Cenovus Energy Inc. will pursue three new carbon-capture projects in the next five years as it seeks to reduce its greenhouse gas emissions by 35 per cent by the end of 2035, and become a net-zero producer of emissions by 2050.
And chief executive officer Alex Pourbaix says offsetting the emissions produced by each barrel of crude “could very easily be the next boom in the Alberta oil sector,” creating jobs, and attracting investment in technology and research dollars.
Calgary-based Cenovus is the latest in a growing list of energy companies planning to embrace carbon capture, utilization and storage (CCUS) to try and reduce their emissions, and prove they’re taking climate change seriously.
Carbon capture projects are facilities that force CO2 emissions deep into the ground to keep them out of the atmosphere. The technology can be used in various major industrial sectors, including power generation and manufacturing.
The company intends to sustain its 2021 production levels of 800,000 barrels of oil equivalent per day over the next five years and increase its downstream throughput – the amount of crude processed – by around 14 per cent, while reducing its greenhouse gas emissions by 5 per cent.
During its annual investor day on Wednesday, the company’s chief sustainability officer Rhona DelFrari outlined three small CCUS projects on which Cenovus is focusing in the next five years – for its Lloydminster upgrader, its Minnedosa ethanol plant and its Elmworth gas plant.
Ms. DelFrari said a CCUS project at the company’s upgrader in Lloydminster – a small city that straddles the Alberta-Saskatchewan boundary – could capture up to 420,000 tonnes of carbon dioxide each year. Its Minnedosa plant in southwest Manitoba could capture about 100,000 tonnes a year, and the Elmworth gas facility in Northern Alberta roughly 60,000 tonnes.
In the longer term, Cenovus wants to expand CCUS to larger assets, such as its Foster Creek and Christina Lake oil sands facilities and Lima refinery in the U.S. Midwest, by around 2035. It’s also looking to replace steam with solvents in the oil sands, and undertake a pilot project for small modular nuclear reactors to produce power.
Cenovus and its partners in the oil sands net-zero alliance (a group targeting net zero by 2050, whose members account for more than 90 per cent of oil sands production) are continuing to assess what the group calls its foundational CCUS project – a pipeline system that would connect oil sands facilities in Northern Alberta with a carbon-storage hub near Cold Lake.
But the breadth of carbon-capture deployment in the oil and gas sector will depend on what Ottawa comes up with in its CCUS tax credit.
The federal Liberal government has said that CCUS projects for enhanced oil recovery (EOR) – in which captured carbon is injected into mature oil wells to boost production – will not be included in the tax credit slated to come into effect in 2022. That pledge is something environmental groups support in the bid to reduce fossil fuel use, but oil companies have railed against, saying EOR is key to making carbon-capture projects financially feasible.
Mr. Pourbaix told media after the online investor presentation that Cenovus has “significant opportunities” to build its EOR business, and encouraged Ottawa to “have an open mind” about including it in the tax credit.
Cenovus’s 2022 guidance also included capital spending of between $2.6-billion and $3-billion. It plans to allocate about half of its excess free funds flow to shareholder returns, including the planned repurchase of up to 146.5 million common shares.
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