Occidental Petroleum Corp, a U.S. oil and gas producer, announced on Tuesday that it has agreed to pay $1.1 billion for Carbon Engineering Ltd, a Canadian company that develops technology to capture carbon dioxide (CO2) from the air and store it underground or use it for making low-carbon products.

The deal is part of Occidental’s strategy to become a leader in the emerging field of direct air capture (DAC), which is seen as a potential solution to combat climate change by reducing the amount of CO2 in the atmosphere. CO2 is a greenhouse gas that contributes to global warming.

Occidental plans to build about 100 DAC plants using Carbon Engineering’s technology, which uses large fans and chemical processes to extract CO2 from the air and convert it into a liquid form that can be injected into underground reservoirs or used for making products such as concrete and aviation fuel.

The company aims to profit from selling carbon credits or low-carbon products to customers who want to reduce their carbon footprint. Occidental also hopes to use the captured CO2 for enhanced oil recovery, a technique that injects CO2 into oil wells to increase production.

The acquisition will enable Occidental to accelerate the deployment of DAC plants and attract more partners and investors for the projects, said Occidental CEO Vicki Hollub. “The acquisition enables Occidental to catalyze broader development partnerships for DAC deployment in the most capital efficient and valuable way,” she said.

Occidental has been working with Carbon Engineering since 2019 and has already secured federal funding for some of its DAC projects. Last Friday, the U.S. Department of Energy announced that two sites in Texas and Louisiana will receive over $1 billion in grants, some of which will fund Occidental’s 30 proposed DAC plants in Kleberg Country, Texas.

The two sites will be the first funded by a $3.5 billion authorization for regional DAC hubs funded by Congress from the bipartisan infrastructure bill.

The acquisition is expected to close by the end of 2023, subject to customary regulatory approvals. The payments will be spread over three approximately equal annual payments, with the first due at closing, the companies said.

Carbon Engineering, founded in 2009, is one of the few companies in the world that have developed and demonstrated DAC technology at a commercial scale. The company operates a pilot plant in Squamish, British Columbia, that can capture up to one tonne of CO2 per day.

The company’s investors include Microsoft co-founder Bill Gates, Chevron Corp, BHP Group, and Shopify Inc. Carbon Engineering CEO Steve Oldham said: “We are thrilled to join forces with Occidental and leverage their expertise and resources to scale up our technology and deliver solutions that can make a meaningful difference in addressing climate change.”

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