Dealing with climate change is one of the most significant global imperatives of our time. The world needs solutions that can be acted upon locally, nationally, regionally and globally. But, on the eve of the global climate conference, COP26, the US called on the Organisation of the Petroleum Exporting Countries (OPEC) to produce more crude oil to ease the disruption of high prices brought on by insufficient supply, Europe is in an energy crisis, looking to Russia to supply much needed natural gas, and China is increasing its coal production to meet increasing energy demands. Energy security and lifting people out of poverty is a top priority for all nations. Fossil fuels will remain part of the global energy mix for decades to come. The question is, should we view these imperatives as intractable trade-offs or trade-offs to innovate around or thrive within?
The nations which came together at COP26 know that it must be the latter. None are prepared to simply shut-in the production of hydrocarbons. This means that the hydrocarbons industry needs to play an active role in generating global energy solutions to climate change. This is something that the Canadian oil & gas industry has known and acted on intuitively for some time and is increasingly and deliberately part of their strategic action plans.
Canada is the fourth-largest producer of crude oil and the fifth-largest producer of natural gas in the world. As a country, Canada's CO2 emission intensity on a per capita basis is relatively high (approximately 15Mt of CO2 per capita), similar to the US and much higher than the People's Republic of China (approximately 7.2Mt of CO2 per capita). However, on an absolute basis, Canada' 2020 global share of CO2 emissions from fossil fuels is only 1.54 percent, compared with the US at 13.5 percent and China at almost 31 percent. The top three emitters, the US, China and India, collectively were responsible for producing more than 50 percent of CO2 emissions in 2020. On a cumulative basis, from 1750 to 2019, Canada's share of CO2 emissions is 1.99 percent. By contrast, the US's cumulative share of CO2 emissions in that same period is almost 25 percent.
Coal, so important to energy security in China and India, and still comprising a prevalent energy source in the US and Australia, no longer accounts for an appreciable portion of Canada's carbonbased production (57.8 Mt or 0.7 percent of 2020 global coal production). China (3764 Mt) and India (760 Mt), by contrast, produced almost 50 percent and 10 percent of the world's coal in 2020, with Australia (493 Mt) and the US (485 Mt) not far behind at 6.5 percent and 6.4 percent, respectively. In terms of methane emissions, Canada has very strict methane and flaring standards and has some of the lowest methane intensity hydrocarbons that are produced in the world. It has been suggested that if oil & gas producing countries adopted Canadian standards, emissions from methane would drop by almost 23 percent. In fact, Canada's increase in methane emissions between 1990 (104.8 Mt) and 2016 (105.61 Mt) was less than 1 percent, according to World in Data: Methane Emissions: Table & Country/CAN, notwithstanding Canada's significant increase in production, including production from oil sands, during that same period. For example, between 1990 and 2019, Canadian crude oil production increased from 1.7 million barrels per day (b/d) to 4.7 million b/d.
Examining the Canadian experience could provide useful guidance and information for other oil & gas producing nations. The Canadian oil & gas industry has a history that is rooted in collaboration and innovation among government, including more recently our indigenous partners (where Canadians have a lot more work to do), industry players, technology companies, lenders and local communities. Canadian oil & gas producers are increasingly active, deliberate and strategic participants in the move to address CO2 and other greenhouse gas (GHG) emissions.
One of the best examples of this is found in the development of Canada's oil sands. With the assistance of government funding to help de-risk emerging technologies and collaboration of industry players, oil sands producers have made great strides in lowering the costs and emissions associated with oil sands production. The adoption of steam assisted gravity drainage (SAGD) for the recovery of bitumen that could not be recovered through traditional mining techniques is a case in point. Unlike mining, SAGD operations have a similar environmental footprint to conventional oil & gas extraction. Invented by Dr Roger Butler in the late 1970s, the Alberta government established the Alberta Oil Sands Technology and Research Authority (AOSTRA) to accelerate the commercialisation of SAGD technology.
The private sector worked with AOSTRA to privately fund SAGD pilot projects and in 2001, the first commercial SAGD project became operational. Today, SAGD oil production accounts for almost half of Canada's oil sands production.
