Join +750K new investors every month who copy stock picks from billionaire's portfoliosSign Up Free

IPC CEO urges Canada to offer more funding to build carbon capture

Published 03/19/2023, 09:05 AM
Updated 03/20/2023, 07:06 AM
© Reuters. FILE PHOTO: Oil goes into a tailings pond at an oil sands operation near Fort McMurray, Alberta, September 17, 2014./File Photo
SPGI
-
IMO
-

By Nia Williams

(Reuters) -International Petroleum Corp, 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 government financial incentives become available, its CEO told Reuters.

Geneva-based IPC, part of Sweden's Lundin Group, sanctioned phase one 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 boost public funding for the costly technology that is seen as key to cutting 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 are at odds over who should provide increased funding.

"There's still an opportunity - if we can have some sensible government decisions about getting serious about meeting climate targets - that if the right incentives come along, we're in a very good position to look at carbon capture down the line," CEO Mike Nicholson said in an interview in late February.

Until then, the company will pay Canada's carbon tax, set 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 developing phase one 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 greenfield oil sands project to be sanctioned since Imperial Oil (NYSE:IMO) Ltd gave the go-ahead to its Aspen plant in 2018, only to shelve it indefinitely just months later.

It comes after years of tepid foreign investment in the oil sands, with international firms deterred by high upfront capital costs, crippling export pipeline congestion that has curtailed production, and concerns about bitumen's high carbon intensity.

Nicholson said IPC's decision was underpinned by new Canadian export pipeline capacity and IPC's own strong financial position.

The petroleum industry's recent focus on paying down debt and buying back shares has also left global oil supplies extremely tight, he added.

"Our industry hasn't been invested in for more than a decade, all the recent investment has been very short-cycle," Nicholson said.

"There's still definitely a preference for shareholder returns. But that's not how you build long-term sustainable businesses."

RISING PRODUCTION, EMISSIONS

IPC's investment underlines the importance of Canada's vast bitumen deposits, the world's third-largest crude reserves, amid global concerns about energy security following Russia's invasion of Ukraine.

But Blackrod, though relatively small, also highlights how growing production risks derailing Canadian Prime Minister Trudeau's emissions-cutting goals and cementing Canada's place as a climate laggard.

Canada's oil sands produced a record 3.15 million bpd in 2022 and are forecast to hit 3.7 million bpd by 2030, according to S&P Global (NYSE:SPGI).

Meanwhile emissions from the oil sands have jumped 137%, or 48 megatons, between 2005 and 2021, according to the Canadian Climate Institute.

They are forecast to rise another 23 megatons by 2030 unless CCS projects take off and the federal government passes tougher climate legislation, including a controversial federal oil and gas emissions cap, the think-tank said.

© Reuters. FILE PHOTO: The processing facility at an oil sands operations near Fort McMurray, Alberta, September 17, 2014.   REUTERS/Todd Korol/File Photo

Strong global crude prices mean oil sands production will likely continue to climb through existing project expansions, analysts said, even though a wave of greenfield projects like Blackrod are unlikely.

"The oil sands are long-life, low-decline assets," said Wood Mackenzie analyst Scott Norlin. "We use the term 'cash-flow generating machines'. They just print money, especially when oil is above $70."

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.