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Canada: Industry shrugs off IEA carbon capture, CCUS, warnings
Gary Park for Petroleum News
After years of foot-dragging, the Canadian government is expected to finally deliver over the next month on its promise of investment tax credits for carbon capture and sequestration projects, unleashing an array of projects carrying price tags in the range of multi-billion dollars.
But the impending shift to carbon capture and underground storage, CCUS, as a major advance by oil and gas producers to achieve decarbonizing of their operations clashes with a warning from the International Energy Agency against banking on CCUS technology to end continued warming of the planet.
The Paris-based IEA said oil and gas producers should start "letting go of the illusion" that large volumes of carbon capture are the solution to the climate crisis.
CCUS seen as key However, Canadian producers refuse to abandon their belief that CCUS remains the key pillar of the oil and gas sector's decarbonization goal.
"We're tracking at least 15 proposed (decarbonization) projects in the province of Alberta and nearly every one of those will involve CCUS," said Bob Masterton, CEO of the Chemistry Industry Association of Canada.
Initially proposed in the 2021 budget of Prime Minister Justin Trudeau's government, the administration since has announced that a new investment in CCUS tax credits will be set at 50% for spending on equipment needed to capture carbon dioxide, while a 37.5% tax credit will be provided for investments in equipment used for the transportation and storage for such developments.
"It is really important for the energy industry in Canada because it extends the life of Canada's largest industrial sector and maintains our competitiveness over the long term," said the Business Council of Alberta.
Projects Among the projects poised to proceed is Dow Canada's proposal to build the world's first net-zero carbon emissions ethylene and derivatives complex near Edmonton that could cost C$10 billion.
A final investment decision is expected soon "pending completion of our negotiations for subsidies and incentives with the Canadian government," said Dow CEO Jim Fittwerling during an earnings call in October.
The Pathways Alliance, a partnership of six major oil sands producers, wants to proceed with building a C$16.5 billion carbon capture network in Alberta, along with a CO2 trunkline connecting oil sands facilities to an underground storage hub in east-central Alberta, provided the federal government legislates the investment tax credit, said Pathways president Kendall Dilling.
The alliance said discussions with the federal and provincial governments should provide the fiscal and policy tools for large-scale projects such as the carbon capture network.
Meanwhile, Edmonton-based Capital Power is working on a C$2.8 billion carbon capture and storage development, while the Alberta government has been working on its own CCUS incentive package.
Businesses in Canada have been watching closely as the Biden administration has assembled an incentive package through the U.S. Inflation Reduction Act, sparking concerns in Canada that investment dollars in decarbonization ventures will start flowing south of the border.
The Canadian government has confirmed that the Canada Growth Fund could be a key entity for allocating up to C$7 billion to projects. But it is unclear how many projects will fit under this umbrella, given the sheer number of potential initiatives.
IEA concerns While the IEA acknowledges that CCUS is an important tool in the fight against climate change -- particularly when it comes to offsetting emissions from sectors that have no viable alternative -- the IEA warns against "excessive expectations" and reliance on the technology.
The report states that while limiting global temperatures to the targets set in global agreements, the Paris accord would require an "inconceivable" 32 billion metric tons of emissions to be sequestered by 2050.
"The amount of electricity needed to power these technologies would be greater than the world's entire electricity demand" said the IEA report, estimating that the investment in technology would be US$3.5 trillion by 2050.
The IEA report is a "stunning rebuke" to Canadian oil executives and politicians "who claim that they can simply slap on some government-funded carbon capture incentives and continue with business as usual in a world rapidly weaning itself off oil and gas," said Keith Stewart, senior energy strategist for Greenpeace Canada.
--GARY PARK
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