Direct Air Capture: Occidental’s Big Bet

The fight against climate change has moved beyond simply reducing emissions. It has entered a new phase focused on removing carbon dioxide that is already in the atmosphere. Leading this charge in the desolate plains of Ector County, Texas, is Occidental Petroleum. Through its subsidiary, 1PointFive, the energy giant is currently constructing “Stratos,” a facility designed to be the largest Direct Air Capture (DAC) plant in the world. This project represents a massive gamble on technology that is currently expensive but potentially vital for the future of the energy industry.

The Stratos Project: A Titan in Texas

To understand the magnitude of Occidental’s bet, you have to look at the numbers. Until recently, the largest operating DAC plant was the Orca facility in Iceland, operated by Climeworks, which captures about 4,000 tonnes of CO2 per year.

Occidental’s Stratos plant blows those figures out of the water. Designed to capture 500,000 tonnes of CO2 per year when fully operational, Stratos represents a scale-up of more than 100 times the current industry standard.

Construction is well underway in the Permian Basin, the heart of American oil country. The location is strategic. The Permian Basin offers geological formations ideal for injecting and permanently storing carbon dioxide underground. Occidental expects the facility to be commercially operational by mid-2025. This is not a pilot project or a small experiment; it is an industrial-scale attempt to prove that carbon removal can be a viable business model.

How the Technology Works

Stratos relies on technology developed by Carbon Engineering, a Canadian firm that Occidental acquired in 2023 for $1.1 billion. Unlike traditional carbon capture, which scrubs emissions from a smokestack (point-source capture), Direct Air Capture sucks carbon dioxide directly out of the ambient air. This is significantly harder because CO2 makes up only about 0.04% of the air we breathe.

The process at Stratos involves a few distinct mechanical and chemical steps:

  • Air Contactors: Giant fans pull massive amounts of ambient air across thin plastic surfaces.
  • Chemical Capture: A liquid solution flows over these surfaces, binding with the CO2 to trap it as a carbonate salt.
  • Pellet Reactor: The salt solution moves into a reactor where it interacts with calcium pellets, trapping the CO2 in a solid form.
  • Calciner: Finally, the pellets are heated to extremely high temperatures. This releases the CO2 as a pure gas, which can be compressed and pumped underground for permanent storage. The remaining calcium is recycled back into the system to capture more carbon.

This cycle runs continuously, acting as a mechanical tree that does the work of millions of natural trees without requiring the same land and water resources.

The Economics of Air: Tax Credits and Investments

Building a facility like Stratos is not cheap. The estimated cost for the project is approximately $1.3 billion. To help finance this massive undertaking, Occidental secured a $550 million investment from BlackRock, the world’s largest asset manager.

However, the real financial engine driving this project is the United States government. The Inflation Reduction Act (IRA) significantly boosted the 45Q tax credit, which provides a federal subsidy for carbon sequestration.

  • The 45Q Boost: Under the new rules, companies can receive up to $180 per tonne of CO2 captured via DAC and permanently stored.
  • Revenue Streams: Before the IRA, the credit was much lower (around $50/tonne for regular capture), making the economics of DAC nearly impossible. At $180/tonne, the gap between cost and revenue narrows significantly.

Occidental is betting that as they build more plants (they have plans for 100 facilities by 2035), the cost of the technology will drop due to economies of scale, while the value of carbon credits will rise.

Corporate Buyers and the Market for Removal

Beyond government tax credits, there is a growing private market for Carbon Dioxide Removal (CDR) credits. Major corporations with “Net Zero” pledges are realizing they cannot eliminate all their emissions. They need to buy offsets to balance their books.

Occidental has already pre-sold a significant portion of Stratos’s future capacity. Notable customers include:

  • Amazon: Committed to buying 250,000 metric tons of carbon removal over 10 years.
  • All Nippon Airways (ANA): signed a purchase agreement for CDR credits.
  • Airbus: Pre-purchased 400,000 tonnes of carbon removal credits.
  • AT&T and TD Bank: Have also signed deals with 1PointFive.

These companies are buying a premium product. Unlike cheap forestry credits (which are often criticized for low quality or impermanence), DAC credits offer measurable, permanent verification. The CO2 is injected into saline aquifers deep underground, where it turns into stone over time. It does not leak back out.

The "Net-Zero Oil" Controversy

Occidental’s strategy is not without its critics. Environmental groups argue that Direct Air Capture provides a “license to operate” for oil companies, allowing them to continue extracting fossil fuels rather than transitioning to renewables.

Occidental CEO Vicki Hollub has been open about this. She has spoken about the concept of “Net-Zero Oil.” The idea is simple: if Occidental extracts a barrel of oil, which emits carbon when burned, but simultaneously captures an equivalent amount of carbon from the atmosphere and injects it back into the ground, the net impact on the climate is zero.

This approach could theoretically allow the internal combustion engine to survive for decades longer. For Occidental, Stratos is not just an environmental project; it is a survival strategy for the oil and gas industry in a carbon-constrained world.

Why This Matters for the Energy Industry

The completion and operation of Stratos will be a pivotal moment for climate science and energy markets. If the plant runs successfully and stays within its budget, it proves that DAC is scalable.

If it fails, faces technical delays, or if the costs remain prohibitively high (currently estimated between $400 and $600 per tonne without subsidies), it could signal that mechanical carbon removal is not the silver bullet many policy makers hope it is.

For now, the steel is rising in the Texas desert. Occidental is betting over a billion dollars that the future of oil involves putting carbon back into the ground just as fast as they take it out.

Frequently Asked Questions

What is the difference between Carbon Capture (CCS) and Direct Air Capture (DAC)? CCS usually refers to capturing carbon at the source, such as a factory smokestack, where CO2 concentrations are high. DAC captures carbon from the ambient air anywhere in the world, where CO2 is much more dilute. DAC is more expensive but more flexible regarding location.

When will the Stratos plant be operational? Occidental and its subsidiary 1PointFive expect the Stratos facility to be commercially operational by mid-2025.

Who owns the technology being used at Stratos? The technology was developed by Carbon Engineering. Occidental Petroleum acquired Carbon Engineering in 2023, bringing the technology in-house.

Does this process actually reduce global warming? Yes, provided the captured carbon is stored permanently and the energy used to run the plant comes from low-carbon sources. Stratos is designed to inject the CO2 into deep saline aquifers for permanent sequestration.

How much does it cost to capture a ton of CO2? Current costs for DAC are high, ranging from $600 to $1,000 per tonne depending on the specific setup. Occidental aims to drive this cost down significantly, potentially below $200 per tonne in the long term, as they deploy more facilities.