The fate of Canada’s largest proposed carbon capture and storage project now hangs in the balance after Prime Minister Justin Trudeau announced that he would resign after a new leader of his Liberal Party is chosen.
According to industry watchers, the $16.5B project faces an uncertain future with a new federal government to be elected later this year. To be built by the Pathways Alliance, a consortium whose members include some of Canada’s largest energy companies, the high-profile project would capture harmful carbon dioxide emissions from the Canadian oilsands, the country’s heaviest-emitting sector.
“I can’t imagine a huge project like that could really move forward in a time like right now,” Michael Bernstein, executive director of the non-profit group Clean Prosperity, told Bloomberg. “When you’re looking at a project that has at least a 15-year time horizon, you want as much certainty as possible. And there’s just more uncertainty than I can remember in my whole time doing this work right now,” he added.
Over the past decade, major oil companies, under pressure from investors and environmentalists, have been fleeing Canada's oil sands, the fourth-largest oil reserve in the world, while investment in existing projects has stalled. A lack of pipelines and heavy emissions have weighed on the Canadian heavy crude sector for years, with some companies exiting after coming under pressure to invest in projects with lower emissions. According to research firm Rystad Energy, oil sands production in Alberta generates ~160 pounds of carbon per barrel of crude pumped, the highest of any oilfield in the world.
However, Alberta’s politicians have no plans to ditch the province’s main cash cow any time soon. Alberta premier Danielle Smith has declared that the energy-rich region will transition away from emissions, not oil.
"We're transitioning away from emissions, we're not transitioning away from oil and gas. We're not going to phase out production of oil and natural gas, we're just going to change the way in which we use it," Smith has said at the World Petroleum Congress in Calgary, Alberta.
According to her, hydrogen from natural gas will likely become an increasingly important fuel in the province while carbon capture, utilization and storage (CCUS) will play a role in cleaning up emissions. Smith has differed radically with Canada's minister of energy and natural resources Jonathan Wilkinson who supports IEA’s prediction that world oil demand will fall to just 25 million barrels per day by 2050, or a quarter of current global demand, an assertion Smith has dismissed as ‘ludicrous’. Wilkinson had argued that oil and gas after 2050 would primarily be used in applications not requiring combustion, such as petrochemicals, lubricants, solvents, carbon graphite, asphalt and waxes.
Canada considers CCUS a key tool in helping the country’s high-polluting oil and gas industry slash emissions without cutting back on production. However, Canadian companies have been holding back on final investment decisions mainly because of the high costs associated with carbon capture and have been lobbying for more government support.
An Alberta incentive program, working alongside a federal government investment tax credit first announced in 2023, would be pivotal in jumpstarting Canada’s nascent CCUS sector.
"We're going to make sure we do a robust consultation to get it right. If we get it right, that means that we're going to see another economic boom here in Alberta," Jean told Reuters in an interview.
Canada has set a net-zero emissions by 2050. A number of companies including Enbridge Inc.(NYSE:ENB), TC Energy Corp. (NYSE:TRP) as well as Pathways Alliance have proposed building major CCS storage hubs.
Their American peers are considerably ahead .
Last year, Exxon Mobil (NYSE:XOM) acquired the developer of carbon capture, utilization and storage (CCUS) solutions, Denbury Inc. in an all-stock transaction valued at $4.9B, or $89.45/share. Denbury recycles CO2 through its Enhanced Oil Recovery (EOR) operations and uses it to produce environmentally-friendly, carbon-negative Blue Oil. The company owns the largest CO2 pipeline network in the U.S. at 1,300 miles, including nearly 925 miles of CO2 pipelines in Louisiana, Texas and Mississippi, as well as 10 onshore sequestration sites.
The acquisition is part of ExxonMobil’s newly-launched CCUS projects. Exxon CEO Darren Woods says that the company’s Low Carbon business has the potential to outperform its legacy oil and gas business within a decade and generate hundreds of billions in revenues.
In 2023, Exxon CEO Darren Woods told investors that the company’s low-carbon business has the potential to outperform its legacy oil and gas business within a decade and generate hundreds of billions in revenues. According to Woods, the business has the potential to hit hundreds of billions after the initial 10-year ramp-up. However, Ammann said that whether Exxon is able to actualize its dream will depend on regulatory and policy support for carbon pricing and the cost of abating greenhouse gas emissions, among other changes. Exxon believes that the Low Carbon segment will be "much more stable, or less cyclical" and also less prone to commodity price swings through predictable, long-term contracts with customers aiming to lower their own carbon footprint.
In the same year, oil field services giant Schlumberger Ltd (NYSE:SLB) unveiled its newly carved SLB New Energy unit. The segment will invest in hydrogen, carbon solutions, energy storage, geothermal and geoenergy and critical minerals. According to SLB New Energy president Gavin Rennick, the new unit has the potential to hit revenue of $3 billion by the end of the current decade and at least $10 billion by the end of the next decade.
By Alex Kimani for Oilprice.com
