Occidental Petroleum’s Direct Air Capture Strategy 2025: From Pilots to AI-Driven Commercial Scale

Occidental’s Direct Air Capture Projects: Tracking Commercial Scale Adoption in 2025

Occidental Petroleum has transitioned its Direct Air Capture strategy from foundational technology acquisition and pilot agreements to a commercially operational business directly serving the decarbonization needs of the AI industry.

• Between 2021 and 2024, Occidental established the commercial groundwork for its DAC business by signing early offtake agreements with companies like Airbus for 400,000 tonnes of carbon removal credits and acquiring the core technology through its $1.1 billion purchase of Carbon Engineering in August 2023. These moves validated market interest and secured the necessary intellectual property for large-scale deployment.
• By 2025, the strategy fully materialized with the mid-year commercial launch of the $1.3 billion STRATOS DAC facility in Texas, designed to capture 500,000 metric tons of CO2 annually. This shift to operational status was underscored by a landmark multi-year deal to sell 500,000 metric tons of carbon credits to Microsoft specifically to offset its AI-related emissions, demonstrating a direct link between DAC and the tech sector’s growing carbon footprint.
• The expansion of commercial agreements in Q2 2025 to include major corporations like JPMorgan and Palo Alto Networks confirms that Occidental has successfully created a viable business model. This progression shows DAC is moving from a theoretical climate solution to a critical infrastructure component required by the digital economy.

Investment Analysis: How Occidental is Funding its Multi-Billion Dollar DAC Expansion

Occidental is financing its capital-intensive DAC expansion through a combination of strategic acquisitions, major corporate and government investments, and cash flow from its optimized upstream operations. The acquisition of CrownRock for $12 billion in late 2023 significantly expanded the asset base that generates the funds for these low-carbon ventures. This financial strategy de-risks the construction of its large-scale DAC facilities and validates the commercial model with backing from key financial players and federal agencies.

Table: Occidental Petroleum’s Strategic Investments in DAC and Technology (2023-2025)

Strategic Partnerships: Building Occidental’s DAC Ecosystem and Key Alliances for 2025

Occidental has constructed a robust ecosystem of partnerships to finance, build, and create a market for its DAC technology. These collaborations range from technology providers like AWS and Cognite for operational efficiency to major offtake partners like Microsoft and international energy firms like ADNOC for market expansion. This network is critical for both de-risking capital-intensive projects and building demand for its carbon removal services.

Table: Occidental Petroleum’s Key Partnerships for DAC and Technology (2023-2025)

Geographic Focus: Why Texas is Occidental Petroleum’s DAC Proving Ground

Occidental Petroleum’s Direct Air Capture strategy is geographically concentrated in Texas, leveraging the state’s favorable geology for carbon sequestration, established energy infrastructure, and supportive policy environment.

• During the 2021-2024 period, Occidental’s geographic focus was on securing foundational sites in the United States. This was solidified in August 2023 when its projects in Texas and Louisiana were selected for the Department of Energy’s DAC Hubs program, confirming the U.S. Gulf Coast as its primary operational theater.
• In 2025, this strategy became tangible with the launch of the $1.3 billion STRATOS facility in the Permian Basin of Texas. The company further deepened its Texas footprint with a plan for a South Texas DAC Hub, backed by up to $650 million in DOE funding.
• While Texas remains the core, international expansion efforts began to formalize in 2025. The partnership with ADNOC to evaluate a DAC facility in the UAE signals a new phase of exporting the Texas-proven model to global energy hubs.

Technology Status: Occidental’s Journey From DAC Acquisition to Commercial Operation

Occidental has successfully progressed its DAC technology from a strategic acquisition to a commercially operational, large-scale industrial process, establishing a first-mover advantage in building a full-stack carbon management business.

