Oil sands CEOs are working together in the race to get to net zero

President and CEO of Suncor Mark Little, at work in the company’s headquarters in Calgary, in 2020.Todd Korol/The Globe and Mail

Every Friday at 7 am, the chief executives of Canada’s six largest oil sands companies set aside their competitive differences and jump on a conference call.

the topic? How to reduce the greenhouse gas pollution from their sites in northern Alberta, and bring emissions to net zero by 2050.

That weekly meeting plays a key role in keeping the Oil Sands Pathways to Net Zero initiative grinding toward its target. The group includes Canadian Natural Resources Ltd. CNQ-N, Cenovus Energy Inc. CVE-T, ConocoPhillips Canada Instrument COP-N, Imperial Oil Ltd. IMO-T, MEG Energy Corp. MEG-T and Suncor Energ Inc. SU-T, which operate together about 95 per cent of Canada’s oil sands production (which in turn accounts for about 3 per cent of global oil production).

Its plan is anchored on carbon capture, utilization and storage (CCUS), a technology that captures carbon dioxide for injection underground for storage, or for other uses such as extending the life of mature oil wells or helping with concrete production.

The first goal of the alliance is to build a new carbon dioxide pipeline system, which will link oil sands facilities in Fort McMurray and Cold Lake to a sequestration hub to store captured carbon. The line will also be available to companies outside the oil sector who want to tap in to reduce their own emissions.

To defray some of the costs of the trunk line project, the group is banking on a federal CCUS investment tax credit, details of which are due to be released soon.

The alliance is also pushing for other financial support from governments to help it meet its net-zero goal. Specifically, it wants programs that would use royalty and tax revenues generated by the sector and drive them back into emissions-reduction technologies.

“I think the province and the industry and the feds working together, we can do something that none of us can do apart. That’s the exciting opportunity,” Suncor president and CEO Mark Little told The Globe and Mail in an interview.

Oil sands companies have financial muscle to go their own way on emission reductions

Rhona DelFrari is the chief sustainability officer at Cenovus. She told The Globe the alliance isn’t chasing grants. Instead, it wants partnerships with various levels of governments.

Pointing to several government programs that supported the development and deployment of renewable energy technology, she said such partnerships with industry are key to incentivize the construction of emissions-reducing infrastructure.

“These are not projects that make revenue. So for a corporation that is owned by shareholders to put 100 per cent of the costs into a project that doesn’t bring any revenue back, that is not something that a corporation can do. Because while the shareholders still obviously want us to reduce their emissions, they also want returns,” Ms. DelFrari said.

“So, it has to be a balancing act. And that’s what we’re working with governments on.”

But a recent report by the Canadian Institute for Climate Choices said governments in Canada will need to “make some tough choices” in how they allocate scarce funds, because “decarbonizing fossil fuel production may not produce the best long-term economic outcome.”

The institute was formed and is funded by Environment Canada as a source of independent advice and analysis on climate change threats and possible ways to minimize them.

Its report, released Wednesday, assessed whether or not federal, provincial and territorial policies that could be considered fossil fuel subsidies support Canada’s transition to a low-carbon economy. The paper’s main conclusion was that updating and redesigning fossil fuel policies is critical not just for Canada’s climate goals, but for the country’s long-term prosperity.

“Public investment in assets at elevated risk of being stranded in global low-carbon scenarios could generate less economic and job benefit than investment in areas that could capture a share of growing, transition-opportunity markets,” it said.

“The fossil fuel sector is no longer the secure source of economic growth and job creation it once was. Coal, oil and gas demand will inevitably decline globally, although there is uncertainty on the exact timing and slope of decline over the next decade. Public investment in long-lived fossil fuel assets now carries significant risk and less certain benefits for society.”

From the alliance’s perspective, though, government economic assistance is the only way forward. Brad Corson, Imperial’s president and CEO, recently told investors that getting the oil sands’ emissions to net zero by 2050 will require $70-billion to $75-billion of investment.

The CCUS facilities and pipeline are similar to projects in Norway, the Netherlands, the United Kingdom and the United States, but the scale of the trunk line dwarfs anything ever built in Canada. The plan has also encountered some initial bureaucratic hurdles in Alberta.

The line requires companies to secure the geological formations needed to store captured carbon, called pore space. The Prairie province is rich in pore space, but the Alberta government has yet to issue a request for a proposal that would allow the group to apply for a space allocation.

The Alberta government is looking for a company to build a carbon sequestration hub using the pore space in Alberta’s Industrial Heartland around Edmonton, but it has not yet expanded those plans to the oil sands region.

Deals in the oil sands are coming, as Canada’s biggest energy companies put cash and science to work

Energy Minister Sonya Savage told reporters in January that the government would move quickly to open up pore space in the north. Her office told The Globe there’s no firm timeline on when that will happen, but said it will likely be in the next few months.

While the oil sands alliance is keen to get going, Suncor’s Mr. Little said in an interview that securing pore space will “just take a bit of time.”

“There’s a few pilots that have been done, but we’re talking about doing this on a scale that’s world leading,” he said. “The province is working through it, but you can imagine there’s lots of interesting times.”

While building the trunk line for oil sands facilities is a significant part of the plan, Cenovus’s Ms. DelFrari said each company will use whatever technologies make sense for its specific oil sands assets.

Dozens of employees across the six alliance companies have also formed working groups focusing on ways to hit net zero, looking at everything from CCUS to commercial arrangements, government policy and alternative emissions-reducing measures, such as hydrogen or small modular nuclear reactors.

“Even though we’re competitors, we’re all working together as one team when it comes to the pathways initiatives. We’ve put aside any corporate cultural differences and we’ve put aside the competitive nature that’s in all of us,” Ms. DelFrari said.

The alliance also believes its work, and how it has managed to bring together competing companies, could be replicated across a variety of sectors that want to reduce their emissions. Ms. DelFrari said governments tell her it’s the first sector to come forward with a collaborative effort that lays out a concrete plan to net zero by 2050, “and they really value that collaborative effort.”

“It’s not each company lobbying them or having discussions with them separately. We are a unified voice as this sector, and that makes it so much easier for them to work together with us,” she said.

“In in the end, we all have the same goal and outcome that we’re trying to achieve.”

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