National Post (National Edition)
CARBON AS AN `UNTAPPED RESOURCE'
A NEW CROP OF ALBERTA COMPANIES TAKES ON THE CO2 CHALLENGE
I'M BULLISH THAT THE TECHNOLOGIES ARE GOING TO GET BETTER AND THE ECONOMICS ARE GOING TO LEAN IN THEIR DIRECTION. INVESTORS WANT TO MAKE BETS ON THE NEW ECONOMY. — JASON SWITZER, EXECUTIVE DIRECTOR, ALBERTA CLEAN TECHNOLOGY INDUSTRY ALLIANCE
In 2015, as oil prices plunged, leaving chemists, engineers and others across Alberta freshly unemployed, Mina Zarabian had a decision to make.
Zarabian had just won a prestigious Alberta Innovates-Technology Futures Scholarship as a PhD candidate in chemistry at the University of Calgary, and she had to pick a research topic.
That year, amid increasing concern about the effect of climate change, every major country in the world sent delegates to Paris, and signed commitments to curb carbon emissions.
Zarabian said she marched up and down the university campus, meeting with professors and visiting labs, before finally finding Pedro Pereira Almao, a professor of chemical and petroleum engineering. Pereira, who emigrated to Canada from Venezuela, had established a track record for innovation in both countries, and held several patents in addition to a decade of experience in the petroleum industry.
“His expertise I would say is developing technologies from academia,” Zarabian told the Financial Post.
“A lot of colleagues and friends were being laid off and we were really incentivized to look: how do we use the infrastructure, the expertise and the tools we have here to do something else?” She added.
The starting point for their research was a simple idea. Instead of viewing carbon dioxide as a pollutant that needs to be stuffed underground, or that could be written off as a useless byproduct, what if they could harness its power as a chemical to build something — to monetize it?
After several years of research, they hit upon a way to use carbon dioxide to construct carbon nanofibres — a material that is lighter, stronger, and more flexible than steel, and is now drawing growing interest for use as a material in batteries, electric vehicles, concrete, tires, reinforced plastics, semiconductors and all manner of products.
Today, Zarabian is chief executive of Carbonova Corp., which she and Pereira co-founded, initially with backing from the University of Calgary. Still in the process of scaling up to bring their carbon nanofibres to market, it's one of a growing crop of startups, many based in Alberta and many operated by new Canadians who came here to complete their education, that have devised innovative ways of using CO2, treating it, as Zarabian put it, as “an untapped resource,” nearly limitless in supply.
“Carbon dioxide is a chemical that doesn't want to do anything,” she explained. “It's so lazy. It's so symmetrical.”
For a long time, that natural stability made it an irksome chemical that required too much energy to change into something more useful. But now those same properties are fuelling investor excitement into at least a half-dozen companies that are researching CO2 as a component of fuels, industrial gases, soap, carbon nanofibres and various new chemicals and materials.
Indeed, Carbonova is in the process of closing its first seed financing. While Zarabian could not disclose the exact amount, she said it is in excess of $1 million, with backing from prominent oil and gas entrepreneurs and executives, including a personal stake by Pat Carlson, the founder of Seven Generations Ltd., and through Kiwetinohk Resources Corp., the company where he is currently chief executive. Sue Riddell Rose, a major investor in the oilpatch, also made a personal investment in Carbonova and through her company Perpetual Energy Inc.
The company also received part of its initial funding from the University of Calgary — where in 2018 Zarabian completed a PhD in chemical engineering — and through Alberta's GreenSTEM program, which guides funds from the pricing of carbon emissions into clean technology.
Alberta, of course, has long been a testing ground for carbon dioxide innovation. With its long-lived oilsands mines, companies operating in the oilpatch have always been well-positioned to conduct research and development.
As the province and other jurisdictions used tax credits to incentivize cleaner emissions, oil companies have been at the forefront of capturing and storing CO2, and even pumping it into their reservoirs to improve oil recovery. Shell Canada Ltd. operates the Quest Carbon Capture Project that since 2015 has captured and stored CO2 two kilometres underground, while Saskatchewan Power Corp. operates Boundary Dam Power Station near Estevan, that uses carbon capture and storage (CCS) technology.
But the new crop of companies innovating with CO2 differ in at least one crucial way from oil and gas producers. Their products are often built around closed loop systems, that are designed to be carbon neutral, or carbon negative, and that's helping power a rush of investor excitement.
“I'm bullish that the technologies are going to get better and the economics are going to lean in their direction,” said Jason Switzer, executive director of the Alberta Clean Technology Industry Alliance. “Investors want to make bets on the new economy.”
Indeed, the general investor and market sentiment towards oil and gas producers has turned cautious recently, while companies that aim to take carbon dioxide out of the atmosphere are generating notoriety and headlines.
Last week, for example, Elon Musk, the CEO of Tesla Inc., announced he would put up US$100 million from his personal fortune to anyone anywhere that creates the best technology to pull carbon dioxide out of the atmosphere or oceans — potentially the largest amount of scientific prize money in history.