• The 2021-2024 period was defined by technology acquisition and validation. The pivotal event was the $1.1 billion purchase of Carbon Engineering in 2023, which vertically integrated the core DAC technology and moved Occidental from a licensee to an owner of the intellectual property.
• The year 2025 marks the transition to commercial maturity with the mid-year launch of the STRATOS plant. This moved the technology from a blueprint to a physical asset capable of capturing 500,000 tons of CO2 per year, providing a critical proof point for the technology’s viability at scale.
• The company’s focus has now shifted to iterative improvement and cost reduction. The acquisition of DAC startup Holocene in April 2025 to advance liquid sorbent technology and the planned launch of a second DAC plant in 2026 demonstrate a strategy focused on scaling capacity and enhancing efficiency.

SWOT Analysis: Occidental Petroleum’s Direct Air Capture Strategy for 2025

This analysis outlines the strategic shifts in Occidental’s DAC business, highlighting how the company has converted foundational strengths and early opportunities into a commercially validated and operationally de-risked enterprise.

Table: SWOT Analysis of Occidental Petroleum’s DAC Strategy

Future Outlook: What’s Next for Occidental’s DAC and AI-Driven Energy Strategy

Occidental’s primary strategic objective for the coming year is to prove the economic model of its DAC business at scale by ensuring the successful operation of STRATOS and securing more large-scale offtake agreements tied to the AI industry.

• The most critical upcoming milestone is the performance of the STRATOS plant in its first full year of operation. Achieving its capture targets and contributing to a projected $1 billion improvement in free cash flow in 2026 will serve as the definitive financial proof point for the venture.
• Watch for the final investment decision on Occidental’s second large-scale DAC plant, planned for completion by mid-2026. This project’s development will signal the company’s ability to replicate, improve, and reduce costs based on learnings from STRATOS.
• The potential development of the “Horizon” project concept, which aims to directly supply 2 GW of power to an AI data center complex, represents the next phase of integration. Progress on this front would show a move from simply offsetting emissions to directly powering the AI industry with a lower-carbon solution.
• Expect Occidental to aggressively pursue additional carbon removal agreements with other major technology companies. Securing more deals similar to the Microsoft partnership will be essential to validate long-term demand and solidify its leadership position in the carbon management market.

Frequently Asked Questions

Why is Occidental targeting the AI industry with its Direct Air Capture (DAC) technology?
Occidental is targeting the AI industry because its massive energy demand has created a specific, high-value customer base for decarbonization services. The landmark deal to sell 500,000 metric tons of carbon removal credits to Microsoft specifically to offset AI-related emissions demonstrates a direct commercial link between DAC technology and the tech sector’s growing carbon footprint.

How is Occidental funding its multi-billion dollar investment in DAC?
Occidental is financing its DAC expansion through a combination of methods: using cash flow from its upstream operations (bolstered by the $12 billion CrownRock acquisition), securing major corporate investments like the $550 million from BlackRock, raising capital through equity offerings ($704 million in 2025), and receiving significant government support, including hundreds of millions in grants from the U.S. Department of Energy for its DAC hubs.

What is the STRATOS project and why is it significant?
STRATOS is Occidental’s first commercial-scale DAC facility, a $1.3 billion project in Texas designed to capture 500,000 metric tons of CO2 annually. Its mid-2025 commercial launch is significant because it marks the transition of Occidental’s DAC strategy from pilot projects and technology acquisition to a fully operational business, providing a real-world proof point for the technology’s viability at scale.

Besides acquiring technology, how has Occidental built an ecosystem for its DAC business?
Occidental has built a robust ecosystem by forming strategic partnerships. This includes securing major customers for carbon credits like Microsoft, JPMorgan, and Palo Alto Networks to create market demand. It has also partnered with international energy firms like ADNOC for global expansion, technology providers like AWS and Cognite for operational efficiency, and financial giants like BlackRock to de-risk and validate its projects.

What is the next major step for Occidental’s DAC strategy after launching STRATOS?
The next critical step is to prove the economic model of DAC at scale. This involves ensuring STRATOS meets its performance targets in its first full year of operation. The company also plans to make a final investment decision on a second large-scale DAC plant for completion by mid-2026, aiming to replicate and improve upon the STRATOS design while reducing costs.