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While it may not have the blockbuster price tag of $4.9 billion that ExxonMobil spent to acquire Denbury for its carbon dioxide pipeline (and oil and gas assets), the acquisition of Aker Carbon Capture by Schlumberger means that the appetite for mergers and acquisitions in carbon capture, utilization, and storage is likely to continue through 2024.

The market for CCUS was projected to reach $5 billion spent in 2023, according to a November report from BNEF, which is down slightly from the $6.4 billion spent on CCUS in 2022. But analysts at BNEF predict demand to rise on the back of CCUS deployments in hard-to-abate sectors like steel and cement and as a gateway to hydrogen production for oil and gas companies.

Looking ahead through 2035, BNEF projects CCS will grow at an 18% compound annual growth rate – led by the United States.
That makes the biggest carbon management acquisition in 2023 — ExxonMobil’s purchase of Denbury for $4.9 billion — look a bit more prescient. And, as Bloomberg reported in August 2023, there were nearly 30 potential buyers that were lined up and talking to Denbury, including several large international energy companies.

And a few months prior, Occidental spent roughly $1 billion to acquire Carbon Engineering, a company commercializing technologies to directly capture carbon dioxide from the air.

Schlumberger’s acquisition of was an order of magnitude smaller, but no less an indicator of the appetite for carbon solutions from big acquirers in the market.

The tailwinds are not hard to understand.

The Bipartisan Infrastructure Law (BIL) of 2021 provided $6.5 billion in new carbon management funding over five years, with an additional $11.5 billion for related carbon capture pilots and hydrogen hubs. A year later the Inflation Reduction Act (IRA) dramatically increased the size of the 45Q tax credit – a critical piece of policy support for CCS in the United States – from $50/ton to $85/ton for CO2 captured and permanently sequestered. And the incentive is even higher for Direct Air Capture. The IRA also increased the credit for CO2 injected for enhanced oil recovery as well as direct air capture (DAC).

Together, both laws provide a robust foundation of federal policy support for carbon management technologies, helping de-risk private investing to scale up and reach widespread deployment across the United States in the long-run.

BIL and IRA are expected to spur over a trillion dollars in additional capital investment in energy supply related infrastructure through 2035, per a Princeton University analysis of the long-term impacts of both policies. For instance, investment in CO2 transport and storage could reach a cumulative total of $38 billion by 2035.

Beyond the ExxonMobil/Denbury deal, the landscape of CCUS-related M&A activities is shaped by several key trends and notable transactions:

Key Trends in CCUS M&A:

  • Increased Attention and Investments: The CCUS sector is garnering significant attention from companies, especially within the oil and gas industry, as a critical technology to achieve net-zero emissions goals. This interest is fueled by various factors, including government incentives like the United States’ Inflation Reduction Act of 2022, which offers financial incentives for CCUS deployment​​.
  • Strategic Alliances: Many deals in the CCUS space involve forming strategic alliances for research, feasibility studies, and the development of technology to capture, transport, store, and potentially utilize CO2 for commercial purposes. These alliances are crucial for advancing CCUS technologies and making them viable and cost-effective​​.
  • Geographical Focus: The majority of CCUS M&A activity is concentrated in North America, particularly the United States, followed by Europe and Asia. These regions together account for a significant portion of the global deal count, highlighting their lead in pursuing CCUS projects​​.

Notable M&A Activities and Investments:

  • ExxonMobil and Chevron’s Acquisitions: Apart from acquiring Denbury, ExxonMobil made a significant move by agreeing to acquire Pioneer Natural Resources. Chevron also made headlines with its takeover of Hess Corporation. These deals are part of a broader trend of oil and gas majors investing in companies with CCUS capabilities and assets to diversify their energy portfolios and enhance their low-carbon initiatives​​.
  • Focus on Renewable Generation and Bioenergy: Investments in the low-carbon sector, including CCUS, have seen oil and gas companies actively participating in renewable generation, bioenergy, and electricity storage segments. This indicates a shift towards creating a robust and diverse energy portfolio capable of navigating the energy transition​​.

For oil and gas majors,  CCUS capabilities are a critical component for the manufacturer of blue hydrogen (made from natural gas with carbon capture systems), which is a way these companies intend to extend the utility of their fossil fuel assets while participating in the energy transition.

CCUS is also a component of many manufacturers decarbonization plans — especially in industries like steel and cement which require high temperatures to produce.

For acquirers looking into potential pure-play targets, there aren’t many carbon capture businesses with the scale or contracts of either Aker or Carbon Engineering. Meaningful direct air capture businesses include Climeworks, CarbonCapture, and Global Thermostat.

Other smaller startups have launched in the intervening years, but many have yet to reach a scale big enough for large buyers to be interested.

What everyone is interested in is the size of the market. Recent analysis projects nearly $120 billion will be spent on average annually by 2050 to achieve global emissions reduction goals.

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