In 2012, several major oil sands producers established Canada's Oil Sands Innovation Alliance (COSIA). COSIA is focused on "accelerating the pace of improvement in environmental performance in Canada's oil sands through collaborative action and innovation" within four environmental priority areas (EPAs) – greenhouse gases, land, water and tailings. Today, COSIA's members represent more than 90 percent of oil sands producers in Canada and since 2012, members have invested more than $249m in 175 contributed GHG technologies, $174m in 467 contributed land technologies, $826m in 228 contributed tailings technologies, and $592m in 273 contributed water technologies, reducing freshwater use intensity by 47 percent, which activities have, among other things, contributed to a reduction in GHG emission intensity on a per barrel basis by 28 percent from 2000 to 2017, with a reasonable estimate of further reductions of GHG emissions intensity by 16-23 percent by 2030. Members of COSIA understand there is more work to be done, and that work is ongoing.
In 2021, oil sands producers representing more than 90 percent of oil sands production recognised that they needed to be an even bigger part of the global energy solution and established The Oil Sands Pathways to Net Zero initiative (Pathways to Net Zero), with the goal of achieving net-zero emissions by 2050. Pathways to Net Zero has outlined several initiatives it will undertake to achieve this goal, including switching to lower carbon fuels, such as clean hydrogen, electricity and small modular nuclear reactors to power oil sands operations, improving energy efficiency, accelerating the development of potential emerging emissions-reducing technologies, including direct air capture, and technologies that improve production processes. However, its most significant initiative is to build an open access carbon capture network in the oil sands producing regions of northern Alberta that will capture carbon from more than 20 oil sands and other industrial sites and safely store it underground. The concept, carbon capture use and storage (CCUS), is based on existing technology that is currently in use in Canada and other parts of the world.
Collaboration and innovation are also evident in the industry's support of new clean technologies. Canada ranked second on the 2021 Global Cleantech Innovation Index. Of the 11 Canadian companies chosen for the index, five are directly involved in developing technologies to reduce the release of carbon into the atmosphere. It may surprise many to learn that in Canada, more than 75 percent of private funding for clean-technology initiatives is being spent by the oil & gas industry. It also may surprise many that some of the most promising carbonreduction technologies being advanced today are based on historical and ongoing research and development undertaken by the oil & gas industry. Oil & gas producers are active participants and accelerators for the growth of clean technologies.
Some of the most interesting work in clean tech development centres around the 'circular' economy. In the circular economy, carbon becomes a feedstock for other products rather than a waste disposal problem. As the Canadian government describes it: "The circular economy retains and recovers as much value as possible from resources by reusing, repairing, refurbishing, remanufacturing, repurposing, or recycling products and materials. It's about using valuable resources wisely, thinking about waste as a resource instead of a cost, and finding innovative ways to better the environment and the economy." This is a significant area of investment for the Alberta government, in partnership with private industry. The Alberta government has established the Alberta Carbon Conversion Technology Centre (ACCTC) to accelerate the development and de-risking of new technologies designed to produce valuable products using CO2 as feedstock. Alberta Innovates, the Alberta Crown corporation responsible for ACCTC, advises that "teams [that use the facility] are already shipping industrial and consumer products to market made with CO2".
The global climate crisis will not be solved by taking an either/or approach to its resolution. Focusing on the supply side ignores the very real demand for energy that exists in the world. If the global coronavirus (COVID-19) pandemic has taught us one thing, it is that supply follows demand much more readily than demand follows supply. There is no one single pathway that can realistically be adopted in a world with seemingly intractable complex and competing objectives. The Canadian oil & gas industry has a role to play, not only by continuing to pursue cleaner production, but more importantly, and with much more significant impact and effect, sharing new technologies, best practices and more efficient processes with other parts of the world. Investment in, and financing of, the initiatives that are currently being undertaken in the Canadian oil & gas industry will move the world closer, not farther, from addressing both the environmental costs of carbon and social costs of decarbonisation.
Originally published by Financier Worldwide, January 2022
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