Warren Buffett's Berkshire Hathaway (BRK.A 1.54%) (BRK.B 1.44%) has been buying shares of Occidental Petroleum (OXY 1.75%) hand over fist. Berkshire Hathaway now owns nearly 24% of the oil company's outstanding shares. While Buffett recently dismissed the idea of acquiring Occidental, his company has the approval to boost that position up to 50%.

Occidental Petroleum's exposure to oil prices is a big reason Buffett is buying shares. However, it's not the oil stock's only upside catalyst. Two other potential long-term value drivers make it a compelling investment opportunity.

Chemical-driven growth

Occidental Petroleum is a semi-integrated energy company. While it doesn't have a refining business like Buffett's other top oil stock holding, Chevron, it does have a chemicals business (OxyChem).

OxyChem has a market-leading position. It's the top-three global producer in every product category it produces. The business generated about $2.5 billion of earnings before interest and taxes (EBIT) last year and should make about $1.5 billion this year.

That makes it a meaningful contributor to Occidental Petroleum's financial results. OxyChem's pre-tax income was $472 million in the first quarter, in line with its guidance. That compares to $1.6 billion of pre-tax income from its oil and gas business and only $2 million of pre-tax income from midstream and marketing.

CEO Vicki Hollub highlighted OxyChem on the company's first-quarter conference call as one of the "many opportunities to grow cash flow outside of [oil and gas] production growth." She pointed out that "our new OxyChem projects are expected to contribute $300 million to $400 million in incremental annual EBITDA, with benefits expected to start in late 2023 and full project benefits expected in early 2026."

The company is investing $800 million over the next three years to modernize, expand, and enhance its plants. These projects will increase volumes and cash flows while reducing operating costs and greenhouse gas emissions.

Capturing a potentially massive opportunity

In 2018, Occidental Petroleum launched a fourth business unit: Oxy Low Carbon Ventures (OLCV). The company formed OLCV to leverage its expertise in using carbon dioxide to produce oil through enhanced oil recovery. OLCV has invested in several companies seeking to capture and remove carbon dioxide from the atmosphere and either sequester it underground or utilize it.

Hollub highlighted this emerging business on the call: "Near-term investments in our low-carbon ventures businesses are expected to enable the commercialization of exciting decarbonization technologies with the potential to generate cash flow detached from oil and gas price volatility."

Carbon capture, sequestration, and utilization (CCSU) is a potentially massive market opportunity for Occidental Petroleum. The company believes it could eventually become a $3 trillion to $5 trillion global industry, which aligns with what others see. For example, ExxonMobil anticipates CCSU could be a $4 trillion global market opportunity by 2050.

Hollub has previously stated that she believes the company could eventually make as much money from this technology as it currently does from producing oil and gas. Further, as she commented in the first quarter, these earnings would be a lot less volatile than its oil and gas business. That's because it will get paid fees for capturing and storing carbon dioxide under long-term contracts. Exxon sees a similar potential to generate meaningful and stable earnings from the technology.

The company is investing $1.1 billion to build its first direct air capture system in Texas, which should begin operations in late 2024. One way it's monetizing that investment is through the sale of carbon credits. For example, Airbus pre-purchased the capture and permanent sequestration of 100,000 tons of carbon dioxide for four years. The company also struck deals with two Texas pro sports teams to offset some of their emissions for three seasons.

Occidental is also working on capturing carbon directly from the source and developing hubs to sequester it underground. It's partnering with several pipeline companies to provide transportation services between the point of capture and the company's underground sequestration hubs.

Oil isn't the only thing fueling Occidental Petroleum's growth

Occidental Petroleum currently makes most of its money producing oil and gas. While that gives it lots of upside potential to higher prices, it also makes its earnings volatile when prices cool off as they have in the past year.

However, oil is one of the company's many growth catalysts. It's investing heavily to expand its chemicals business and build a low-carbon platform, which could be big growth drivers in the coming years. In addition to its upside to oil prices, they give investors two more reasons to follow Buffett into buying Occidental Petroleum stock.