019

US Oil and Gas | 13 September 2021 23

Aqueous hydroxide solutions

24 US Oil and Gas | 13 September 2021

Source: National Academy of Science