Occidental signs CO2 offtake deals targeting 2 million metric tons

Occidental has signed two long-term carbon dioxide offtake agreements expected to supply 2 million metric tons annually, with expansion potential that could double the flow to 4 million metric tons a year.

By Elena Vasquez

The agreements, announced earlier this week, cover planned projects rather than operating assets. Occidental expects the first shipments in 2029, but both developers must secure final investment decisions before that schedule becomes firm.

What are the two projects adding?

Each agreement covers a project linking natural gas processing facilities in the Delaware Basin with Occidental’s existing Permian Basin operations. The two developers will finance and construct the required capture, transportation and delivery infrastructure; Occidental has not identified the counterparties.

Together, the projects are designed to capture and transport about 2 million metric tons of CO2 per year for enhanced oil recovery. The combined figure could reach 4 million metric tons if development and expansion decisions proceed.

“Securing reliable, long-term sources of CO2 supports Occidental’s advanced recovery strategy to extend the productive life of existing fields and enhance recovery across our conventional and unconventional resource base,” said Vishal Gupta, president and general manager of EOR Ventures at Occidental.

The buildout includes nearly 100 miles of new CO2 pipelines across the Delaware Basin and a connection to Occidental’s existing Permian transportation network. Those new additions and associated capture and delivery infrastructure remain within the pre-final-investment stage.

The network is intended to do more than move CO2 for the two initial contracts. Its added capacity could accommodate future connections from natural gas processing facilities and other industrial CO2 sources, giving third-party carbon capture developers access to Occidental’s established infrastructure.

When will shipments start?

The 2029 delivery schedule remains contingent on both developers reaching final investment decisions. The arrangement puts construction and delivery with those counterparties while letting Occidental connect the new supply to its established Permian network.

How does 45Q support the economics?

The projects rely partly on federal Section 45Q incentives, according to Occidental. The credit supports eligible carbon capture and sequestration activities, including qualifying CO2 use in enhanced oil recovery when paired with secure geological storage. The applicable credit depends on statutory requirements and project eligibility.

Gupta said: “The projects, once operational, will help diversify our CO2 supply, improve access to cost-effective resources and create infrastructure that can connect additional carbon capture projects over time. Federal 45Q incentives are an important support for these investments.”

How does EOR differ from permanent removal?

The announcement also draws a boundary between CO2 utilization and durable removal. CO2 used for enhanced oil recovery is not necessarily equivalent to CO2 permanently removed from the atmosphere. Qualifying geological storage can retain injected CO2 underground, but the associated oil production creates a separate emissions consideration.

Through its subsidiary 1PointFive, Occidental is developing direct-air capture capacity at its Stratos facility in Texas, designed to capture up to 500,000 metric tons of CO2 annually. The offtake projects’ combined 2 million metric tons would equal four times that designed annual capture capacity. The comparison is one of scale only: Stratos is designed to draw CO2 directly from air, while the new projects connect natural-gas-processing supply to enhanced oil recovery.

Occidental continues to pursue additional third-party anthropogenic CO2 supplies. If the current projects advance, they could become part of a larger regional carbon transportation and utilization network.

The next market gate is final investment decision by the two unnamed developers. Those decisions determine whether nearly 100 miles of pipeline and 2 million metric tons of annual supply can move toward 2029 operation, while 4 million metric tons remains conditional on later expansion.