“The world's leading scientists estimate that we may need to remove as much as six gigatonnes of CO2 per year by 2030, and 10 gigatonnes per year by 2050 to avoid the worst effects of climate change,” the contest website, known as the X Prize Carbon Removal, explains.
The Squamish, B.C.-based Carbon Engineering Ltd. regularly generates headlines for its plans to suck CO2 out of the air. Founded by David Keith, a Harvard professor who grew up in Ottawa, the company built a test plant in 2017 that's already pulling tonnes of carbon dioxide out of the air every year.
Next up, with backing from Occidental Petroleum Corp. and private equity firms, and the benefit of a U.S. federal tax credit, it is moving forward with plans for a much larger plant in Texas capable of pulling one million metric tonnes of CO2 out of the atmosphere. The plan is to use the CO2 to enhance oil recovery.
Switzer said such companies, working on what's known as direct air capture, continue to draw investment, in part because more research is needed to bring down the cost of removing CO2 from the air.
“If they can make the economics work, if the world continues to be serious about climate change,” he said, “you would imagine those facilities are going to be cranked out.”
Last month, analysts at Citi Research estimated that carbon capture, storage and utilization, which thus far has received a negligible amount of investment, is rapidly gaining momentum.
“We think investment will grow from close to zero to a $70 billion per year business this decade, and doubling in size again in the 2030s,” the Citi analysts wrote.
But Carbon Engineering is far from the only player working in this area, with the Citi report noting that Royal Dutch Shell Plc, BP Plc and Equinor ASA are among the oil majors investing in carbon capture and storage, though not all of these companies are looking into direct air capture. Some are simply capturing CO2 at known emission points rather than sucking it out of the air.
In addition, there is an emerging group of startups that, like Carbon Engineering, are researching how to pull CO2 from the atmosphere.
Earlier this month, the Alberta Cleantech Investment Summit, an online forum for startups to pitch their companies, featured two companies that are using carbon dioxide as a building material to make a product.
“The concept of taking CO2 and producing new fuels is not new,” said Paul Addo, chief executive of See 02 Energy Inc. in Calgary told the Financial Post. “But there's now a good push for companies to be socially responsible.”
Addo, who emigrated to Canada from Ghana to complete a PhD at the University of Calgary, is working on a way to create fuel from CO2 and water. Already, his company has drawn investment from the government-funded Sustainable Development Technology Canada, is forming partnerships with large companies such as Luxembourg steel company ArcelorMittal S.A.
Like Zarabian and Pereira's Carbonova, Addo's company also emerged out of the Creative Destruction Lab at the University of Calgary, which helps start ups achieve scale through seed investments.
Meanwhile, the oil industry is facing a retrenchment, and in Canada, a push for consolidation and greater efficiency from investors.
After capital expenditures in the oil and gas sector in Canada peaked in 2014 at $76.1 billion, they have fallen five consecutive years. Since 2015, investment has not exceeded 2006 levels of $40.7 billion, and in 2020 stood at $24 billion.
But even as worldwide investment in oil and gas has grown, experts are debating whether oil demand or production have finally reached their peak. Royal Dutch Shell announced earlier this month, for instance, that its oil production peaked in 2019, and would drop by one per cent per year from here on out.
On the production side, OPEC predicts oil supply will rise nine per cent from its current levels over the next two and a half decades to 109 million barrels per day in 2040.
Meanwhile, consulting firm McKinsey & Company released a Global Energy Perspective 2021 report in January that predicts aggregate fossil fuel demand is set to peak in 2027 with oil peaking in 2029 and natural gas in 2037
The picture shows that investor sentiment around oil and gas has become more cautious, a trend that's been reinforced each time a major investor announces plans to reduce the carbon intensity of their investment portfolio.
Back at the University of Calgary, Zarabian's professor Pereira said that as far back as 2014, it was obvious that low oil prices in Canada were structural and that the province needed to diversify its economy; and he had been toying with using CO2 as a catalyst for various purposes.
“I had an idea in the back of my mind (about using CO2) for something, but I didn't have the resources to develop it,” he said.
Working with Zarabian provided an opportunity to test some of his ideas, and together they figured out the method to convert CO2 and methane into carbon nanofibres that has become the basis for Carbonova.
Pereira said he initially figured someone else might have tried some of the methods, but found it was fairly open territory.
“I was surprised,” he said. “We couldn't find anyone that was doing that, taking CO2 and methane to carbon fibres.”
The carbon nanofibre industry has long been dominated by a handful of companies based in Japan, Zarabian explained.
But while their methods release approximately 20 tonnes of carbon dioxide into the atmosphere for every tonne of carbon nanofibre, Pereira and Zarabian have created a method that they say is essentially carbon neutral, and will displace the use of metals and other materials that require massive carbon emissions to produce.
“CO2 is a chemical for us, a building material,” she said. “So we don't hate it like a lot of others — that was the starting point.”