Carbon Capture is a Major Opportunity for Canadians: REPORT

Carbon Capture a Major Opportunity for Canadians and the Environment REPORT COVER v2

The build-out of carbon capture, utilization and storage (CCUS) technology can help transform Canada's oil and gas sector into one of the lowest greenhouse gas (GHG) emission feedstocks in the world, according to a new report by CIBC Capital Markets.

CIBC estimates that completing the first phase of CCUS projects could reduce Canadian oil sands emissions intensities by 14 per cent. Additional phases would make our petroleum some of the least carbon-intensive feedstock globally.

Furthermore, providing incentives for energy companies to build and maintain CCUS infrastructure could promote the decarbonization of up to 75 million metric tonnes per annum (MMtpa) in "…proximal non-oil and gas industrial emissions, the equivalent of removing almost every ICE vehicle in Canada from the road."

Below are highlights from CIBC's report showing Canada's CCUS opportunity. Also see:

Key Points

#1 – Canadian government will need to provide at least 45 per cent of the total capital expenditures support to incentivize the construction of megatonne-scale CCUS projects using existing technologies.

Developing new technologies would likely need higher levels of capex support (up to 70 per cent) from government to promote major CCUS deployment. The opportunity cost for the federal government at about 50 per cent involvement is ~$37 per tonne, which is lower than the April 1st, 2022, price on carbon of $50 per tonne.

#2 – Rising carbon emissions are a global problem and CCUS has entered a period of rapid growth. It is expected that investment will migrate to more favourable jurisdictions.

If Canada cannot create an attractive investment environment, it would squander its advantages over other major energy producers – including experience in carbon capture, expertise in underground reservoir management, and geographic proximity of carbon emissions to storage.

#3 – Canadian oil and gas have traded at a discount compared to products from other nations given concerns over emissions, despite Canada's strong performance on Environmental, Social and Governance indices. Global investors continue to focus solely on GHGs, but recent geopolitical events have highlighted the importance of energy security.

A clear strategy for decarbonization through CCUS can aid Canada's energy sector in closing the valuation gap on its product and outperforming global peers on emissions while being a stable supply source, making Canadian oil and gas preferred by global buyers.

Other CCUS-Related Findings

canadian oil sands GHG emissions to drop 14% with phase one of carbon capture projects in Canada

> Government needs to provide incentives to Canadian industries as current CCUS technology does not compete for capital. De-risking megatonne-scale carbon capture projects involves creating a financial framework that incorporates at least 45 per cent in government support in the form of an investment tax credit (ITC) for such developments to move forward at cost-of-capital breakeven economics.

> Canada is well-positioned to participate in the ~$1.2 trillion of capital spending on carbon capture, utilization and storage. The decades of experience Canadian energy companies have in reservoir management, the proximity of oil and gas emissions to storage areas, and existing CCUS projects and infrastructure suggest are all reasons why. 

> The first phase of CCUS projects could reduce Canadian oil sands emissions intensity by roughly 14 per cent, down to ~49.8 kilograms of CO2 equivalent per barrel (kgCO2e/Bbl) of production, comparable to the average global upstream carbon intensity of 55.0 kgCO2e/Bbl.

> Additional phases could reduce oil sands emissions intensity to ~30.4 kgCO2e/Bbl, making Canadian oil and gas one of the lowest GHG-intensive feedstocks in the world.

> Synergies with oil and gas producers and other large industrial emitters could help Canada reduce its overall emissions even faster. For example, several Canadian energy companies have signed agreements with various non-energy partners to implement CCUS technology. Additionally, the Oil Sands Pathways to Net Zero alliance will play an instrumental role in reducing ~75 MMtpa of heavy industry GHG emissions concentrated in major industry hubs across Western Canada.

> Oil sands companies are Canada's largest producers and consumers of hydrogen. Established technology can aid in reducing the carbon intensity of hydrogen production by coupling it with CCUS. There is a near-term opportunity to capture ~8.5 MMtpa of CO2 via the method above before 2030. Further development of blue hydrogen could help advance the decarbonization of other Canadian industries while providing low carbon energy products for buyers globally.

> The global energy transition is likely to take decades. Therefore, low carbon-intensity hydrocarbons will gain advantages in pricing and accessibility to funding. CCUS helps remove environmental concerns for investors, helping Canada to get more value for its oil and gas products while also making us a preferred supplier of choice for many years to come while benefitting Canadian families and the global environment.

Canada is a CCUS Leader

Canada is home to 15% of major carbon capture projects globally

The International Energy Agency says that carbon capture, utilization and storage is an important emissions reduction technology that can be applied across energy systems. In heavy industry sectors, like cement, for example, without CCUS there currently are limited or no solutions for tackling emissions.

In 2021, there were more than 100 new facilities announced worldwide. However, the build-out of CCUS capacity – currently at 40 million tonnes of CO2 (MtCO2) annually – needs to increase to 1.6 billion tonnes (GtCO2) in 2030 to align with the IEA's pathway to net zero by 2050.

Despite the shortfall by 2030, Canada is doing its part. Home to 15 per cent of the world's current major projects, Canada is already a global leader in the deployment of CCUS and is planning to do more.

By creating new CCUS infrastructure, Canada can make its oil and gas a preferred choice amongst global buyers while benefitting Canadian families and the global environment!

Canada is an ESG Leader

Canada's environmental, social, governance (ESG) record versus other major global oil producers

Advancing Canada's CCUS sector will add to an already long list of Canadian leadership on the global stage when it comes fighting climate change and protecting the environment.

For example, of the world's top oil and gas producers, Canada ranks at the top – if not number one – on the following ESG indices:

Who would you want the world's future energy supply coming from? Would it be from countries like Canada, with a demonstrated commitment to developing cleantech and innovation, or from other producers with often much weaker protections for human rights and the environment?

The choice is clear - choose Canada!

Join Us Today!

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More CCUS in Canada means more investment into our communities and more long-term, well-paying jobs for Canadians. By supporting the CCUS sector, you support bringing back investment and jobs to hard-working families who need it the most.

Will you join us?! Follow us on Twitter, Instagram and Facebook to learn more about how both Canadians and the environment stand to benefit from supporting the continued development of a strong CCUS sector today!

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