(Bloomberg) — Canadian driller Strathcona Resources Ltd. is planning up to C$2 billion ($1.5 billion) in projects to capture carbon dioxide emissions from its oil sands operations, with help from support of a Canadian public investment vehicle.
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While Strathcona will own and operate the assets, it will equally share the initial capital costs with the Canada Federal Growth Fund and repay the government vehicle with cash flows from carbon credits generated by the system, according to a statement released Wednesday. -fair. The driller claims the project will capture up to 2 million metric tons of CO2 per year.
Strathcona chief executive Adam Waterous said a successful carbon capture system could take his company’s oil sands production to just under twice as carbon intensive as average global oil production, to about a fifth of that reference value. If implemented more widely by other producers, carbon capture could represent a “dramatic flip of the script” by turning Canada’s oil sands — currently a top target for environmentalists — into a more desirable source of oil, he said. .
“I’m optimistic that community support will follow the data on carbon intensity,” Waterous said in an interview. “As carbon intensity decreases, reputation will follow.”
Extracting thick oil from Canada’s oil sands deposits requires large amounts of steam, making oil one of the most carbon-intensive types of production in the world. Strathcona’s systems would work by capturing CO2 produced by burning natural gas at the company’s central steam production facilities and storing it underground.
Critics’ view
Opponents of carbon capture say that using the technology to produce oil does little to help combat climate change because 80% or more of oil companies’ emissions come from the combustion of their products by end users. Carbon capture projects around the world also have a spotty track record in meeting performance projections.
Although Waterous says he doesn’t like that his company is among the pioneers of the “new and therefore risky” technology, he expects the system to work because Strathcona’s oil sands production in Saskatchewan and Alberta is located in formations suitable for storing CO2.
The Canada Growth Fund will initially commit 500 million Canadian dollars to the projects, with the total later increasing to up to 1 billion Canadian dollars. Strathcona said its share of the capital costs will be fully covered by federal tax credits for investments in carbon capture and other grants. The company expects a final investment decision on the first project in mid-2025, with operations beginning about a year later.
Strathcona also agreed to guarantee a carbon price for the partnership – in contrast to other proposals where companies ask governments to guarantee a carbon price.
Although the carbon tax implemented by Prime Minister Justin Trudeau is expected to increase over time, his opponent in Canada’s next federal election – who is leading in polls – has promised to eliminate the tax, at least on consumer fuels. It remains unclear whether the industrial carbon tax, which applies to oil sands projects, would be canceled or changed under Conservative leader Pierre Poilievre.
The level of this tax has a great influence on the value of credits that the Strathcona system will generate, determining the economic viability of the project. Waterous said this is a risk his company, which pays about C$65 million a year in carbon taxes, is willing to take, and he hopes other industry players can eventually echo his views.
“Over time, the sequestered CO2 will be an important asset to the community and we believe we will be economically rewarded for it,” he said.
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