Occidental Petroleum signs pair of CO2 offtake agreements for Permian Basin operations

What happened

Occidental Petroleum said it signed long-term agreements with two companies to obtain up to 2M metric tons of carbon dioxide annually, captured at natural gas processing facilities in the Delaware Basin, for enhanced oil recovery in the Permian Basin. The projects still need final investment decisions; developers will fund and build nearly 100 miles of new pipelines, with first shipments anticipated in 2029.

Confirmed

Global impact / market context

If approved and completed, the agreements could secure carbon dioxide for Occidental’s oil-recovery operations while shifting the cost of new pipelines to the project developers. The connections may also let other carbon dioxide suppliers use the network, potentially broadening future supply options for Permian operations.

Analyst inference

The article reports that Occidental’s third-quarter realized oil price rose 32.5% year over year to $85.91 per barrel, while production fell 2.5% to 1.43 million barrels of oil equivalent per day. The proposed carbon dioxide supply is a longer-term operational plan, with shipments not anticipated until 2029.

Analyst inference

What to watch

1. Whether both projects receive final investment decisions, which would confirm that developers intend to proceed with construction and funding of the proposed carbon dioxide supply infrastructure. Confirmed
2. Progress on the nearly 100 miles of planned pipeline and its connection to the existing network, including whether construction stays aligned with shipments anticipated in 2029. Confirmed
3. Whether other carbon dioxide sources eventually interconnect, as additional suppliers could expand available feedstock for Occidental’s enhanced oil recovery operations and use of the pipeline network. Analyst inference

Evidence

• seekingalpha.com