In June, MEG Energy, Canadian Natural Resources, Cenovus Energy Inc., Imperial, and Suncor Energy joined forces in forming the Oil Sands Pathway to Net Zero initiative.
The goal of this alliance, by working closely with the federal and Alberta governments, is to achieve net zero greenhouse gas emissions (GHG) from oil sands operations by 2050 to help Canada meet its stated climate goals. This unprecedented alliance will heavily focus on a carbon capture, utilization, and storage (CCUS) trunkline connected to a carbon sequestration hub from oil sands facilities in Fort McMurray and Cold Lake regions to the aforementioned hub, also near Cold Lake.
Each company will play integral roles in this initiative, deploying innovative technology and large operational investments to band together on this journey. BOE Report spoke with Derek Evans, President and Chief Executive Officer, MEG Energy, to glean information on how MEG is contributing to the alliance, what spearheaded the alliance, and how it will benefit the Alberta economy and oil and gas industry.
BOE Report: What spearheaded the Pathways to Net Zero initiative?
Derek Evans: I think the thing that spearheaded the initiative was the desire and the need to get after finding a way to capture carbon. One of the interesting things is all of these different companies that are involved in the Pathway have all been working to figure out ways to not only reduce carbon intensity but how are we going to decarbonize? What you quickly realized when you start looking at the various technologies that are involved, the technologies take the carbon out of the facility are interesting, but without an enabling pathway or a pipeline and sequestration facility, you’re totally hooked and sunk. And when you got to that point in your thinking you realized very quickly, ‘Hey, I have to talk to all my other partners in the business.’ The thing that’s unique about the oil sands, is there’s no natural sequestration facility, in and around where we operate. And that’s why you see this 400 Kilometer pipeline that goes from north of Fort McMurray all the way down to Cold Lake, which is really the first natural sequestration facility. What drove this was the realization that we’re going to have to work together, not only with our partners in the oil sands, but also in terms of working with the federal and provincial government in terms of the pore space, and how that’s going to be allocated on the sequestration side. We want to work with the federal government to achieve that goal.
BOE Report: What part is MEG Energy playing specifically, and what has MEG done to help push this initiative forward?
Derek Evans: MEG was late to this particular consortium. We were one of the last people to join, but that’s because we were working on another consortium of Christina Lake producers, IE in our area trying to do exactly the same thing. When the two consortiums got together and realized we were both trying to do the same things we joined the larger group. Really what we’ve been focusing on with MEG is the is the capture piece. We’ve been doing a lot of cost estimating work trying to understand what it’s going to cost us to capture carbon. Are there shallow sequestration opportunities available to us? The rules changed with respect to sequestration where they’re qualified reservoirs that were shallower that would work. So we’ve been working on that. And we’ve got some money from Alberta Innovates to investigate that. So we’ve been very active in this space, doing the things that we could do individually but also working to pull together the people that need to collaborate, to achieve the larger goal of getting some of this enabling infrastructure in place.
BOE Report: How will all the companies withing the initiative be working together, and to what extent?
Derek Evans: This level of cooperation is unprecedented. We’ve all realized that we’ve got a huge job to do here and there’s amazing cooperation and support inside of the alliance, as people, individual companies take on individual areas of responsibility to try and drive those forward there’s a sense of urgency. We know we need to move this forward. We don’t see this as a competitive type of exercise. He see as an important ethical and environmentally responsible exercise and people are putting their shoulders behind it is, it is really exciting and it’s driven by the leadership. The leadership of these individual companies set the tone and has made this possible.
BOE Report: Is this initiative target solely towards oil sands? Is any part of this affecting or improving conventional oil drilling?
Derek Evans: It’s set up to capture carbon. We’ve got 90% of the production the oil sands producers but that doesn’t mean that a conventional producer couldn’t tie in, or if you were a hydrogen producer in the Cold Lake that you couldn’t co-locate up beside our hub. This will be open infrastructure and access to the extent that other people want to utilize this pathway, them to throw carbon in is open to everybody.
BOE Report: Could you describe the sequestration hub, and how important is sequestration versus reduction?
