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BP on firing line over sands re-entry Public image takes bruising as super major joins oil sands ‘club; industry, governments turn attention to carbon capture, storage By Gary Park For Petroleum News
Like it or not, the Alberta oil sands are front and center in a spreading environmental crusade against “dirty” fuel.
And no one is better positioned than BP these days to describe the wrath of critics on the heels of its about-face late last year.
Under former chief executive John Browne it bypassed the northern Alberta resource as too expensive to develop.
It sold off its oil sands assets to Canadian Natural Resources — which has parlayed the holdings into a multibillion-dollar development — only to have a total change of heart under Browne’s successor, Tony Hayward.
It joined the rest of the pack in grand style through its C$11.7 billion joint-venture with Husky Energy, which gives it a 50 percent stake in Husky’s 200,000 barrels per day Sunrise project in return, while Husky acquires half of BP’s Toledo, Ohio, refinery.
In making the oil sands part of its portfolio, BP has been accused of undermining its “Beyond Petroleum” advertising campaign designed to put the company in the forefront of the industry’s green movement.
Hayward got a sense of what might lie ahead during a Feb. 5 news conference when he was challenged to explain why BP “jumped into bed with Husky.”
Another reporter suggested it was “irresponsible for an oil company to help (Canada) destroy its attempts to reach Kyoto targets.”
Priority to provide energy Hayward said BP’s priority is to provide energy the world needs — which translates into seeing the oil sands as a necessary growth opportunity — and “we are going to do it in a very environmentally responsible way.”
He argued there are ways to develop the oil sands without forcing Canada to breach its Kyoto commitments.
Whether or not they think being dragged into the international spotlight in this fashion could harm investment in the oil sands, industry and governments in Canada are lending urgency to their efforts to reduce greenhouse gas emissions from a resource labeled as the greenhouse gas pariah.
Carbon capture and storage technology is portrayed as the best hope of meeting global energy demands while lowering the impact of fossil fuels on the environment.
It is especially crucial if Canada is to allow a quadrupling of oil sands output over the next 15 years and become, in the words of Prime Minister Stephen Harper, a global energy powerhouse.
But there is a long road to travel before a dent can be made in the GHGs associated with oil sands extraction and processing.
Just how far and at what cost has emerged in a series of reports and developments over the last few weeks.
Some estimates put a price tag of C$16 billion over the next 20 years to create a carbon capture and storage system that would capture 20 million metric tons of GHGs by 2020 — an amount that overshadows the initial C$2 billion of government spending recommended by a joint Canadian-Alberta government panel to build four initial carbon capture and storage projects.
Bill Gunter — an Alberta Research Council scientist, who played a role in the 2007 Nobel Peace Prize awarded to the United Nations’ Intergovernmental Panel on Climate Change and former U.S. Vice President Al Gore — says Canada has much lost ground to make up on work by Americans, Europeans and Australians to develop and implement carbon capture and storage technology. Abu Dhabi is also working on a plan to capture 15 million metric tons of carbon dioxide and use it to rebuild reservoir pressures for enhanced oil recovery.
In Gunter’s view, Canada is lagging far behind other governments in advancing carbon capture and storage technology, even though he told the Globe and Mail that Western Canada has excellent storage potential, a large source of carbon dioxide and a market for CO2 in enhanced oil recovery.
What’s missing is the economic incentive for companies to invest the billions of dollars needed to build an integrated carbon capture and storage network.
Economic challenge The economic challenge was hinted at last March by Alberta Environment Minister Rob Renner who estimated meeting his government’s GHG targets could run to C$5 billion, costs that would “eventually be borne by the consumer.”
In unveiling Alberta’s latest climate change plan Jan. 24, Renner said the program would result in “real reductions” of 50 percent or 200 million metric tons of GHGs a year by 2050, with carbon capture and storage accounting for 70 percent of those cuts.
But he said test projects will be needed to refine and prove carbon capture and storage technology before the government can approve pipelines and storage facilities, delivering GHGs from the oil sands to enhanced recovery projects in southern oil fields.
A government-industry council will be named to work on a go-forward policy for implementing technologies needed for a large-scale carbon capture and storage project.
David Pryce, vice president of the Canadian Association of Petroleum Producers, said that council needs to swing into action without delay because carbon capture and storage poses timing, technical and funding challenges.
However, he said the industry is aware that it must play a “significant role” in lowering petroleum-related GHGs and carbon capture and storage is the “key tool for industry to meet this objective.”
Stefan Bachau, a senior scientific advisor to the Alberta Geological Survey and the Alberta Energy Resources Conservation Board, said carbon capture and storage is the key element of Alberta’s strategy to reduce GHGs, noting that success with carbon capture and storage could make oil sands production less GHG intensive on a per unit basis than conventional oil production.
He said that is crucial if Alberta is to deflect the criticisms it is facing domestically and internationally, but he doubts carbon capture and storage site selection, applications, regulatory approvals and construction could be completed before 2011.
Report calls for C$2 billion The initial hurdles to be cleared were outlined in a report released Jan. 31 by a joint task force of the Canadian and Alberta governments.
It called for a commitment of C$2 billion in taxpayers’ money to “leverage the billions of dollars of industry investment in the first carbon capture and storage projects,” with the funding distributed through a competitive request for proposals.
“Government (federal and provincial) must commit financial support for CCS and industry must commit to building and operating CCS projects immediately,” it said.
As well, the task force urged prompt action on regulatory changes to establish a clear and concise policy allowing carbon capture and storage projects to become operational by 2015.
It said the objective is to establish three to five plants, each capable of handling 5 million metric tons a year.
Task force chairman Steve Snyder, chief executive officer of utility company TransAlta, said the long-term benefits of carbon capture and storage in Canada could be as high as 600 million metric tons a year, but a failure to get started will pose serious problems for the oil sands sector.
He said that with more than C$150 billion in capital spending already announced, government must show it is serious about carbon capture and storage.
Otherwise, facilities will be built with existing technology and face costly retrofits later to incorporate carbon capture and storage technologies.
Alvarez: policy certainty needed Pierre Alvarez, president of the Canadian Association of Petroleum Producers, agreed that developing carbon capture and storage infrastructure will require an industry-government partnership if companies are to meet their obligations.
But, until there is certainty involving the policy framework, the 2015 target date will be difficult to meet, he said.
Rather than wait for governments to decide how much they are ready to contribute, two industry groups have swung into action — one working on a carbon capture network and pipeline and one led by Enbridge and involving 19 companies, including BP Canada Energy, Chevron Canada, ConocoPhillips, EnCana, OPTI Canada, Penn West Energy Trust, TransCanada and UTS Energy.
The Enbridge-led partnership laid out a three-phase initiative Feb. 4 for its Alberta Saline Aquifer Project, starting with a C$750,000 budget to identify suitable locations for long-term CO2 sequestration in deep aquifers.
Pending that selection and regulatory approval, a pilot project could cost up to C$30 million and take three years to complete, while a third step to a full-scale commercial operation could need another C$200 million-$300 million.
Enbridge Chief Executive Officer Pat Daniel said the project is a stepping stone towards “climate change solutions that work.”
The Alberta Research Council expects more such projects will emerge as the Canadian and Alberta governments introduce legislation setting carbon limits on industries.
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