Occidental’s South Texas DAC Hub: A Fortified Play in the Carbon Capture Gold Rush

The climate tech revolution is no longer theoretical. On May 16, 2025, Occidental Petroleum (OXY) and Abu Dhabi National Oil Company (ADNOC)’s XRG investment arm announced a landmark partnership to develop the South Texas DAC Hub, a $500 million Direct Air Capture (DAC) facility backed by $650 million in U.S. Department of Energy (DOE) grants. This venture isn’t just about carbon capture—it’s a blueprint for de-risking cutting-edge climate tech, scaling geologic storage solutions, and cornering a $100 billion carbon credit market. For investors, the timing is golden.

Strategic De-Risking Through Partnerships

The joint venture with ADNOC’s XRG—a $80 billion arm of the UAE’s state-owned oil giant—adds geopolitical and financial credibility to Occidental’s DAC ambitions. XRG’s $500 million commitment isn’t just capital; it’s a seal of approval from a firm deeply embedded in global energy markets. The partnership builds on a 2023 MOU and decades of collaboration, including ventures like the UAE’s Al Hosn Gas plant. This isn’t a speculative bet—it’s a strategic alliance that mitigates execution risk by pooling Occidental’s subsurface expertise with ADNOC’s financial clout.

Meanwhile, the $650 million DOE grant isn’t just funding; it’s regulatory validation. The Biden administration’s push for energy independence and climate goals is directly subsidizing Occidental’s tech. This funding also shields the project from political headwinds, as it aligns with bipartisan priorities: energy security and job creation in Texas.

Scalability Meets Storage: A 3 Billion-Tonne Fortress

The South Texas DAC Hub’s 165-square-mile site isn’t just a plot of land—it’s a geologic marvel. With storage capacity for 3 billion tonnes of CO₂, this hub dwarfs existing projects. For context, global annual CO₂ emissions are ~40 billion tonnes, meaning this single site could store 7.5% of global emissions. But the real game-changer is the modular design: the first 500,000-tonne DAC facility is just the start.

Occidental’s STRATOS DAC technology, already nearing commercialization in West Texas, provides a proven template. The hub’s proximity to Gulf Coast industrial hubs and energy infrastructure ensures efficient CO₂ transportation, slashing costs. This scalability isn’t just theoretical—1PointFive, Occidental’s carbon subsidiary, is already building out DAC pipelines, and the DOE’s funding accelerates front-end engineering.

Carbon Credit Markets: The Profit Engine

DAC projects like this aren’t just climate saviors—they’re profit machines. As corporations from Microsoft to BP race to meet net-zero targets, carbon credit demand is exploding. The South Texas DAC Hub’s storage capacity alone could generate $2.4 trillion in credits at $800/tonne—a price point that’s already being hit by high-demand sectors like aviation.

Occidental isn’t just a carbon manager; it’s a carbon credit mint. With its existing CO₂ pipeline network and Enhanced Oil Recovery (EOR) expertise, the firm has a 50-year track record of subsurface management. Pair this with DAC’s ability to pull CO₂ directly from the air, and OXY becomes a one-stop shop for carbon neutrality solutions.

Geopolitical Catalysts: Energy Transition as Diplomacy

The timing of this announcement—during Trump’s UAE state visit—was no accident. The U.S. and UAE are deepening energy ties: ADNOC is a top U.S. crude supplier, and this DAC deal signals a shift from oil to climate tech collaboration. For Occidental, this partnership insulates it from trade tensions while securing access to Middle Eastern capital.

The Investment Case: Buy the Dip, Own the Upside

Critics will cite risks: regulatory delays, tech overruns, or carbon credit price volatility. But Occidental is de-risking all three. The DOE’s grant covers 60% of the first-phase costs, while ADNOC’s equity stake shares execution burdens. Meanwhile, carbon credit prices have surged 200% since 2020, and the EU’s Carbon Border Adjustment Mechanism (CBAM) will soon force industries to buy credits or pay tariffs.

Occidental’s stock has underperformed oil peers this year, but its $25 billion net cash position and DAC growth engine make it a contrarian buy. The South Texas DAC Hub isn’t a moonshot—it’s a multi-decade moat in a $100 billion market.

Final Call: OXY is the Climate Tech Play with Legs

The South Texas DAC Hub isn’t just Occidental’s next project—it’s the template for industrial-scale climate solutions. With geopolitical tailwinds, DOE-backed scalability, and a partner as deep-pocketed as ADNOC, OXY is poised to dominate a market that’s only getting hotter. For investors, this isn’t just ESG investing—it’s smart, risk-adjusted growth. The time to act is now.

Action Item: Occidental’s stock is primed to rise as DAC commercialization accelerates. Buy OXY on dips below $60/share and set a price target of $85 by 2026. The carbon credit gold rush has begun—and Occidental is holding the pickaxe.