IPC CEO urges Canada to supply extra funding to construct carbon seize

By Nia Williams

(Reuters) – Worldwide Petroleum Corp, the primary overseas oil firm to sanction a undertaking in Canada’s oil sands in additional than a decade, might add carbon seize and storage (CCS) to the plant if extra authorities monetary incentives turn into accessible, its CEO advised Reuters.

Geneva-based IPC, a part of Sweden’s Lundin Group, sanctioned section one of many 30,000 barrel-per-day (bpd) Blackrod thermal undertaking in northern Alberta final month.

The corporate joins Canada’s greatest oil producers in urging policymakers to spice up public funding for the pricey know-how that’s seen as key to chopping emissions from the carbon-intensive oil sands.

Business says CCS tasks want extra authorities assist to be financially viable, whereas Ottawa and the oil-rich province of Alberta are at odds over who ought to present elevated funding.

“There’s nonetheless a possibility – if we are able to have some smart authorities selections about getting critical about assembly local weather targets – that if the best incentives come alongside, we’re in an excellent place to take a look at carbon seize down the road,” CEO Mike Nicholson mentioned in an interview in late February.

Till then, the corporate can pay Canada’s carbon tax, set to rise to C$170 a tonne by 2030, Nicholson mentioned.

IPC, a 50,000-bpd producer with property in Canada, France and Malaysia, will spend $850 million growing section one in all Blackrod. First oil is predicted in 2026, and IPC has regulatory approval to supply as much as 80,000 bpd.

The plant is the primary greenfield oil sands undertaking to be sanctioned since Imperial Oil (NYSE:) Ltd gave the go-ahead to its Aspen plant in 2018, solely to shelve it indefinitely simply months later.

It comes after years of tepid overseas funding within the oil sands, with worldwide corporations deterred by excessive upfront capital prices, crippling export pipeline congestion that has curtailed manufacturing, and considerations about bitumen’s excessive carbon depth.

Nicholson mentioned IPC’s choice was underpinned by new Canadian export pipeline capability and IPC’s personal robust monetary place.

The petroleum trade’s latest concentrate on paying down debt and shopping for again shares has additionally left international oil provides extraordinarily tight, he added.

“Our trade hasn’t been invested in for greater than a decade, all of the latest funding has been very short-cycle,” Nicholson mentioned.

“There’s nonetheless positively a desire for shareholder returns. However that is not the way you construct long-term sustainable companies.”

RISING PRODUCTION, EMISSIONS

IPC’s funding underlines the significance of Canada’s huge bitumen deposits, the world’s third-largest crude reserves, amid international considerations about power safety following Russia’s invasion of Ukraine.

However Blackrod, although comparatively small, additionally highlights how rising manufacturing dangers derailing Canadian Prime Minister Trudeau’s emissions-cutting objectives and cementing Canada’s place as a local weather laggard.

Canada’s oil sands produced a file 3.15 million bpd in 2022 and are forecast to hit 3.7 million bpd by 2030, in response to S&P World (NYSE:).

In the meantime emissions from the oil sands have jumped 137%, or 48 megatons, between 2005 and 2021, in response to the Canadian Local weather Institute.

They’re forecast to rise one other 23 megatons by 2030 until CCS tasks take off and the federal authorities passes harder local weather laws, together with a controversial federal oil and gasoline emissions cap, the think-tank mentioned.

Robust international crude costs imply oil sands manufacturing will seemingly proceed to climb by way of present undertaking expansions, analysts mentioned, despite the fact that a wave of greenfield tasks like Blackrod are unlikely.

“The oil sands are long-life, low-decline property,” mentioned Wooden Mackenzie analyst Scott Norlin. “We use the time period ‘cash-flow producing machines’. They only print cash, particularly when oil is above $70.”