Occidental Petroleum (Oxy) is turning to cutting-edge carbon capture technology to unlock billions of barrels of oil trapped beneath the Permian Basin in West Texas — while simultaneously helping reduce atmospheric CO2 levels.
Legacy Oilfields Still Holding Billions of Barrels
Oxy’s conventional oilfields in the Permian Basin have been producing oil for decades. Although production rates have slowed, engineers estimate that approximately 2 billion barrels of oil remain locked thousands of feet underground. Extracting this stubborn oil has long challenged the industry due to the rock’s tight pore spaces, akin to a dense sponge.
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Traditional methods to extract residual oil include water flooding—injecting water below the oil layer to push it out—and steam injection, which softens the crude. Now, Oxy plans to deploy an even more effective solvent: carbon dioxide (CO2).
CO2: A More Effective Solvent for Enhanced Oil Recovery
At a recent conference hosted by the Harold Hamm Institute for American Energy, Oxy’s CEO Vicki Hollub explained that CO2 molecules outperform steam in flushing oil from rock formations. Importantly, the injected CO2 remains trapped underground, occupying the space left by the extracted oil, making the process more efficient.
Sourcing CO2: From Natural Reservoirs to Direct Air Capture
Historically, Oxy has extracted naturally occurring CO2 from underground reservoirs in Colorado and New Mexico, transporting it by pipeline to Permian oilfields for enhanced oil recovery. However, the company recognizes the environmental benefits of leaving natural CO2 in the ground.
In response, Oxy has invested approximately $500 million in Direct Air Capture (DAC) technology, aiming to remove CO2 directly from the atmosphere. This summer, Oxy plans to inaugurate its first DAC facility near Odessa, Texas, marking a milestone in industrial-scale carbon removal.
Dual Use: Injecting CO2 into Oilfields and Saline Reservoirs
The captured CO2 will be injected into both depleted oilfields and deep saline aquifers for permanent storage. Hollub emphasized that these techniques are crucial for the United States to maintain its energy independence and meet climate goals. Without advanced recovery methods like CO2 injection, Oxy estimates it cannot extract the 2 billion barrels of oil still in the Permian.
Extending U.S. Oil Production Amid Decline
Hollub forecasts that U.S. oil production will peak by the decade’s end and then steadily decline. CO2 injection can significantly slow this decline by enhancing recovery from existing fields. Moreover, Oxy aims to sequester more carbon underground than the emissions generated from the fossil fuels it produces — a key step toward marketing net-zero-carbon oil.
Building the Carbon Capture Infrastructure
Oxy’s carbon capture subsidiary, 1Point5, acquired Canadian startup Carbon Engineering in 2023, which uses potassium hydroxide to chemically bind and capture CO2 from the air. Conveniently, Oxy is the largest U.S. producer of potassium hydroxide, giving the company an operational advantage.
The initial DAC plant is designed to capture 250,000 tons of CO2 annually, with a second plant planned for mid-2026. Using artificial intelligence, Oxy engineers are creating digital twins of the oilfields, processing millions of data points to optimize CO2 injection and oil recovery strategies.
The Critical Role of Federal Incentives
Despite promising technology, economic viability hinges on government support. The Inflation Reduction Act (IRA) of 2022 offers tax credits up to $180 per ton of sequestered CO2. However, current operational costs exceed these incentives, and frustratingly, the highest credits favor CO2 stored in saline reservoirs over enhanced oil recovery (which receives $135 per ton).
Hollub expressed hope that the federal government will maintain and equalize these tax credits to ensure DAC and sequestration remain financially feasible. She called this the industry’s “one big ask” of the administration.
Regulatory Progress and Future Expansion
In early 2025, Oxy and 1Point5 secured Class VI permits from the EPA to begin CO2 sequestration outside of oilfields, a critical regulatory milestone. Additionally, the EPA announced it will delegate future Class VI well permitting in Texas to state authorities, potentially accelerating project approvals.
Oxy intends to license its carbon capture technology to other industrial players, expanding the market for DAC solutions.
Warren Buffett’s Stake and Potential Oxy Acquisition
Berkshire Hathaway, led by Warren Buffett, owns over one-third of Oxy’s shares and preferred stock, along with significant warrants. With Oxy’s stock currently trading below Buffett’s strike price, speculation exists that Berkshire could acquire the remainder of Oxy, especially given its vast cash reserves.
Buffett has recently increased holdings in Japanese conglomerates involved in carbon capture and green technologies, signaling potential synergies. Oxy CEO Hollub admitted on the conference sidelines that a full Berkshire acquisition “would be a dream come true.”
Frequently Asked Questions
What is Occidental Petroleum’s plan for CO2 in the Permian Basin?
Oxy plans to capture carbon dioxide directly from the air and inject it into old oilfields and saline reservoirs in the Permian Basin to enhance oil recovery and permanently store CO2 underground.
Why use CO2 instead of traditional methods like water or steam injection?
CO2 is more effective than water or steam at loosening and extracting stubborn oil from tight rock formations. Additionally, CO2 remains trapped underground after injection, which helps with carbon sequestration.
How does Direct Air Capture (DAC) work?
DAC technology chemically removes CO2 directly from the atmosphere using processes like potassium hydroxide absorption, capturing the greenhouse gas for storage or utilization.
Where will the captured CO2 be stored?
Captured CO2 will be injected into depleted oilfields to improve oil extraction and into deep saline aquifers for long-term sequestration.
How much CO2 can the first DAC plant capture?
The initial plant near Odessa, Texas, is expected to capture approximately 250,000 tons of CO2 annually, with plans for additional plants in the future.
What role does government policy play in this project?
Federal tax credits under the Inflation Reduction Act provide financial incentives for CO2 capture and sequestration, critical for making the technology economically viable.
Conclusion
Occidental Petroleum’s ambitious strategy to capture CO2 from the atmosphere and inject it into aging oilfields could redefine enhanced oil recovery and carbon sequestration. By combining innovative technology, regulatory support, and strategic investment, Oxy aims to extend U.S. oil production while advancing toward net-zero carbon fuels — a critical balance for energy security and climate goals.