Suncor bets on carbon capture
Oilsands ideal for clean tech
• Carbon capture is the new buzzword in the Canadian oilpatch with Calgary’s biggest producers leading a rush to invest in the sector to drive down their emission-intensity rates.
Mark Little, CEO of Canada’s largest integrated oil company, Suncor Energy Inc., believes the technology is the ticket to driving down emissions that will “allow Canada to achieve its ambition of getting to net zero by 2050.”
“A lot of environmentalists believed that the only way we were going to achieve the increased ambition that the Prime Minister just laid out to reduce emissions by 40 to 45 per cent by the time we get to 2030 is through carbon sequestration,” he said, adding that oilsands facilities are ideal candidates for carbon capture, utilization and storage (CCUS) investments.
“We have a fabulous place to do it because we have assets that literally stay in the same location for decades,” Little said. “We have long life resources with low decline rates, so we can amortize carbon sequestration literally over decades….”
Canada’s three largest oil producers — Suncor, Canadian Natural Resources Ltd., and Cenovus Energy Inc. — as well as North America’s largest pipeline company Enbridge Inc. have all expressed interest in CCUS investments and have said the technology will be needed to drive down emissions, though there are concerns about costs.
“If Canada wants to get there, the costs are going to be material. If we’re going to get there, it’s going to take everybody working together,” Cenovus president and CEO Alex Pourbaix said on a May 7 earnings call.
Similarly, Enbridge president and CEO Al Monaco said on an earnings call that his company was interested in both pipelines for carbon sequestration and “in the upstream,” where the company could potentially become a CCUS provider to oil and gas producers.
“CCUS is at least one of the two to three keys in achieving lower carbon emissions,” Monaco said, in describing how Enbridge was looking at efforts to reduce emissions, including capturing methane from landfills as “renewable natural gas” for future use.
Suncor, alongside multiple unnamed investors, recently invested in Vancouver-based CCUS company Svante Inc., which markets itself as a clean tech company capable of capturing carbon at “less than half the capital cost of existing solutions,” Little said.
Svante markets its facilities as being able to capture one million tonnes of carbon emissions per year, which would be equivalent to taking 200,000 cars off the roads.
“The net-zero pledges of major countries and large corporations is also a key driver for the interest and rapid growth of the carbon capture and storage new industry,” Svante president and CEO Claude Letourneau said in a release announcing Suncor’s investment.
Demand for Svante’s technology and other carbon sequestration schemes are expected to rise in lockstep with Canada’s steadily increasing carbon tax, which is expected to jump from current prices of $50 per tonne to $175 per tonne by 2030.
At the same time, companies like Suncor, which refine oil into products like gasoline, diesel and jet fuel are facing the implementation of Canada’s Clean Fuel Standard, which experts say will force companies to reduce their emissions further.
Suncor has made multiple direct equity investments in recent years in a handful of other clean-tech companies focused on both carbon sequestration and on turning waste into fuel, which Little said will contribute to the company’s long-term environmental goals.
Suncor participated in two different equity raises in Montreal-based Enerkem Inc., which turns household waste into biofuels and chemicals, in 2019 including making a $50-million investment in the company.
In June 2020, the Calgary-based oil producer and refinery operator also invested $15 million in Lanza-tech, a company that recycles carbon to make “sustainable aviation fuel.”
“These are all important steps on our journey to be able to drive down our emissions and to allow Canada to achieve its ambition of getting to net zero by 2050,” Little said.
On Tuesday, Suncor and Calgary-based ATCO Ltd. agreed to build a new hydrogen facility that would produce 300,000 tonnes of hydrogen per year, while capturing 90 per cent of the emissions generated in the process, the companies announced Tuesday.
Little said Suncor is already one of Canada’s largest producers and users of hydrogen. “We make about 10 per cent of all of Canada’s hydrogen and we consume about 15 per cent of it,” he said.
