Industry says CCS projects need more government support to be financially viable, while Ottawa and the oil-rich province of Alberta are at odds over who should provide increased funding. "There's still an opportunity - if we can have some sensible government decisions about getting serious about meeting climate targets - that if the right incentives come along, we're in a very good position to look at carbon capture down the line," CEO Mike Nicholson said in an interview in late February. Until then, the company will pay Canada's carbon tax, set to rise to C$170 a tonne by 2030, Nicholson said. IPC, a 50,000-bpd producer with assets in Canada, France and Malaysia, will spend $850 million developing phase one of Blackrod. First oil is expected in 2026, and IPC has regulatory approval to produce up to 80,000 bpd. The plant is the first greenfield oil sands project to be sanctioned since Imperial Oil Ltd gave the go-ahead to its Aspen plant in 2018, only to shelve it indefinitely just months later. It comes after years of tepid foreign investment in the oil sands, with international firms deterred by high upfront capital costs, crippling export pipeline congestion that has curtailed production, and concerns about bitumen's high carbon intensity. Nicholson said IPC's decision was underpinned by new Canadian export pipeline capacity and IPC's own strong financial position.
The petroleum industry's recent focus on paying down debt and buying back shares has also left global oil supplies extremely tight, he added. "Our industry hasn't been invested in for more than a decade, all the recent investment has been very short-cycle," Nicholson said. "There's still definitely a preference for shareholder returns. But that's not how you build long-term sustainable businesses."
RISING PRODUCTION, EMISSIONS IPC's investment underlines the importance of Canada's vast bitumen deposits, the world's third-largest crude reserves, amid global concerns about energy security following Russia's invasion of Ukraine. But Blackrod, though relatively small, also highlights how growing production risks derailing Canadian Prime Minister Trudeau's emissions-cutting goals and cementing Canada's place as a climate laggard. Canada's oil sands produced a record 3.15 million bpd in 2022 and are forecast to hit 3.7 million bpd by 2030, according to S&P Global.
Meanwhile emissions from the oil sands have jumped 137%, or
48 megatons, between 2005 and 2021, according to the Canadian
Climate Institute.
They are forecast to rise another 23 megatons by 2030 unless
CCS projects take off and the federal government passes tougher
climate legislation, including a controversial federal oil and
gas emissions cap, the think-tank said.
Strong global crude prices mean oil sands production will
likely continue to climb through existing project expansions,
analysts said, even though a wave of greenfield projects like
Blackrod are unlikely.
"The oil sands are long-life, low-decline assets," said Wood
Mackenzie analyst Scott Norlin. "We use the term 'cash-flow
generating machines'. They just print money, especially when oil
is above $70."
(Reporting by Nia Williams
Editing by Denny Thomas and Marguerita Choy)
