Energy Update !

Decarbonizing Oil & Gas: The Role of CCUS in a Greener Future

Introduction: CCUS and the ESG-Driven Transformation of U.S. Oil & Gas

The oil and gas sector in the United States is undergoing one of the most significant transformations in its history. As the world confronts the escalating threat of climate change, the need to reduce greenhouse gas (GHG) emissions—especially carbon dioxide (CO₂)—has never been more urgent. In this context, Carbon Capture, Utilization, and Storage (CCUS) technologies are emerging as a powerful enabler for decarbonization.

At the same time, Environmental, Social, and Governance (ESG) principles are becoming key metrics for investors and regulators alike. ESG-linked investments are pushing companies to rethink their sustainability strategies—not only for regulatory compliance but also to meet growing investor and stakeholder expectations.

This shift is backed by robust federal support. Legislation such as the Inflation Reduction Act (IRA) and the Infrastructure Investment and Jobs Act (IIJA) has catalyzed innovation and investment in CCUS technologies. These laws include enhanced tax credits (like 45Q) and significant infrastructure investments, creating fertile ground for CCUS to take root.

Meanwhile, financial tools like sustainability-linked loans (SLLs) and green bonds are helping oil and gas companies fund their low-carbon transitions. These instruments tie financial performance to environmental outcomes, rewarding companies for achieving specific emissions or sustainability targets.

Together, these trends are not only reshaping how oil and gas companies operate but also creating new economic opportunities around climate-tech solutions. In this blog, we'll explore the current landscape of CCUS in the U.S. oil and gas industry, including key technologies, major projects, and the challenges and opportunities ahead.

2. CCUS Projects in U.S. Oil & Gas

2.1 Understanding the Technology: From Capture to Storage

At its core, CCUS is a set of technologies that work together to mitigate CO₂ emissions at their source—or in some cases, directly from the atmosphere. Here's a breakdown of the CCUS process:

• Capture: CO₂ is captured from industrial sources such as power plants, natural gas processing facilities, refineries, and cement kilns. Capture technologies include:
  • Post-combustion capture: Extracts CO₂ after fossil fuels are burned.
  • Pre-combustion capture: Removes CO₂ before combustion, typically in hydrogen production.
  • Direct air capture (DAC): Captures CO₂ directly from ambient air.
• Compression and Conditioning: The captured CO₂ is purified and compressed into a dense phase for transport.
• Transport: CO₂ is usually transported via pipelines, though trucking or shipping may be used in early-stage or small-scale projects.
• Utilization or Storage:
  • Utilization: CO₂ is used in industrial processes. The most common use in the U.S. is Enhanced Oil Recovery (EOR)—a method where CO₂ is injected into depleted oil fields to extract additional oil.
  • Storage: CO₂ is permanently stored underground in geological formations such as deep saline aquifers or depleted hydrocarbon reservoirs.

The Link Between CCUS and Enhanced Oil Recovery (EOR)

EOR has played a critical role in CCUS deployment in the U.S. for decades. Since the 1980s, operators have injected CO₂ into mature oil fields to extract additional hydrocarbons, often boosting recovery rates by 10–20%. This has made EOR not only a profitable venture but also a stepping stone for building the infrastructure and know-how needed for broader CCUS adoption.

However, this close relationship has drawn criticism. Environmental advocates argue that EOR may undercut climate goals by extending fossil fuel production, potentially delaying the transition to renewable energy sources. Nevertheless, EOR remains a significant driver for early CCUS investments.

2.2 The U.S. CCUS Landscape: Projects and Pipelines

The United States is currently a global leader in CCUS, both in terms of operational capacity and planned developments. As of mid-2025:

• 13 CCUS facilities are fully operational, most of which are linked to EOR.
• Approximately 68 new projects are in development, covering diverse sectors such as cement, steel, hydrogen, power generation, and natural gas processing.

