The Permian Isn't Done Yet, and Oxy Has Receipts

Occidental lifts EOR spending by $200M in 2026 as reformed tax credits reshape recovery economics in the Permian Basin

6 Apr 2026

Occidental Petroleum is increasing its investment in enhanced oil recovery in the Permian Basin, confirming during its fourth-quarter 2025 earnings call that it will raise capital allocated to Permian EOR, the Gulf of Mexico, and international operations by approximately $200 million in 2026.

The move coincides with a significant shift in federal policy. Recent changes to the 45Q tax credit have lifted the credit value for CO2 used in EOR to $85 per metric ton, matching the rate for permanent geological storage for the first time. Analysis from Enverus found this reduced breakeven costs for conventional EOR projects by more than 40%, placing them below the threshold of the best remaining unconventional Permian inventory.

Occidental is better placed than most to benefit. The company has operated CO2-EOR projects in the Permian for more than 50 years and is integrating that infrastructure with its Stratos direct air capture facility in Ector County, Texas, which is scaling toward 500,000 tonnes of CO2 per year. Captured CO2 from Stratos will feed directly into EOR injection, supporting both production volumes and the company's net-zero oil commercial model.

Management confirmed that roughly 70% of total oil and gas capital in 2026 will be directed at US onshore assets, with EOR named as an optimisation priority. Production gains from the programme are not expected until late 2027, giving investors a defined milestone against which to measure progress.

The broader implications are harder to dismiss. When the dominant US CO2-EOR producer raises dedicated EOR capital in a year of otherwise constrained spending, it carries weight across the sector. Whether that signal translates into wider industry mobilisation will depend on how quickly CO2 supply infrastructure matures across the basin and whether the 45Q credit structure holds under future administrations.