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Quebec-based CO2 Solutions will use enzyme-based technology to eliminate CO2 gases from boilersThe Canadian Press

Husky Energy Inc. is teaming up with Quebec-based CO2 Solutions Inc. to build a pilot project to capture carbon dioxide at its Pike Peaks South heavy oil project in Saskatchewan, with the hope of driving down costs and commercializing the technology used to reduce greenhouse gas emissions.

CO2 Solutions has won financial backing from the federal and Alberta government for its technology, which uses enzyme-based solutions to scrub carbon dioxide from the emissions of natural-gas-fired boilers that are used to produce steam for heavy oil and oil sands recovery.

Initially, the plant to be built in 2015 will capture 15 tonnes a day of CO2, but the Quebec company is hoping its will lead to commercial-scale projects that could scrub more than 150 tonnes a day of CO2 from gas-fired boilers at Pikes Peak South. Husky produces about 37,000 barrels a day of crude from thermal heavy oil projects in the area, and is looking to expand that to 55,000 barrels a day.

CO2 Solutions believes the pilot project will reduce the cost of carbon capture by more than a third compared to existing ammonia-based scrubbers, bringing costs down to a point where it may be profitable to extract CO2 for use in enhanced oil recovery in nearby fields, chief executive Evan Price said in an interview Tuesday.

"There's a lot of interest," Mr. Price said after the companies announced the pilot project. "There is a lot of interest in the solution we're offering.

Canada is a leader in carbon capture and storage technology, with projects at SaskPower's Boundary Dam coal-fired power plant near Estevan and at Royal Dutch Shell PLC's Scotford upgrader near Edmonton. Those projects are being heavily subsidized by federal and provincial governments, and there are major hurdles to commercialization, not least the lack of aggressive regulation or carbon pricing for the oil industry.

However, many major emitters of greenhouse gas among oil companies and other industries operate with the assumption that the cost of emitting CO2 into the atmosphere will rise dramatically in the coming years, and they assume a notional carbon price for the purpose of project planning. Mr. Price said companies are also increasingly interested in using CO2 to stimulate oil recovery, and so there is a growing market for what is now essentially a waste product.

"We think that is something that could be interesting almost regardless of the regulatory environment," he said. "Certainly a more robust regulatory environment is very favourable to us. But as we look at it internally, we can't wait for regulations to make our business case."

For its part, a Husky spokeswoman said the company is working with a number of companies on pilots to capture CO2, but it is "early days" to assess the commercial viability.

"Husky works to actively reduce its emissions and capturing carbon dioxide is one way to do that," Kim Guttormson said in an e-mail.