Focus: Canada oil producers grapple with Trudeau's demand for faster emissions cuts

Yangarra Resources

22/10/2021 06:00

By Rod Nickel
    WINNIPEG, Manitoba, Oct 22 (Reuters) - Canada's oil
producers face new pressure from Prime Minister Justin Trudeau
to reduce emissions in just three years, a sudden acceleration
of their plans that at least one major company said looks
unrealistic.
    Suncor Energy  SU.TO , the second-largest Canadian crude
producer, says it remains focused on cutting emissions by 2030,
not 2025 as the Canadian government will require.
    "Honestly, 2025 is going to be tough," Martha Hall Findlay,
Suncor's Chief Sustainability Officer, told Reuters. "That's not
a number we've used, it's a number the feds have used."
    Trudeau's advanced timetable for cuts to the oil sector's
total emissions by 2025, announced last month https://www.reuters.com/world/americas/trudeau-pledges-cut-canadas-oil-emissions-even-country-keeps-pumping-more-2021-09-13,
 comes as the oil sector has focused on longer-term targets, and
on reducing emissions on a per-barrel basis. 
    "That is light speed for an oil sands company. That’s
tomorrow," said Kevin Birn, chief analyst of Canadian oil
markets at consultancy IHS Markit, of Trudeau's demand. "They’re
a very hard ship to turn because they have so much emissions."
    Previously, Ottawa had a target of cutting national
emissions by at least 40% by 2030, but it did not single out the
oil sector. Canada's crude industry generates some of the
highest emissions per barrel worldwide. 
    Suncor is the only big producer that has laid out a plan -
in May - to cut total emissions by 2030, depending heavily on
carbon capture, greener power sources and energy efficiency. 
    But Trudeau's 2025 demand came as a surprise.
    "We had obviously been having conversations with the feds
long before the budget came out last spring, long before the
(election) campaign," Hall Findlay said. "None of those
discussions have mentioned 2025. At Suncor, we're laser-focused
on 2030."
    Canadian Natural Resources Ltd  CNQ.TO  and Cenovus Energy
 CVE.TO , have been planning for months to unveil their
emissions targets by year-end.
    Cenovus intends to cut emissions on an absolute and
per-barrel basis, said spokesman Reg Curren, but he would not
say if cuts would occur by 2025.
    Canadian Natural is working on "mid-term" targets connected
to the Pathways carbon capture project with its peers, said
spokesperson Julie Woo. She would not say if they would address
Trudeau's 2025 requirement. 
    Governments and business would need to spend C$60 billion
annually to cut Canada's emissions by 75% in the next 30 years,
RBC Economics said.
    Canadian producers are expected to report big quarterly
profits in coming weeks as oil and gas prices have soared. The
companies have prioritized repaying debt and returning cash to
investors, but Trudeau wants producers to spend some profits on
curbing emissions. 
    He plans to unveil his new cabinet on Tuesday, just ahead of
the United Nations' Climate Change Conference in Glasgow,
Scotland. 
    Ottawa wants to ensure there are ambitious emission
reductions from the oil and gas sector, making a meaningful
contribution to Canada's climate goals, said Joanna
Sivasankaran, spokesperson for the Canadian environment
department.
    Trudeau's 2025 goal is "ambitious for sure" and it would be
more realistic to expect the sector to cut emissions sharply by
a decade later, said Steve MacDonald, CEO of Emissions Reduction
Alberta, an arms-length corporation funded by the provincial
government. 
    
    'EASIER THAN ANYONE THINKS'
    Some small conventional oil producers are already showing
deep emissions cuts are possible, however, using methods that
big producers Canadian Natural and Cenovus could widely apply.
Both companies produce crude in the oil sands and by
conventional methods.
    Yangarra Resources  YGR.TO , which produces 10,000 barrels
of oil equivalent per day, says it will cut total emissions by
47%, or 50,000 tonnes of carbon dioxide equivalent, by the end
of 2022. Its plans involve powering 80 pumpjacks with
electricity from the Alberta grid, instead of burning natural
gas, and replacing older instruments that emit high amounts of
methane.
    "Cutting carbon in the oil patch is going to be a whole lot
easier than anyone thinks," said Yangarra CEO Jim Evaskevich.
"All of the changes we are implementing make incredible economic
sense."
    The moves are likely to generate substantial credits next
year that Yangarra can sell to bigger emitters, although the
monetary value has not yet been determined, Evaskevich said.
    Cenovus, which generates 18% of its production from
conventional operations, has cut its methane emissions by nearly
half from 2015 levels, a spokesperson said. Canadian Natural has
cut methane emissions by 28% since 2016, Woo said.
    "They're big, large operations, and they can't pivot quite
as quickly," MacDonald said. "But that doesn't mean they aren't
moving forward in the same areas."
    Emissions reductions are difficult for oil sands operations
because of the energy they require, while conventional methane
emissions are easier to tackle, said Keith Stewart, senior
energy strategist at Greenpeace Canada. 
    Oil sands producers are counting on expanded carbon capture
and sequestration facilities to cut emissions. But the economics
require government funding https://www.reuters.com/world/americas/exclusive-oil-companies-ask-canada-pay-75-carbon-capture-facilities-2021-10-07,
 said Greg McNab, a partner at the Baker McKenzie law firm.
Using renewable power to run oil sands facilities may be the
quickest way to curb emissions, he said.

 (Reporting by Rod Nickel in Winnipeg; Editing by David
Gregorio)
 ((rod.nickel@tr.com; Twitter: @RodNickel_Rtrs;
1-204-230-6043;))