Vicki Hollub ran operations in the Permian basin for Oxy before becoming CEO. She posed for Forbes in 2017.
Tim Pannell for Forbes
Occidental Petroleum’s conventional oilfields in the Permian basin of west Texas have been producing for decades. And although output has slowed, there remains 2 billion barrels of oil still trapped thousands of feet below the surface. Engineers have figured out several methods over the years to scour out stubborn oil from nooks and crannies in the reservoir rock (think of a sponge but with much tighter pore spaces). One involves strategically injecting water below the level of the oil in order to flush it out. When that doesn’t work they shift to injecting steam, which further softens up stubborn crude oil. After that, they turn to an even more effective solvent: carbon dioxide.
Chief Executive Vicki Hollub said last week that Occidental Petroleum engineers are using artificial intelligence to build digital twins of these oilfields — feeding them millions of datapoints from thousands of sensors in order to design and simulate more effective strategies to help permanently inject the maximum amount of CO2 while extracting what will effectively be “net-zero-carbon” petroleum.
Hollub — speaking at a conference organized by the Harold Hamm Institute for American Energy at Oklahoma State University in Oklahoma City — said that CO2 molecules are proven to be more effective than steam at scouring oil out of the rock. And what’s especially compelling about CO2 oil recovery is that the CO2 remains trapped in the rock, taking the place of the oil.
Such techniques aren’t just nice to have, says Hollub, they are vital if the United States is to achieve and maintain anything close to the energy “dominance” promised by President Donald Trump. Without advanced recovery techniques, said Hollub, Oxy won’t be able to tap 2 billion barrels of oil left in conventional fields in the Permian.
Hollub believes that the U.S. oil industry will hit peak production by the end of the decade. After that U.S. oil output will inexorably decline, she believes. Injecting CO2 into old oilfields could dramatically reduce that rate of decline. Hollub’s dream is ultimately to sequester more carbon into these layers of reservoir rock than is contained in the fossil fuels that Oxy produces from them — thereby enabling Oxy to market net-zero-carbon fuels.
The first direct air capture plant under Oxy’s Stratos project is nearing completion near Odessa.
Courtesy Occidental Petroleum
Ironically, although carbon dioxide surrounds us, it’s hard to find it in concentrated form. Oxy for years has bought CO2 for injection from pipeline giant Kinder Morgan, which gets it from naturally occuring underground deposits. But it doesn’t make much sense to pull CO2 out of the earth only to move it through a pipeline and stick it back underground.
Which is why Oxy in recent years has bet big on something called Direct Air Capture. This summer near Odessa, Texas, Oxy expects to start up its first plant, being built via a $550 million JV with BlackRock, to suck CO2 out of the air. Oxy acquired Canadian startup Carbon Engineering in 2023 to acquire the tech, which uses potassium hydroxide to chemically react with CO2 and capture it from the air. Oxy is the nation’s biggest maker of potassium hydroxide. This initial plant will make 250,000 tons per year of CO2, and Oxy is already leveraging iterative learnings to build a second plant for completion mid-2026.
Hollub emphasized that this effort depends for its economic viability on the largesse of Uncle Sam. Federal law, as promulgated by the 2022 Inflation Reduction Act, currently provides for tax credits of as high as $180 per ton of CO2 recovered and sequestered underground. Current costs are higher than that. Frustrating (and inexplicable) for Hollub, the federal rules give maximum tax credits if the CO2 is permanently sequestered into non-oil saline reservoirs rather than used for enhanced oil recovery (whch gets $135 per ton).
Hollub said that Oxy has already pre-sold carbon reduction credits tied to the project and hopes that, despite Trump administration promises to gut green subsidies, the IRA’s so-called 45q provisions are kept in place. “It’s our one big ask” of the Trump Administration, said Hollub at the Hamm Institute conference: “Keep 45q in place for direct air capture. Make the credit equal to sequestration. Making net zero carbon oil is better than putting in a saline reservoirs. Getting penalized for not putting it in a saline is crazy.”
Once perfected, Oxy will look to license the technology to other industrial companies. Keeping an eye on developments is Warren Buffett. Berkshire Hathaway owns more than a third of Oxy via shares and preferred stock. Berkshire is also sitting on 84 million Oxy warrants with a strike price of $59.62. With Oxy shares at $40, Buffett’s investment is billions of dollars underwater.
Buffett might like to bring down his cost basis. Berkshire, sitting on more than $300 billion in cash, could well afford to gobble up the rest of Oxy (p/e 12, market cap $40 billion). Buffett has sold down holdings of Apple and Bank of America and only just begun to redeploy, adding recently to Berkshire’s holdings in a handful of Japanese conglomerates such as Itochu, Sumitomo, Marubeni, Mitsui and Mitsubishi. Mitsui last year invested in an unrelated direct air capture pilot plant in Louisiana, while Mitsubishi and Itochu are investors in an Australian carbon-capture-cement startup. Who knows, with Buffett as salesman, he might soon be selling them Oxy’s air capture machines.
Asked on the sidelines of the conference how she would feel about Berkshire and Buffett someday acquiring the rest of Oxy, Hollub replied, “It would be a dream come true.”
Source: https://www.forbes.com/sites/christopherhelman/2025/04/29/oxy-taps-ai-to-help-inject-old-oilfields-with-carbon-dioxide/