The following is excerpted from the question-and-answer section of the transcript.
(Questions from industry analysts are provided in full, but answers are omitted - download the transcript to see the full question-and-answer session)
Question: Leo Paul Mariani - KeyBanc Capital Markets Inc., Research Division - Analyst
: I wanted to ask just a bit of a high-level question here. So just so I understand it, it sounds like, obviously, it's clearly proceeding with
its first DAC plant in the Permian construction later this year on by late '24. But when you kind of talk about expanding this business
to potentially get up to 70 DAC plants, if I'm kind of hearing you all right, it really sounds like that's going to have to be driven by
just larger government tax credits here over time. And then as well, you certainly talked about kind of these private market credits
where certainly, folks are kind of maybe willing to pay for these directly to kind of offset their admissions. Is that really just the crux
of this? Is that you really need to see both of those markets just develop and the credits really improve to the point where you can
say, "Hey, guess what, we will proceed with this potential for 70 plants here?"
Question: Leo Paul Mariani - KeyBanc Capital Markets Inc., Research Division - Analyst
: Okay. I just wanted to ask you guys a follow-up here. So an example of, say, DAC for EOR here in the Permian. Just trying to get a
sense of whether or not when you look at the business model and you create net zero oil, is it your expectation that buyers are willing
to pay some material premium for this net zero oil versus just a regular way barrel? And obviously, you announced this, I guess, sort
of an option deal for SK to purchase oil here. So I guess in that scenario with SK, are they also paying some significant premium over
just sort of a regular way barrel?
Anthony Cottone
This is Tony again. Yes, for net zero oil barrel, we would expect a premium. So sort of a decarbonization premium over the underlying
commodity. This is being -- this would be purchased by a refiner and the value proposition to the refiner is that they're able to sell
the product at the back end, the Jet A fuel that's been decarbonized to a lower carbon aviation fuel at a premium to their aviation
customers that are flying internationally.
From a refinery perspective, it's a really interesting value proposition that they don't have to change or the sunk capital that they
have in there over a long-term period, and it's a way for them to decarbonize their business.
Michael Avery
This is Mike, maybe just to follow-up on that. So the way to think about any premium pricing on a product that we make is -- it's the
total cost of an abated turn to CO2 into their model. And so whether it comes through something like a net zero oil, you calculate
that back to a tonne of abated CO2 versus credit, which could be measured on the same metric. And that's how you rack things up
relative to each other and decide on how you want to shape your decarbonization portfolio.
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