Oil & Gas industry updates
Sign up to myFT Daily Digest to be the first to know about Oil & Gas industry news.
Canada’s government should pay for up to 70 per cent of a proposed C$75bn ($60bn) project to decarbonise the country’s controversial oil sands and protect a critical engine of the country’s economy, one of the proposal’s backers said.
“If we’re able to solve the puzzle of making Canadian oil significantly lower carbon intensive”, the oil would be the “cleanest in the world”, Alex Pourbaix, chief executive of Cenovus Energy, the country’s second-largest oil producer, told the Financial Times.
But Justin Trudeau’s Liberal government, which last year committed Canada to slashing emissions by 40-45 per cent below its 2005 levels by 2030, must pay up to make it happen, he argued.
“It’s going to take tens of billions of dollars over 30 years to decarbonise [our oil] industry,” said Pourbaix. “But at the same time that will protect something in the range of C$3tn of GDP.”
Pourbaix and industry group the Canadian Association of Petroleum Producers (Capp) also urged the federal government to extend tax credits to oil companies that would use captured carbon to produce more oil.
The calls for federal funding will complicate matters for Trudeau amid criticism that Canada is not moving quickly enough to meet its climate targets while his government defends its high-emissions oil industry, the biggest petroleum exporter to the US.
Despite imposing an aggressive carbon tax regime, the federal government lobbied for the controversial Keystone XL pipeline from Alberta to Texas — which was cancelled by US President Joe Biden earlier this year — and is funding another export pipeline development from the oil sands to Canada’s west coast.
“Our prosperity and our economy are still highly dependent on” the oil sector, Seamus O’Regan, the country’s Liberal federal resources minister said in a recent interview with the FT. “It is what we do.”
Last month Cenovus joined the four other largest producers in Canada’s oil and gas sector, the biggest single contributor to the country’s greenhouse gas emissions, to propose a vast carbon capture, utilisation and storage (CCUS) project they said was “the only realistic proposal” to curb pollution.
Critics of CCUS say the technology, mentioned for years as a solution to emissions, remains too expensive to achieve the scale needed.
Pourbaix said it showed operators were now “attuned to where the world is moving”.
The proposal includes installation of a trunk line capturing carbon from oil sands projects and other industries near Fort McMurray, in northern Alberta, and storing it further south near Cold Lake.
The proposal came as the Canadian government mooted an investment tax credit designed to accelerate development of a domestic CCUS industry. The credits are due to begin next year.
Pourbaix urged the federal government to reverse a decision to exclude enhanced oil recovery — a method of reinjecting the captured CO2 to help produce more oil — from the tax incentive scheme, saying the EOR could make the CCUS projects economic “right out of the chute”.
Tim McMillan, Capp’s chief executive, welcomed the federal government’s focus on CCUS to help meet its emissions goal, but said “excluding EOR from the federal programme will create substantial challenges to the government in reaching this goal”.
A spokesperson for O’Regan’s office said CCUS was “one of many technologies that will get us to net zero by 2050”, but did not say if the federal government would help pay for the oil sands companies’ proposed project. The government has set aside $319m for research into CCUS and is working on a new strategy to promote it.
The oil sands sector is recovering from last year’s crash. But operators continue to face opposition from climate activists and environment-focused investors because of the higher emissions associated with producing the heavy, bituminous oil found in northern Alberta and Saskatchewan.
International oil supermajors, including Shell, TotalEnergies and Equinor, have pulled investment from the region, home to the world’s third-biggest oil deposit.
Alberta’s provincial government has fought aggressively to protect the sector, including a recent failed legal challenge to stop the federal carbon tax.
Pourbaix said he supported the new carbon pricing scheme and his company has a “long-term ambition” to achieve net zero emissions from its operations. But like other oil sands operators, Cenovus would not commit to a net zero target for its so-called scope 3 emissions — the pollution caused by the burning of the products its sells.
“Scope 3 is largely the responsibility of consumers,” said Pourbaix. “And kind of absolving the consumer of accountability for this doesn’t make sense.”