Suncor plans to inject 65 per cent of the hydrogen produced by the facility in its refining processes at its Edmonton refinery and to make electricity, while ATCO has said it would use up to 20 per cent of the hydrogen produced in the natural gas grid to reduce emissions. The partners estimate the project will reduce emissions in Alberta by two million tonnes per year.
The two companies intend to build the facility at ATCO’S Heartland Energy Centre north of Edmonton, subject to a final investment decision in 2024, with hopes of being operational by 2028. The companies did not release a cost estimate.
Suncor’s current GHG goal is to reduce its emissions intensity by 30 per cent by 2030. But the company is not done yet as Little hinted that additional details on the company’s climate goals would be unveiled at an investors’ meeting at the end of May.
By comparison, a handful of Suncor competitors including Canadian Natural and Cenovus have announced net-zero emissions goals over a longer time frame.
As the cost of carbon emissions spikes, Ottawa announced last month it would include a tax writeoff for CCUS investments, which oilsands companies are interested in using, though few details about the size of the tax breaks are available now.
“So far it’s pretty vague,” CNRL president Tim Mckay said of the government’s tax incentives for CCUS investments.
CNRL is currently the largest operator of CCUS projects in the Canadian oilpatch. The company’s Quest CCS facility at its Scotford oilsands upgrader captures 1.1 million tonnes of CO2 per year and was the first largescale carbon-capture facility built in Alberta.
CNRL also captures 400,000 tonnes of CO2 per year at the hydrogen plant at its Horizon oilsands project.
The company announced Thursday that it had begun capturing carbon at its partially owned NWR Sturgeon Refinery near Edmonton in March. The refinery, which has been plagued by cost overruns and multiple delays, is capable of sequestering 1.2 million tonnes of CO2 per year.
Mckay said since the Quest CCS facility was built, additional clean technology companies have brought new systems to market that make carbon sequestration more efficient.
“Some of the chemicals used to grab the CO2 have improved over time and so there are a few companies today that have better products today that can be more efficient,” Mckay said. “The technology is pretty sound. It’s just how do you improve the efficiency?”
It is imperative that oilsands producers drive their emissions down as Canada strives to meet its emissions targets because sectors outside of the energy industry have been able to drive down their emissions, said Pembina Institute analyst Chris Severson-baker.
However, he said it is possible for oilsands companies to reduce their emissions by 40 per cent to 45 per cent over the next nine years, in line with the federal government’s target, though it will be expensive.
“Technically, it is feasible. The technology has been proven and demonstrated at a commercial scale in Alberta,” Severson-baker said, though he noted that some emissions in the oilsands would need to be offset rather than captured.
“The emissions that you would have to offset would be the mining operations — the vehicles, the tailings ponds and the smaller combustion sources to get all the way to net zero,” Severson-baker said.
In addition, some smaller, steam-based oilsands operations have a shorter expected operating life and, based on the current projected expenses for CCUS installations, may not be economic candidates for CCUS installations.
“The only other way to achieve (absolute emissions reductions) is to reduce production,” he said.
While Suncor prepares for a future where carbon must be sequestered, the company also expects a near-term bull market for oil that could see substantial production increases by competitors. U.S. crude prices were trading above US$65 per barrel this week.
“I would say that I’m actually quite optimistic about it,” Little said of the outlook for oil markets. “We’ve seen the best discipline of OPEC and Opec-plus, with Russia involved. We’ve seen the best discipline from them, maybe ever in the cartel’s history.”
Little reiterated that he would direct any additional cash this year toward paying down debts the company piled on when markets crashed in 2020, repurchasing its own shares and, eventually, increasing its dividend. He questioned whether other large oil producing companies in North America would do the same.
“We continued to invest in economic projects that fit with our strategy going forward. Many companies have not. So you wonder if in a high price environment generating a lot of cash, will they stick with the discipline of not investing in economic projects?” Little said.
“The history of this industry has been that this discipline will not last.”
CHEMICALS USED TO GRAB THE CO2 HAVE IMPROVED OVER TIME.