Occidental’s Billion-Dollar Carbon Credit Plan Takes Shape

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Occidental Petroleum Co. (NYSE: OXY) is primarily recognized in the energy sector as a leading international oil and gas producer. It's notably been a growing position for the Oracle of Omaha as Berkshire Hathaway Co. (NYSE: BRK.B) raised its stake to 28% of the company in February 2025. What is not so well known is Occidental Petroleum’s ambitions to become a leading player in the decarbonization movement, enabling itself and others to reach net-zero levels.

This goal is not just to get the green theme but to generate another source of revenue to offset some of the volatility of oil prices. By doing so, it’s also diversifying its revenue base.

The Journey Toward Carbon Zero

Occidental’s carbon capture ambitions took root in 2019 as it partnered with Canadian direct air capture (DAC) technology firm Carbon Engineering Ltd, which was backed by Microsoft Co. (NASDAQ: MSFT) co-founder Bill Gates. In 2022, Occidental announced plans to invest up to $1 billion in STRATOS, its first large-scale direct air capture (DAC) plant in Texas’s Permian Basin.

DAC is a technology that directly removes CO2 from ambient air. It doesn’t capture it from a specific source like a power plant but pulls it out of the atmosphere itself using a chemical process to separate it from other gases in the air. The CO2 is captured and collected and can be used or stored. In 2023, Occidental acquired Carbon Engineering for $1.1 billion, locking in DAC technology ownership to fast-track revenue potential, while STRATOS's costs grew to $1.3 billion.

Occidental formed a subsidiary called 1PointFive to start pre-selling carbon credits. 1PointFive is a carbon capture utilization and sequestration (CCUS) company aiming to limit global temperature rise to 1.5 degrees Celsius by 2050 through decarbonization solutions. In March 2022, 1PointFive struck a deal with Airbus SE (OTCMKTS: EADSY) to sell them 400,000 tonnes of carbon dioxide removal credits after STRATOS launches.

STRATOS Set to Launch in 2025 and 100 More to Follow by 2035

Occidental’s Strato is expected to launch in mid-2025. The DAC plant has a 500,000-ton annual capacity, which requires massive infrastructure, including chemical reactors, fans and pipelines. Carbon dioxide removal (CDR) credits are earned for removing one metric ton of carbon dioxide (C02).

These carbon credits, which range from $500 to $1,100 per metric ton, can be used to offset carbon emissions, used as a tax credit, or sold on the voluntary carbon markets for cash. Occidental plans to open 100 more DAC plants by 2035.

Carbon Credit Deals Already Struck

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Occidental was already striking deals through its 1PointFive subsidiary during the construction phase of STRATOS. On September 12, 2023, 1PointFive struck a 10-year carbon removable credit (CDR) with Amazon.com Inc (NASDAQ: AMZN). Amazon will purchase 250,000 metric tons of CDR credits over 10 years.

On July 9, 2024, 1PointFive announced a deal with Microsoft to purchase 500,000 metric tons of DAC CDR credits over six years to support Microsoft’s carbon removal strategy in the largest DAC carbon credit purchase deal ever. At $500 a ton, the contract would equate to $250 million over six years or $500 million at $1,000 a ton. The large deals with Airbus, Amazon, and Microsoft validate the technology and provide a runway toward hundreds of millions in additional revenue. If Occidental is able to open 100 more DACs, the revenue potential is in the billions.

Microsoft’s Senior Director of Carbon Removal and Energy Brian Marrs commented, “We're very pleased to announce this deal with 1PointFive, a pioneer in the Direct Air Capture space, which is building the largest DAC project worldwide. To achieve the gigatons of removals needed this century, first-of-a-kind projects like STRATOS are essential to move from pilots to scale. DAC plays an important role in Microsoft's carbon removal portfolio, supporting our broader goal of becoming carbon negative by 2030.”

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