UPDATE 1-Oxy to boost Permian oil output with new CO2 project

(Adds details and comments from CFO)

NEW YORK, June 30 (Reuters) - Occidental Petroleum Corp (OXY.N) will spend $1.1 billion to partner with SandRidge Energy (SD.N) in a project to boost Oxy's West Texas oil output by 50,000 barrels per day within five years.

The project includes constructing a West Texas gas processing plant and a pipeline that will ship carbon dioxide to Oxy oil wells, where the gas will be injected to help boost output, the company said on Monday.

The process, known as enhanced oil recovery, will add to the nearly 200,000 barrels of oil equivalent per day that Oxy produced from West Texas' Permian Basin in 2007, and will boost its proved reserves of oil by 500 million barrels, said Stephen Chazen, Oxy's chief financial officer.

"This is a couple years' worth of production" from the fields, Chazen told Reuters.

The oil industry has long injected CO2 into wells to help pull out oil that would otherwise be left in the reservoirs.

"Our business is basically taking old fields that need work and improving them," Chazen said. "From our perspective, this is the easiest way to increase our production reserves."

Oxy is one of the largest buyers of CO2 from Colorado that is used for enhanced oil recovery in the Permian. It hopes to buy more CO2 to increase its production in the region.

Oxy is the largest producer of Permian Basin oil, with about a 16 percent share of the production that comes from the basin, one of the oldest oil developments in the United States.