Occidental is strengthening its position in the US carbon capture and oil production market through two new long-term CO2 supply agreements designed to support enhanced oil recovery in the Permian Basin.
The Occidental CO2 agreements will connect natural gas processing facilities in the Delaware Basin with the company’s existing operations, creating additional infrastructure for Permian Basin carbon capture and enhanced oil recovery.
Announced earlier this week, the agreements cover two projects expected to capture and transport approximately 2 million metric tons of CO2 annually. The combined capacity could eventually double to 4 million metric tons per year, depending on project development and expansion decisions.
The two developers will finance and construct the necessary capture, transportation and delivery infrastructure. Occidental expects the first CO2 shipments to arrive in 2029, although both projects must first secure final investment decisions. The companies involved in the agreements have not been identified.
Beyond securing additional CO2 supplies, the agreements will support the construction of nearly 100 miles of new CO2 pipelines across the Delaware Basin.
The infrastructure will connect with Occidental’s existing CO2 transportation network serving the Permian Basin. Its additional capacity is intended to accommodate future connections from natural gas processing facilities and other industrial CO2 sources.
The development could therefore create a broader transportation platform for Occidental’s oil recovery operations, while giving third-party carbon capture developers additional access to established infrastructure.
Federal tax incentives are another important component of the projects’ economics. Occidental specifically highlighted the Section 45Q tax credit, which supports eligible carbon capture and sequestration activities, including qualifying CO2 use in enhanced oil recovery when accompanied by secure geological storage.
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