Canada’s Oil Sands Sector is an ESG Leader: Report

Canada’s oil sands sector is producing some of the most ethical and environmentally sustainable oil barrels in the world, according to The 400 Billion Barrel Opportunity for Friendly Oil, and Canada’s Evolving Role by BMO Capital Markets.

The report starkly contrasts several claims by opponents of the oil sands sector who often rely on outdated data, deliberate omissions and at times blatant misinformation to create a negative perception of the industry.

BMO finds Canada has an incredible opportunity to invest today in energy that will be needed tomorrow. By 2040, it projects a cumulative reduction of roughly 80 million barrels per day of production world-wide, or 400 billion barrels of investment opportunity for Canada's oil sands sector.

As investors around the world continue to rely on environmental, social and governance (ESG) criteria to decide on where to put their money, BMO describes in detail how Canada is a leader on several ESG initiatives and should play a vital role in providing the world with sustainably-produced oil for decades to come.

Below we’ve summarized several key takeaways from BMO Capital Market’s latest on Canada’s ESG record while adding a few relevant facts of our own. Read the full The 400 Billion Barrel Opportunity - BMO Capital Markets yourself.

#1 – Canada’s ESG record is world-class

Canada's oil sands in situ potential for zero emissions and water use

Canada ranks #1 for environmental, social and governance practices among nations with the largest oil reserves based on an in-depth assessment of third-party sources.

An aggregated score was given to each country for three ESG categories drawn from the following indexes:

Canada ESG vs. Global Top Oil Reserve Holders

Notice how well Canada ranks for ‘social’ and ‘governance’ ESG metrics among the world’s top 20 producers, coming in 2nd for governance and social progress and 4th on the environment.

Canada ESG Scores vs. Top 20 oil producers

BMO also found Canada to be notably higher in comparison to the world’s top 15 oil reserve holders when examining social and governance indicators.

Social progress (light blue) and governance (pink) seem to not be taken seriously in many top oil-producing nations outside of North America and Europe.

#2 – Canada is a leader in transparency, climate policy

Oil sands producers must follow world-class and transparent policies that are unmatched by most other major oil producing regions of the world.

For example, did you know that Alberta accounts for roughly 80% of Canada’s crude oil production and is one of the few global oil jurisdictions with:

  • Mandatory disclosures
  • Regulated emissions protocols
  • Carbon taxes on excess GHGs

In 2007, Alberta was also the 1st jurisdiction in North America to take climate action with mandatory GHG emission reduction targets for large emitters across all sectors.

Canada's oil sands invested $9.3 billion into research and development since 2012

Provincial and federal government initiatives in place today aim to further improve the quality of these disclosures and stringency of environmental policies.

And in Canada, a nation consistently ranked as one of the least corrupt, most peaceful and democratic countries of the world, it's not all up to government.

Industry-led initiatives like the Canadian Oil Sands Innovation Alliance (COSIA) continue to bring industry together to focus on improving environmental performance through collaboration and innovation.

COSIA is a unique alliance, its sort rarely seen across the globe – if at all, another blaring example of ESG leadership in the oil sands.

Note that between 2012-2018, it was reported that COSIA members:

  • Saw a net reduction in water use from the Athabasca River at mining operations of 18%
  • Collectively reduced GHG emissions intensity at mining operations by 9%
  • Collectively reduced fresh water use intensity at in situ operations by 42%
  • Collectively reduced GHG emissions intensity at in situ operations by 11%

Canadian oil sands producers also invested more than $9.3 billion on research and development over the past decade including a record $1.2 billion in 2018, notably higher than other global oil producers on a per-barrel basis.

#3 – Canada is one of the lowest gas-flaring producers

Alberta has reduced gas flaring by 57% since 2000, making Canada a world leader

Canada’s oil sands sector continues to be monitored closely by government and guided by strict regulatory oversight on all operational aspects.

In contrast, the United States has seen various environmental protections rolled back in favour of industrial growth and development.

Since early 2018, gas flaring / venting practices in the U.S. have grown exponentially and have far surpassed regulatory limits in some of the U.S. shale oil plays due to aggressive development policies.

For example, the Texas Railroad Commission (RRC) is responsible for gas flaring regulations in plays in Texas like the Eagle Ford and Permian basins. In the past, the RRC has exonerated companies for surpassing flaring limits, an act it deemed essential for the U.S. to rise up and attain “global energy dominance.”

gas flaring trends U.S. tight oil fields BMO capital markets

On the other hand, Canada’s oil and gas producers are held to some of the strictest gas flaring regulations and monitoring in the world, exemplified by the following facts:gas flaring trends Alberta oil sands 2000-2018 BMO Capital Markets

  • Flared / vented gas in Alberta has fallen by 57% since 2000 despite significant growth in oil and gas production
  • Flaring / venting associated with crude oil and oil sands bitumen operations has dropped by 68% since 1996 (75% for oil sands)
  • If the rest of the world achieved what Canada’s oil and gas industry has in regards to gas flaring, total world GHG emissions from oil production would be reduced by 23%, equivalent to taking 110 million cars off the road, or 3x the amount of cars in Canada

Canada also ranks very low versus other major oil producers for flaring intensity and total flared gas volume, as indicated by Exhibits 20 and 21 in BMO’s report:

Canada Top Gas Flaring Nations of the World BMO ESG Ex. 20

Canada Gas Flaring Intensity Major Oil Producers of the World BMO ESG Ex. 21

#4 - Canada is a leader in sustainable land use

Oil sands mining operations are often highlighted by opponents to paint a misleading picture of how these unconventional barrels are extracted.

But the truth is that about 97% of Canada’s oil sands land area covers reserves recoverable by in-situ methods only (remaining 3% by mining), which require much less land disturbance than comparative U.S. shale projects do.

