Canada presses oil sands producers on Pathways carbon capture project

(Bloomberg) — Canada’s energy minister said Alberta oil sands producers can absorb the cost of a major carbon capture project despite industry concerns that the country’s climate policies are undermining competitiveness. 

Energy Minister Tim Hodgson said he is “highly confident” the oil sands sector can support development of the proposed C$16.5 billion ($12 billion) Pathways carbon capture project following a recent agreement between the federal government and Alberta on industrial carbon pricing.

The project, backed by major oil sands producers including Cenovus Energy, Imperial Oil and Suncor Energy, would capture carbon dioxide emissions from multiple oil sands facilities and transport them by pipeline to a storage hub in eastern Alberta.

The agreement between Ottawa and Alberta outlines a phased emissions reduction plan targeting 16 million metric tons annually over the next two decades. The initial phase, expected by 2035, would target approximately 6 million metric tons per year.

Hodgson said advances in carbon capture and related technologies are expected to reduce long-term costs and create additional options for emissions reductions.

“I think you’re going to see a bunch of new technologies that are going to get cheaper and cheaper and cheaper,” Hodgson said, citing direct air capture and other sequestration technologies as examples.

He also suggested small modular nuclear reactors could eventually help lower emissions intensity in oil sands operations by replacing natural gas-fired heat sources.

The Pathways project has become closely linked to broader discussions surrounding a proposed new crude oil export pipeline to Canada’s Pacific Coast. Prime Minister Mark Carney previously indicated the carbon capture initiative is an important condition for advancing pipeline approvals.

Industry groups continue expressing concern that Canada’s industrial carbon pricing framework places domestic producers at a disadvantage compared to competing oil-exporting nations.

Kendall Dilling, president of the Pathways-backed Oil Sands Alliance, said the carbon price remains a “competitive disadvantage” for Canadian producers, though additional export capacity to Asian markets could improve the economics for the sector.

Alberta Premier Danielle Smith said she expects an agreement on moving the Pathways project forward could be reached later this year. Alberta plans to unveil its proposed pipeline route by July 1 as part of the next phase of regulatory review and consultation.