Key Projects Shaping the CCUS Ecosystem

• Valero / BlackRock / Navigator CO₂ Pipeline
  • Scope: A massive 1,200-mile pipeline system designed to transport up to 5 million tonnes of CO₂ per year (Mtpa).
  • Purpose: Connects ethanol plants and other emitters in the Midwest to storage sites and EOR fields.
  • Significance: One of the largest CO₂ transport infrastructure projects, this pipeline is crucial for scaling CCUS in agricultural and industrial zones.
• EnLink Midstream / Banpu Barnett Shale Project
  • Location: Texas
  • Focus: Captures CO₂ from natural gas processing and transports it for permanent geological storage.
  • Significance: A model for CCUS applications beyond EOR, supporting permanent removal from the atmosphere.
• Sempra Infrastructure – Hackberry Carbon Storage Hub
  • Capacity: Designed for 2 Mtpa of CO₂ storage.
  • Storage Type: Saline aquifer storage near the Hackberry LNG terminal in Louisiana.
  • Goal: To support decarbonization of LNG exports by integrating CCUS with gas infrastructure.
• Heidelberg Materials – Mitchell, Indiana
  • Industry: Cement manufacturing
  • Status: One of the first commercial-scale CCUS projects in the U.S. cement sector.
  • Potential: Paves the way for carbon-neutral cement, a critical step in decarbonizing the construction industry.

2.3 Challenges and Opportunities in Scaling CCUS

While the momentum around CCUS is strong, several challenges threaten its widespread deployment. Let’s explore these along with the opportunities emerging across the value chain.

Challenges

• High Capital and Operating Costs
  • Inflation and rising interest rates have increased CCUS project costs by approximately 30% in recent years.
  • This puts pressure on developers to secure long-term financing and makes cost-effective deployment harder, especially for non-EOR storage projects.
• Regulatory and Political Uncertainty
  • While federal incentives like 45Q tax credits are generous (up to $85/ton for storage and $60/ton for EOR), a change in administration could introduce delays or policy shifts.
  • Some continuity is expected due to bipartisan support in key energy-producing states, but uncertainty affects investment decisions.
• EOR vs. Permanent Storage Debate
  • Critics argue that EOR may divert attention and resources from permanent CO₂ sequestration.
  • Environmental organizations advocate for stricter standards and incentives for non-utilization-based CCUS pathways.
• Infrastructure Gaps
  • The U.S. lacks sufficient CO₂ pipelines and storage hubs to connect emitters with injection sites at scale.
  • Permitting bottlenecks, community resistance, and land-use issues further slow development.

Opportunities

• Federal and State-Level Support
  • The IRA’s enhanced 45Q credits have drastically improved project economics.
  • Many states (e.g., Texas, Louisiana, North Dakota) are introducing streamlined permitting and public-private partnerships to advance CCUS.
• Industrial Decarbonization
  • Sectors like cement, steel, and chemicals are exploring CCUS as a cornerstone of their net-zero strategies.
  • These “hard-to-abate” sectors cannot decarbonize easily through electrification, making CCUS essential.
• Job Creation and Economic Development
  • CCUS hubs can generate high-paying jobs, attract investment, and revitalize communities reliant on fossil energy.
  • By leveraging existing oil and gas expertise, CCUS offers a just transition for traditional energy workers.
• Innovation in Financing
  • Financial mechanisms such as sustainability-linked loans (SLLs) and green bonds tie interest rates or yields to emissions reduction targets.
  • These tools help companies de-risk capital projects while meeting ESG criteria.

Conclusion: A Strategic Path Forward for U.S. Oil & Gas

CCUS represents one of the most promising—and pragmatic—tools in the fight against climate change, especially for sectors where emissions are difficult or impossible to eliminate entirely. For the U.S. oil and gas industry, it offers a bridge between today’s energy system and tomorrow’s low-carbon economy.

However, realizing its full potential requires:

• Clear and consistent policy from the federal government.
• Massive infrastructure investments—especially in pipelines and storage.
• Balanced public and private sector collaboration, with community engagement to build trust and transparency.
• Diverse deployment models that include EOR but prioritize long-term CO₂ removal.

In this evolving landscape, companies that align early with CCUS and ESG trends will not only future-proof their operations but also unlock new growth opportunities in a decarbonized world.

As the momentum builds, CCUS may well become a central pillar of America’s energy transition—combining environmental responsibility with economic resilience.