Enhanced oil recovery offers Alberta huge opportunities

Energy sector must pivot, Terry R. Mccallum writes.

Following two unprecedented and turbulent years, the recent provincial budget delivered some desperately needed good news. For the first time since 2014-15, Alberta has a surplus. What's more, after being consumed with the COVID-19 crisis, the government is once again looking to the future, making investments in skills development, training and employment programs so more Albertans can get back to work. Fear and uncertainty are finally giving way to optimism, however restrained.

The runaway prices Canadians are experiencing at the pump, fuelled by Russia's recent invasion of Ukraine, clearly demonstrate that oil and gas are still critical commodities, and present Alberta with an opportunity to grow our energy sector. That's not to say the industry doesn't need to change, and Albertans understand that. A lower-carbon future isn't a “nice to have” but a “must achieve.” The sector has made great strides in recent years to lower emissions, deploying innovative technologies to significant effect.

Enhanced oil recovery is one such technology. More commonly known as EOR, it involves injecting CO2 into existing oil fields to increase the overall recovery of the oil in the reservoir, often without any new production wells being needed. Once the oil is recovered, the remaining CO2 is stored in the reservoir permanently. In terms of emissions per a barrel produced, EOR is unrivalled, emitting 82 per cent less than traditional extraction methods.

Where to get this CO2? Carbon capture, utilization and storage (CCUS) is an obvious source. Likely one of the hottest topics in energy circles these days, CCUS involves the capture of CO2 from fuel combustion or industrial processes. Once removed from the atmosphere, the CO2 is then transported by pipeline to be permanently stored in depleted gas reservoirs, deep saline aquifers and, of course, EOR schemes in oil reservoirs.

A lower-carbon future isn't a `nice to have' but a `must achieve.'

Combining CCUS and EOR potentially holds the key to revitalizing a critical component of Alberta's economy — junior/intermediate oil and gas companies. Long regarded as the backbone of Alberta's energy sector, these small companies have been decimated over the past decade. At the beginning of 2015, 229 juniors were listed on the TSX Venture Exchange.

Four years on, that number had fallen to 119. By the end of 2019, there were only 89. There is no great mystery behind this rapid decline — private equity investors weren't interested in putting any more money in the sector if there wasn't a full-cycle economy to exit.

CCUS and EOR have changed that calculation. If the juniors and intermediates can develop their oil and gas assets while helping nearby emitters in the process, they can raise the new capital that is critical. Private equity firms want to pivot into this space, and what better group to pivot to than the entire energy sector. These companies have some of the province's best and brightest — engineers, geologists and geophysicists, to name a few — with significant expertise and experience. CCUS and EOR would allow them to use the exact same skill sets, just in reverse.

And then there are the wider benefits to the province. Using CO2 for EOR would generate hundreds of millions of dollars in royalties at a time when the province is getting back on its feet and looking to get its fiscal house in order.

If the government really wanted to accelerate the process, it could introduce something similar to Saskatchewan's Oil Infrastructure Investment Program, which offers transferable oil and gas royalty/freehold production tax credits for qualified projects such as transmission pipelines and enabling infrastructure.

EOR and CCUS are a once-in-a-generation opportunity for Alberta. Not only can they significantly reduce the province's GHG emissions and generate much-needed revenues, they can also help us transition our existing energy labour force and get more Albertans back to work. It's truly a win-win across the board.