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An oil rig drills a well under moonlight near Cremona, Alta, on Sept. 24. Canada has the third largest oil reserves in the world and is the world's fourth largest oil producer.Jeff McIntosh/The Canadian Press

Alberta will on Tuesday announce a new grant program to encourage carbon capture projects in the province, as the oil and gas sector faces increasing pressure to reduce emissions.

The program will be modelled on the Alberta Petrochemicals Incentive Program, which allows for a refundable tax credit of up to 12 per cent of eligible capital costs once projects are operational, according to Premier Danielle Smith. It aims to augment the federal government’s planned tax credit for carbon capture, utilization and sequestration (CCUS) projects, which will cover up to 50 per cent of capital costs.

Speaking at the Canadian Association of Energy Contractors (CAOEC) State of the Industry luncheon in Calgary Friday, Ms. Smith said the new program will be as broad as possible to encourage extensive adoption of the technology and help reduce emissions from the oil and gas sector.

Ms. Smith said her government used the petrochemical program as a model for the new CCUS scheme, because it has worked well to attract companies to Alberta.

“That’s the kind of thing that we heard we need to do on CCUS as well,” she said.

CAOEC represents drilling and service rig companies across the country, many of which are small- and medium-sized businesses, and says it welcomes the new program.

Its president and chief executive, Mark Scholz, told media Friday that new carbon capture projects could provide years of regular work for Canada’s energy drilling and service sector.

That is just one area where the industry is diversifying. He also pointed to the extraction of lithium and helium and the production of heat from geothermal activity, markets for which have seen “exponential growth,” he said.

“Today’s rigs can work on a natural gas well in one period, move to a geothermal or carbon storage well in the next, and increasingly drill exploration wells for lithium and helium,” Mr. Scholz said.

“We are definitely part of the energy transformation landscape within Canada.”

But he warned that more supportive government policy is required to ensure his members can take full advantage of the energy transition.

The association has not been able to identify a single federal program that it can access to help its members decarbonize, Mr. Scholz said, even though various programs he said it could roll out today – including hydrogen blending, battery technology and electrification – would have a meaningful impact on sector emissions.

That’s because CAOEC members are in the fossil fuels sector, he said, and have been excluded from investment tax credits focused on green technologies. CAOEC has been working with Ottawa to try and remedy the situation, he said.

“If aspirations are to be turned into investments, Ottawa needs to be more flexible and not choose one sector over another.”

A scramble to find workers is another challenge that continues to dog the sector. While applications for entry-level positions are strong, it has been tough to fill senior field positions. That’s unlikely to turn around any time soon, as recruiters in central and Atlantic Canada try to lure workers.

To help fill jobs, Mr. Scholz encouraged CAOEC members to tap into parts of the labour force that have been traditionally underrepresented in the sector – particularly Indigenous peoples, women and new Canadians.

The sector could also attract talent by making it clear that service and drilling jobs can contribute directly to the continuing transformation of the oil and gas sector into a more varied and cleaner industry, he said.

“There is no silver bullet, but we must rebuild the work force from previous years of contraction and lack of stable activity.”

The CAOEC State of the Industry report, released Friday, paints a relatively rosy forecast for the sector in 2024, with modest year-on-year growth in the number of wells being drilled and the creation of more than 3,000 new jobs.

Most of the growth is pegged for the second half of 2024 as the market comes off a softer third quarter in 2023, owing in part to global economic pressures and cautious spending by energy producers.

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