March 19 (Reuters) – International Petroleum Corp (IPCO.TO), the first foreign oil company to sanction a project in Canada’s oil sands in more than a decade, could add carbon capture and storage (CCS) to the plant if more public funds from the incentives become available, its CEO told Reuters.
Geneva-based IPC, part of Sweden’s Lundin Group, sanctioned the first phase of the 30,000 barrel per day (bpd) Blackrod thermal project in northern Alberta last month.
The company joins Canada’s biggest oil producers in urging policymakers to increase public funding for expensive technology seen as key to reducing emissions from the carbon-intensive oil sands.
Industry says CCS projects need more government support to be financially viable, while Ottawa and the oil-rich province of Alberta disagree over who should provide increased funding.
“There is still an opportunity – if we can make sensible government decisions to take meeting climate goals seriously – that if the right incentives present themselves, we are in a very good position to look at carbon capture all the way down the line. “said CEO Mike. Nicholson said in an interview in late February.
Until then, the company will pay Canada’s carbon tax, which is expected to rise to C$170 a tonne by 2030, Nicholson said.
IPC, a 50,000 bpd producer with assets in Canada, France and Malaysia, will spend $850 million to develop the first phase of Blackrod. First oil is expected in 2026 and IPC has regulatory approval to produce up to 80,000 bpd.
The plant is the first new oil sands project to be sanctioned since Imperial Oil Ltd (IMO.TO) gave its Aspen plant the green light in 2018, only to suspend it indefinitely a few months later.
It comes after years of lukewarm foreign investment in the oil sands, with international companies discouraged by high up-front investment costs, crippling congestion in export pipelines that has reduced production, and concerns about high oil intensity. bitumen carbon.
Nicholson said IPC’s decision was supported by new Canadian export pipeline capacity and IPC’s strong financial position.
The oil industry’s recent focus on debt repayment and share buybacks has also left global oil supplies extremely tight, he added.
“Our industry hasn’t been invested in over a decade, all recent investments have been very short-cycle,” Nicholson said.
“There’s always a preference for shareholder returns. But that’s not how you build long-term sustainable businesses.”
INCREASE IN PRODUCTION AND EMISSIONS
IPC’s investment underscores the importance of Canada’s vast bitumen deposits, the world’s third-largest crude reserves, amid global concerns over energy security following the invasion of Ukraine by Russia.
But Blackrod, while relatively small, also highlights how growing production risks derailing Canadian Prime Minister Trudeau’s emissions reduction targets and cementing Canada’s place as a climate laggard.
Canada’s oil sands produced a record 3.15 million bpd in 2022 and are expected to reach 3.7 million bpd by 2030, according to S&P Global.
Meanwhile, emissions from the oil sands jumped 137%, or 48 megatonnes, between 2005 and 2021, according to the Canadian Climate Institute.
They are expected to rise by another 23 megatons by 2030 unless CCS projects kick off and the federal government passes tougher climate legislation, including a controversial cap on oil and gas emissions, the government said. thinking group.
High global crude prices mean oil sands production will likely continue to climb on the back of the expansion of existing projects, analysts said, although a wave of new projects like Blackrod is unlikely.
“The oil sands are long-lived, low-decline assets,” Wood Mackenzie analyst Scott Norlin said. “We use the term ‘cash-generating machines.’ They just print money, especially when oil goes above $70.”
Reporting by Nia Williams Editing by Denny Thomas and Marguerita Choy
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