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International Petroleum Corp. IPCO-T, the first foreign oil company to sanction a project in Canada’s oil sands in more than a decade, could add carbon capture and storage (CCS) to the plant if more government financial incentives become available, its CEO told Reuters.

Geneva-based IPC, part of Sweden’s Lundin Group, sanctioned phase one of the 30,000 barrel-a-day Blackrod thermal project in Northern Alberta last month.

The company joins Canada’s biggest oil producers in urging policy makers to boost public funding for the costly technology that is seen as key to cutting emissions from the carbon-intensive oil sands.

Industry says CCS projects need more government support to be financially viable, while Ottawa and Alberta are at odds over who should provide increased funding.

“There’s still an opportunity – if we can have some sensible government decisions about getting serious about meeting climate targets – that if the right incentives come along, we’re in a very good position to look at carbon capture down the line,” CEO Mike Nicholson said in an interview in late February.

Until then, the company will pay Canada’s carbon tax, set to rise to $170 a tonne by 2030, Mr. Nicholson said.

IPC, a 50,000-barrel-a-day producer with assets in Canada, France and Malaysia, will spend $850-million developing Phase 1 of Blackrod. First oil is expected in 2026, and IPC has regulatory approval to produce up to 80,000 barrels a day.

The plant is the first greenfield oil sands project to be sanctioned since Imperial Oil Ltd. gave the go-ahead to its Aspen plant in 2018, only to shelve it indefinitely just months later.

It comes after years of tepid foreign investment in the oil sands, with international firms deterred by high upfront capital costs, crippling export pipeline congestion that has curtailed production, and concerns about bitumen’s high carbon intensity.

Mr. Nicholson said IPC’s decision was underpinned by new Canadian export pipeline capacity and IPC’s own strong financial position.

The petroleum industry’s recent focus on paying down debt and buying back shares has also left global oil supplies extremely tight, he added.

“Our industry hasn’t been invested in for more than a decade, all the recent investment has been very short-cycle,” Mr. Nicholson said.

“There’s still definitely a preference for shareholder returns. But that’s not how you build long-term sustainable businesses.”

IPC’s investment underlines the importance of Canada’s vast bitumen deposits, the world’s third-largest crude reserves, amid global concerns about energy security after Russia’s invasion of Ukraine.

But Blackrod, though relatively small, also highlights how growing production risks derailing Prime Minister Justin Trudeau’s emissions-cutting goals and cementing Canada’s place as a climate laggard.

Canada’s oil sands produced a record 3.15 million barrels a day in 2022 and are forecast to hit 3.7 million barrels a day by 2030, according to S&P Global.

Meanwhile emissions from the oil sands have jumped 137 per cent, or 48 megatons, between 2005 and 2021, according to the Canadian Climate Institute.

They are forecast to rise another 23 megatons by 2030 unless CCS projects take off and the federal government passes tougher climate legislation, including a controversial federal oil and gas emissions cap, the think-tank said.

Strong global crude prices mean oil sands production will likely continue to climb through existing project expansions, analysts said, even though a wave of greenfield projects like Blackrod are unlikely.

“The oil sands are long-life, low-decline assets,” said Wood Mackenzie analyst Scott Norlin. “We use the term ‘cash-flow generating machines’. They just print money, especially when oil is above $70.”

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