If decarbonized oil sands heavy crudes displace carbon-intense heavies from Nigeria, Venezuela etc. then its a net-carbon benefit not a “carbon bomb”
When was the last you heard someone suggest that the Alberta oil sands could be part of reducing global greenhouse emissions? The argument isn’t as preposterous as it seems, according to Kevin Birn of consultancy IHS Markit, especially as producers begin to adopt new technologies that take carbon out of the crude oil barrel in response to new provincial regulations.
Canadians are accustomed to hearing eco-activists talking about the oil sands as a “carbon bomb” or “dirty oil.”
Albertans recall Nov. 6, 2015 when Barack Obama’s rejected the Keystone XL pipeline to bolster his political position at the Paris climate conference, when he talked about how “shipping dirtier crude oil into our country would not increase America’s energy security” and famously declared that “we’re going to have to keep some fossil fuels in the ground rather than burn them and release more dangerous pollution into the sky.”
The Democratic president never seriously considered that Canadian ingenuity might be able to “take carbon out of the barrel,” as Tim McMillan, president of the Canadian Assoc. of Petroleum Producers, put it a few weeks later when Alberta Big Oil executives stood on the stage with Premier Rachel Notley to announce the Climate Leadership Plan.
Just 18 months later and Alberta has begun to deliver on industry’ promise – helped in large measure by the oil sands emissions cap and output-based allocation regulations introduced by the Alberta government.
In April I wrote about a new study from the Canadian Energy Research Institute that detailed how oil sands producers were eager to get a jump on new technologies that could both reduce the carbon-intensity of their crude oil and lower production costs.
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Quite a virtuous double whammy.
There are two basic technologies involved. On the in situ side, substituting solvent for steam, which is created using natural gas that adds more greenhouse gas emissions to a barrel of crude. On the mining side, paraffinic froth treatment – pioneered by Imperial Oil at its Kearl plant, where crude is produced with a carbon-intensity only two per cent above the American average – is becoming the process of choice to lower emissions.
“Industry will come to the metrics where we see oil sands bitumen has the same – or even lower – intensity than a conventional barrel of oil. I think industry is moving towards that and I think that’s what drives the innovation from companies, industry organizations, and federal and provincial governments,” Dinara Millinton, VP of research, said in an interview.
In 2015 the California Air Resources Board released a report that created an index for the carbon-intensity of crude oils supplied to state refineries.
A crude oil with average carbon-intensity scored in the five to 10 range. Canadian heavy crudes are commonly in the 20 to 30 range, with a few in the low to high 30s. Canada had plenty of company, especially bad boys Nigeria and Venezuela – Canada’s competitors in the Gulf Coast market – which had plenty of grades in the 30s.
One, Nigerian Brass, scored a whopping 82.48.
California had its own share of carbon offenders, such as the Placerita field at 41.72.
The point here is that there will soon be an opportunity for decarbonized Canadian heavy crudes from the Alberta oil sands to displace crudes with a higher carbon-intensity in the market.
“One of the things that we often hear is ‘Well, it doesn’t matter what Alberta does to production because the world is going to continue consuming oil anyway,'” Kevin Birn, director, IHS Energy Oil Sands Dialogue, said in an interview.
“If that’s true, then if we can reduce oil sands emissions-intensity without reducing the production, then we can offset consumption from higher emissions regions – we actually end up translating reductions in Alberta emissions into reductions in global emissions. And that’s what we want from a climate change perspective.”
Jeff Gaulin is the CAPP VP of communications. He says industry is working with COSIA (Canadian Oil Sands Innovation Alliance) on a “technology roadmap” for the next 10 to 12 years that will enable producers to generate a “cost-efficient carbon-neutral barrel of oil.”
“Imagine a barrel of oil sands crude produced with zero emissions. Not only are you taking out 30 per cent of the greenhouse gas emissions out of the barrel, but industry might find other ways to go beyond that threshold,” he said in an interview.
“That’ll be a breakthrough. Instead of a carbon burden, Canadian oil sands can be seen as a carbon benefit to displace other forms of oil around the world.”
The Alberta industry has a long history of innovation and, in fact, has been working on steam substitution and PFT for several decades now.
But it took the growing global consensus on climate change, the Alberta Climate Leadership Plan, and provincial regulations to kick start adoption in a significant way.
Can the Alberta-based oil sands industry change the way the world thinks about its product?
Can CAPP and the companies – aided by the Alberta government – market decarbonized oil as a net benefit to the decarbonizing process agreed to in the Paris Climate Accord?
If it can, Alberta will have an even better argument for a continued expansion of the oil sands and the approval and construction of new pipelines.