Note the well-spacing patterns of a project in the U.S. Midland Permian Basin versus one in the Southern Athabasca oil sands region, both across 100km2:

permian basin well spacing vs oil sands well spacing 1

oil sands well spacing vs. permian basin well spacing 2

Some important facts regarding sustainable land use on a comparative basis between oil sands and U.S. tight oil projects:

  • An example Permian project (30,000 barrels per day for ~30 years) requires nearly 600 lifetime wells to offset production declines
  • An example SAGD project requires roughly 200 new wells over its lifespan
  • Therefore, a typical SAGD oil sands project requires up to 75% fewer wells than a comparable U.S. tight oil project does over its lifetime in order to sustain supply
  • A typical SAGD project would have a total land use of 500 acres or less over its lifetime, versus 1,000-2,000 acres for a conventional tight oil development of the same scale

#5 – Canada’s GHG reductions are world-class

upstream oil sands emission intensity projections by 2030

Canada’s oil sands sector continues to lead the world in reducing its emissions intensity per barrel produced.

Over the past decade, the GHG intensity of oil sands crudes have decreased by more than 25%. IHS Markit also reports potential for another 16-23% reduction by 2030.

For in situ SAGD projects specifically, companies have found ways to produce more oil with less steam (steam-oil ratios, or SORs), reflecting:

  • Advancement in water treatment and recycling
  • Lower process heat and energy losses
  • Major enhancements in bitumen recovery methods

Prior to 2010, the average SORs for oil sands in situ hovered around 3.4x, dropping 21% to 2.7x in 2019.

Canada oil sands projects GHG emission intensities BMO Capital Markets

BMO also found that oil sands are by no means the most “carbon-intensive” barrels in the world when compared to commonly refined crudes including U.S. Bakken (incl. flaring), Nigeria Bonny, Indonesia Duri, Alaska North Slope, Venezuelan medium / heavy blends and California Thermal oil to name a few.

Several newer oil sands projects currently already have emission intensities that are similar to, or below the global average barrel of oil produced as shown above.

#6 – Canada is a leader in reducing fresh water use

Canada oil sands producers use just 0.2 barrels of fresh water per unit of oil in 2018, 60% lower vs. competing USA oils

BMO Capital Markets reports that in situ oil sands producers have reduced fresh water use levels to just 0.20 barrels per unit of oil in 2018, more than 60% below competing U.S. oils.

According to BMO, this is also roughly a 70% reduction compared to a rate of 0.7 barrels per unit in 2006.

canada oil sands vs. U.S. tight shale oil fresh water use comparison BMO capital markets

Today, SAGD oil sands operations now consume much less fresh water per barrel of oil produced on average than competing tight oil projects in the U.S. In situ oil sands projects use roughly 90% recycled water, while makeup from fresh water sources has dwindled to less than 6%.

Cutting-edge innovation and advancements in water recycling technology has allowed oil sands producers to decrease water use intensities at in situ projects across the industry

canada oil sands in situ projects fresh water use intensities BMO capital markets

Water withdrawals are also reported to be much lower than the limits, averaging just 27% of flow throughout 2018.

fresh water withdrawal rates canada oil sands producers BMO Capital markets

Oil sands producers would not have accomplished such incredible reductions in water footprints without investing significant time and capital into developing water-friendly technologies, once again pointing towards the sector's ESG leadership.

#7 – Canada is a leader in social criteria

canada oil sands sector leader on social investor criteria indigenous support 13 billion since 2012

Alberta’s oil sands companies have demonstrated leadership in the 'social' category of ESG by addressing a wide range of basic human welfare concerns, including:

  • Gender equality
  • Racial equality
  • Occupational health and safety
  • Indigenous relations
  • Community engagement

These companies continue to invest considerable time and capital in the local communities found in / near operations, exemplified by the facts:

oil sands producers community investment since 2012

  • Since 2012, oil sands operators have spent more than $80 million a year on average to support community resilience programs, education and skills development, and youth and Indigenous engagement.
  • Since 2012, oil sands producers have spent $13 billion on Indigenous sourced products and services on average per year, accounting for about 18% of total capital spending and 6% of total spending annually
  • In 2018, Indigenous peoples accounted for roughly 6% of total full-time oil sands employees, up from 3.5% in 2014
  • In 2018, average female employment in the oil sands sector improved to 22%, up from 20% in 2016
  • Since 2012, the number of workplace injuries have dropped 50% to a record low of 0.38 incidents per 200,000 work hours in 2018

oil sands producers workplace injuries per hours worked 2012-2018

Support Canada’s Oil Sands Sector!

The International Energy Agency (IEA) has recently projected global oil demand to return to pre-pandemic levels by 2021. Long-term projects from the IEA also show demand is expected to increase until the mid 2030s.

Canada’s leadership on ESG initiatives like those detailed by the BMO report should be top-of-mind for Canadians from coast-to-coast.

salish sea oil tankers crude oil every day

Our oil and gas sector is a world-class leader in reducing emission intensities, water use intensities, and land use disturbances - not to mention supporting local communities to the tune of billions of dollars per year. We should be proud!

The oil and gas sector is responsible for more than 500,000 jobs across the country, nearly 10% of our economy (GDP) and over 20% of our annual merchandise trade exports.

As long as the world still needs oil (which it will for decades to come), it should come from Canada – because that’s good for Canadian families AND the global environment.

Related Articles:

Canada Ranks Top 10 on Human Freedom Index (ESG)

Canada Ranks Top 10 on Democracy Index (ESG)

ESG Scorecard: Top 10 Global Oil Producers

Oil Sands Producers & the Environment: 15 Infographics


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