/Oilpatch faces balancing act as Canadians demand energy expansion and climate action

Oilpatch faces balancing act as Canadians demand energy expansion and climate action

Almost seven in 10 Canadians believe action on climate change must be a priority for the next government once the ballots have been counted in the Oct. 21 federal election.

However, almost six in 10 respondents say development of the oil and natural gas industry in the country — which has the world’s third-largest crude reserves — should also be a priority, according to a survey by the Angus Reid Institute.

This inherent tension — Canadians want governments to act on climate change, but also want to see economic growth by the oil and gas sector — is driving fierce debate and policy divisions across the country.

It’s also compelling some companies to act.

Suncor Energy’s latest major investment, a $1.4-billion cogeneration project at its oilsands plant north of Fort McMurray, embodies the drive to try to meet both economic and environmental objectives.

“Canadians want growth in oil and gas and also to be taking on climate change, so how do you do that, and are those two things in competition with one another?” said Dave Korzinski, the institute’s research director.

In the case of Suncor, the Calgary-based oilsands giant announced this week it intends to do both by replacing its aging petroleum coke-fired boilers that generate heat used to provide steam to run its oilsands base plant.

Three older boilers will be replaced by two high-efficiency cogeneration units, which will burn natural gas to create steam for its oilsands business and to produce 800 megawatts of electricity for the provincial power grid.

Economically, the company says the project is a winner.

Environmentally, it will help lower greenhouse gas emissions associated with creating steam at its plant by about 25 per cent, reducing Suncor’s overall emissions by about 2.5 megatonnes a year.

Suncor CEO Mark Little points out it will also propel the company about one-quarter of the way toward its goal of lowering its emissions intensity — a measure of emissions per barrel — by 30 per cent by the end of next decade from 2014 levels.

“For over 50 years we burned petroleum coke to make steam to run our base plant, both the mine as well as the upgrader. And those boilers are coming to end of life,” Little said in an interview.

“This (change) is actually fairly significant … It is a huge reduction in the greenhouse gas emissions.”

The project is expected to be operating by 2023.

The Suncor Energy Inc. upgrader plant at the Athabasca oil sands near Fort McMurray, Alberta.

Ben Nelms/Bloomberg

As the Angus Reid Institute poll indicates, the pressure is on for governments, as well as industry, to keep improving their performance in the years ahead.

The online survey of 1,534 Canadians, conducted between Aug. 21 and 26, indicates concern about the environment and climate change have risen sharply since the 2015 federal election.

When asked to select up to two top issues facing Canada, one-third identified the environment/climate change — making it the leading concern nationally — while 10 per cent selected the energy sector and oil prices, double the rate of four years ago.

Asked which is the bigger priority for Canada in the next five to 10 years, 52 per cent selected climate change efforts, while 34 per cent chose the oil and gas sector.

“What’s interesting is almost nobody wants to ignore either issue,” said Korzinski.

If the country intends to increase oil production and take action on the climate front — next month’s election results will help shape that — further investments like the one by Suncor will be required.

Investors are also demanding it.

“The world has told the oilsands producers they want to see emissions intensity improvements,” said Kevin Birn, a vice-president with energy consultancy IHS Markit.

“And if oil and gas producers are going to be competing, not only on cost structure but on an emissions structure, there’s an interest to do that and drive down that carbon intensity.”

According to an IHS Markit report last fall, average emissions per barrel from the oilsands have dropped by 21 per cent since 2009 — and could be reduced by another 16 to 23 per cent by the end of the next decade using existing or nearly commercial technology.

Dinara Millington, vice-president of research at the Canadian Energy Research Institute, said the oilsands sector is making strides to lower its footprint, putting it on a trend where emissions from a bitumen barrel “will be on par, or even less, than … an average North American barrel of crude oil.”

She thinks Suncor’s announcement is an example of the progress that can be achieved in the future as new advancements, such using solvents to improve bitumen recovery, come on stream.

But even as emissions are falling on a per-unit basis, total greenhouse gas emissions from the oilsands are growing as overall production rises.

A CERI study reported total oilsands output eclipsed three million barrels per day last year and is projected to peak at 4.7 million bpd in two decades under its base-case outlook.

During that time, total emissions for the oilsands are pegged to climb from 68 megatonnes last year to 94 megatonnes by 2039.

“This is, would you like to have your cake and eat it too?” said Keith Stewart, senior energy strategist with Greenpeace Canada.

“Everyone wants to hold on to that comforting fiction that we can have an economy like today and somehow have completely different environmental results, and that isn’t possible.”

But Suncor’s CEO points out the world’s population is rising — expected to grow by another two billion people by 2050 — and demand for energy continues to grow. He believes Canadian oil has an important role to play in meeting that need.

“If we don’t contribute to it, it just means the oil comes from some other jurisdiction that, I think, is less responsible,” said Little.

“It is an enormous challenge to try and figure out how do we provide the energy and deal with greenhouse gases….

“The cogen (project) is an excellent example of where we challenge ourselves, where the environment can get better and we can keep moving forward.”

Chris Varcoe is a Calgary Herald columnist.

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