Derek Evans: We’ve had a carbon tax since 2007 in the province, and we were one of the first jurisdictions in the world to have a carbon tax. All the companies in our space have been acting and working hard in terms of living inside of that carbon tax and reducing carbon intensity. That’s been MEG’s focus since day one, and we have a carbon intensity level below the average in the business. What we realized was reducing carbon intensity isn’t going to get you to net zero. You have to find a way to decarbonize and you have to be able to extract the carbon. We realized we need a pipeline and we need to find a pore space to put it away. There’s a lot of that pore space right around us. The nearest place is in the Edmonton or Cold Lake area, hence you have to drive a pipeline into those areas, and collecting everybody else’s production along the way makes it that much more economical. The end of this project is going to be about 40 million tonnes per annum, which will be one of the world’s largest carbon capture and storage facilities.
BOE Report: What are the biggest challenges and obstacles facing the initiative?
Derek Evans: I’d say one of the biggest challenges facing the initiative is cost, and understanding what kind of support we have at the federal and provincial levels. If we look at the cost of the enabling pipelines, can we look to our partners in the federal and the provincial government for support. Some of the technologies that we’re talking about, in 2030-2040 are ideas that we think will come to fruition and will have a big impact in helping us along that road to net zero in 2050. The biggest impediment that we have today is the friction to get this going, and the regulatory uncertainty.
BOE Report: From a technical side, how soon is this able to be in operations, and what’s the cost of this pipeline?
Derek Evans: Timing is as soon as possible. We obviously all have 2030 targets and we would like to see this pipeline in the ground and capturing some degree of carbon from our facilities to help achieve those 2030 commitments that we made. I’d estimate the pipeline to be in the $1.4-1.6 billion, but that’s an early estimate.
BOE Report: What benefits do you see for these companies by going net zero?
Derek Evans: The most important benefit is, from my perspective is that you provide yourself with the social license to continue to operate your business. If you can’t get to net zero and if we can’t lead in the race to net zero, we could potentially truncate the reserve life of your assets, and that’s totally unacceptable from an economic perspective, not so much for shareholders but for the economy, Canada. There’s a moral imperative, but there’s also an economic imperative here, and there’s also, I’m going to call it an innovation imperative. The oil and gas business is one of the most innovative businesses that I’ve ever seen. And, you know, the technology that’s going to get developed around this is going to be not only important to Canadian companies but it’s going to be absolutely important for the rest of the industrialized world. How do we make a dent in terms of bringing down those global greenhouse gas emissions. There’s a lot at stake here from what we can add as Canadians onto the global stage.
BOE Report: How many jobs will this create and how does this benefit Alberta’s economy and oil and gas industry moving forward?29dk2902l
Derek Evans: There’s a 400km pipeline that’s got to go in place, so there’s going to be a large number of field-related jobs getting that pipeline in place. The sequestration hub may not have the same amount of capital associated with it but will be important in terms of not only the drilling of the individual wells, but the pumps and measurement equipment that will be associated with it. When you look at carbon capture and storage, 75 to 80%, of the cost involved in the capture side is getting the co2 out of the flue gas and liquefying it and putting it into a pipeline. That’s where there’s going to be a significant amount of manufacturing jobs, and a huge benefit in terms of incremental technology and new tech being put to work. You’re also going to create the opportunity to try small modular reactors in the oil sands, there’s a large number of places that those could be put to work. It’s also putting in place the enabling infrastructure to create the next generation of clean tech companies, such as hydrogen. In my opinion, we’re going to be world leaders around carbon capture. This is a huge impact to Alberta.
This is one of the most exciting things I’ve ever been a part of in this business. We’ve talked about doing something about climate change for a long time. I am so excited about the fact that we’re going to do something. There’s action. There’s going to be boots on the ground. There’s going to be jobs created. There’s going to be massive economic benefits to the province of Alberta, and we are going to be leaders, not only in terms of getting to net zero but in terms of generating the next phase of what I call Alberta’s development, which will be to be a global leader in clean tech.