Occidental Petroleum (Oxy) is pioneering a cutting-edge approach to both extend the life of its aging oilfields and combat climate change by capturing carbon dioxide (CO2) directly from the atmosphere and injecting it deep underground. This dual-purpose strategy promises to unlock billions of barrels of stubborn oil while sequestering greenhouse gases — a bold step toward more sustainable energy production.

Unlocking Oil from Old Permian Basin Fields

Oxy’s conventional oilfields in the Permian Basin of west Texas have been producing oil for decades. Although production rates have slowed, there are still an estimated 2 billion barrels of oil trapped deep underground. Extracting this remaining oil has always been a challenge, as it is held tightly in microscopic pores within the rock, similar to a sponge but far denser.

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Over the years, engineers have used several enhanced oil recovery methods. These include injecting water to flush out the oil and, in some fields, using steam to soften the crude and facilitate extraction. Now, Oxy plans to deploy an even more effective solvent: carbon dioxide.

CO2: A Powerful Solvent for Oil Recovery

Speaking at the Harold Hamm Institute for American Energy conference, Oxy CEO Vicki Hollub explained that CO2 molecules outperform steam in dislodging oil trapped in reservoir rock. More importantly, the injected CO2 remains trapped underground, occupying the space left by the extracted oil.

Traditionally, Oxy has sourced CO2 from naturally occurring underground reservoirs in Colorado and New Mexico, transporting it by pipeline to the Permian Basin. This CO2 is then injected into oilfields to stimulate production — a process known as enhanced oil recovery (EOR).

Direct Air Capture: A New Frontier

Recognizing that it’s preferable to leave naturally occurring CO2 underground where it is found, Oxy has invested heavily in Direct Air Capture (DAC) technology. After investing roughly $500 million, including partnership with BlackRock, Oxy expects to launch its first DAC plant near Odessa, Texas, later this year.

This plant will pull CO2 directly from the atmosphere — a significant step given that CO2, while ubiquitous, is challenging to capture in concentrated form. Once captured, the CO2 will be stored deep underground, either in old oilfields or saline water reservoirs, helping reduce the concentration of greenhouse gases in the air.

Economic and Strategic Importance

Hollub emphasized that these efforts are crucial for the U.S. to maintain its energy “dominance,” a goal articulated by President Donald Trump. Without advanced recovery techniques like CO2 injection, Oxy would not be able to access the remaining 2 billion barrels of oil in its Permian fields.

Hollub also projects that U.S. oil production will peak by the end of this decade, then decline. Injecting CO2 into old oilfields can help slow this decline. Her vision extends beyond oil recovery to carbon sequestration, with the hope that Oxy will ultimately sequester more carbon underground than it releases through fossil fuel production — enabling the company to market net-zero-carbon fuels.

Innovation and Expansion in Carbon Capture

To drive this vision forward, Oxy established the carbon capture subsidiary 1Point5 and acquired Canadian startup Carbon Engineering in 2023. Carbon Engineering’s technology uses potassium hydroxide to chemically extract CO2 from the air — a process well-aligned with Oxy’s position as the largest U.S. producer of potassium hydroxide.

The initial DAC plant will capture 250,000 tons of CO2 annually, with plans already underway for a second facility by mid-2026. Oxy is leveraging artificial intelligence and digital twins — virtual replicas of its oilfields fed by millions of data points — to optimize CO2 injection strategies and maximize both oil recovery and carbon sequestration.

The Role of Government Incentives

The economics of carbon capture and storage rely heavily on federal support. The 2022 Inflation Reduction Act offers tax credits of up to $180 per ton of CO2 sequestered underground. However, the current system provides the highest incentives for CO2 stored in saline reservoirs ($180/ton) rather than for enhanced oil recovery projects ($135/ton), a policy that Hollub criticized as counterproductive.

Oxy has pre-sold carbon reduction credits tied to its projects and hopes that despite political pressures, the tax credit framework—particularly the “45Q” provisions—will remain intact. “It’s our one big ask,” Hollub said, “Keep 45Q in place for direct air capture. Make the credit equal to sequestration. Making net-zero carbon oil is better than putting CO2 in saline reservoirs. Penalizing EOR projects makes no sense.”

Regulatory Progress and Industry Outlook

In April, Oxy and 1Point5 received Class VI permits from the U.S. Environmental Protection Agency (EPA) to begin sequestering CO2 in non-oilfield reservoirs. The EPA recently announced it would delegate future Class VI well permitting to Texas regulators, streamlining the approval process.

Looking ahead, Oxy plans to license its DAC and sequestration technologies to other industries, expanding its impact beyond oil and gas.

Investor Interest: Warren Buffett and Berkshire Hathaway

Berkshire Hathaway, led by Warren Buffett, owns more than a third of Oxy’s shares and preferred stock, along with 84 million warrants. Currently, with Oxy’s stock trading below the warrants’ strike price, Buffett’s investment is underwater. However, with more than $300 billion in cash, Berkshire could potentially acquire the rest of Oxy.

Buffett has recently shifted investment focus toward Japanese conglomerates, some of which are investing in carbon capture technologies, including direct air capture pilots. If Buffett deepens involvement with Oxy, he could become a major player in commercializing these clean energy technologies.

When asked about this prospect, Hollub responded, “It would be a dream come true.

Frequently Asked Questions

What is Occidental Petroleum’s plan for capturing CO2?

Oxy plans to capture carbon dioxide directly from the atmosphere using Direct Air Capture (DAC) technology and then inject it deep underground into depleted oilfields and saline reservoirs.

Why inject CO2 into old oilfields?

Injecting CO2 into old oilfields helps to extract additional oil by displacing it from the rock formations. This process, known as enhanced oil recovery (EOR), also permanently traps the CO2 underground.

How much oil remains in Oxy’s Permian Basin fields?

There are approximately 2 billion barrels of oil still trapped underground in the Permian Basin fields operated by Oxy.

What is Direct Air Capture (DAC)?

DAC is a technology that removes CO2 directly from the atmosphere using chemical processes, allowing the gas to be captured in concentrated form for storage or utilization.

How much CO2 will the first DAC plant capture annually?

The initial DAC plant near Odessa, Texas, is expected to capture around 250,000 tons of CO2 per year.

How does Oxy’s CO2 injection process contribute to climate goals?

By capturing CO2 and sequestering it underground, Oxy aims to reduce atmospheric greenhouse gases. The goal is to sequester more carbon than the company’s fossil fuel production emits, moving toward net-zero carbon fuels.

Conclusion

Occidental Petroleum’s bold move to combine direct air capture with enhanced oil recovery represents a promising path forward in the energy sector. By capturing CO2 from the atmosphere and injecting it into depleted oilfields, Oxy aims to extend oil production, reduce greenhouse gas emissions, and potentially deliver net-zero carbon fuels. This innovative approach, supported by cutting-edge technology, federal incentives, and investor interest, could redefine how the industry balances energy needs with climate goals.