A consortium of major oil sands companies in Canada, known as the Pathways Alliance, is actively engaged in discussions with the Canada Growth Fund (CGF), the federal government’s $15-billion green investment arm. Their aim is to secure support for a significant carbon capture and storage (CCS) project in northern Alberta. CCS technology is recognized as a crucial tool in reducing emissions in industries with high pollution levels, such as oil, gas, and cement. Canada sees the adoption of CCS as vital in achieving its ambitious net-zero emissions targets.
The country currently hosts several operational CCS projects that have successfully stored approximately 44 million tonnes of CO₂ since 2000. To meet its carbon emission reduction objectives, the federal government plans to triple the national CCS capacity by 2030. This expansion would necessitate the establishment of new facilities capable of capturing 15 million tonnes of CO₂ annually. The Pathways Alliance’s proposed project involves a $16.5-billion network designed to capture and store CO₂ emissions from more than a dozen oil sands facilities. The captured CO₂ would be transported to a central hub in Cold Lake, Alberta, where it would be permanently stored underground, contributing to emission reduction efforts across Alberta’s oil sands industry. This initiative marks a significant stride in Canada’s oil and gas sector’s decarbonization journey.
Despite the positive outlook for decarbonization efforts, concerns linger among oil sands executives regarding the financial risks associated with the uncertainty of future carbon prices. Adam Waterous, the executive chairman of Strathcona Resources, highlighted the industry’s apprehension towards potential regulatory changes or policy shifts that could impact the value of carbon credits. Waterous emphasized the need for caution in committing capital to projects that could result in stranded assets if carbon prices fail to stabilize. He also underscored the growing demand for sequestered carbon from technology firms seeking to offset emissions, citing a recent carbon capture deal between Microsoft and Occidental Petroleum as an example.
To address industry concerns and mitigate risks, experts advocate for the utilization of Carbon Contracts for Difference (CCfD), which offer a guaranteed floor price for sequestered carbon. By providing more stable pricing, CCfDs can help de-risk investments in emissions reduction technology and incentivize companies like the Pathways Alliance to pursue costly CCS projects. Canada Growth Fund, established to facilitate green investments, has yet to offer CCfDs to oil and gas producers seeking support for carbon capture technology. The fund’s current agreement involving CCfDs is with Entropy, a clean-tech company owned by Advantage Energy, allowing Entropy to sell carbon credits at a fixed price. However, oil producers seeking similar agreements to meet compliance obligations have faced challenges in securing support from CGF, creating a gap in assistance for key industry players.
The Pathways Alliance, comprising six major oil sands companies including Canadian Natural Resources, Suncor Energy, Cenovus Energy, Imperial Oil, MEG Energy, and ConocoPhillips Canada, aims to establish the world’s largest carbon capture and storage network. If successful, this initiative would mark a significant milestone in global CCS projects. The alliance recognizes the importance of government backing in ensuring the viability of large-scale CCS ventures and is eager to collaborate with Ottawa to advance their project. Kendall Dilling, president of the Pathways Alliance, expressed optimism about Ottawa’s commitment to de-risking industry investments, emphasizing the need for long-term viability of carbon capture and storage infrastructure.
The success of the Pathways Alliance’s CCS project hinges on the development of carbon pricing policies and market demand. Recent trends in carbon credit retirements indicate a potential future shift that could significantly impact carbon prices. Rich Gilmore, CEO of Carbon Growth Partners, highlighted the surge in demand for carbon credits and the impact of major players like Shell on the voluntary carbon market. The increased demand for carbon offsets could drive up prices and create a more competitive market, emphasizing the industry’s reliance on carbon capture technology to achieve decarbonization targets.
As part of its Emissions Reduction Plan, Canada is focused on substantial emission cuts in the oil and gas sector. The ongoing negotiations between the Pathways Alliance and CGF underscore the challenges and complexities of advancing green initiatives in a competitive, carbon-intensive industry. With potential government support on the horizon, Canada’s oil sands companies have the opportunity to make significant strides towards lowering emissions, setting a precedent for industry-government collaboration on climate action in the future.
