New technologies needed to reduce Alberta’s greenhouse gas emissions can’t be developed fast enough to meet the cuts required under the international Kyoto treaty, industry experts say.
Energy-efficiency upgrades as well as new technologies – such as permanently storing carbon dioxide underground – to reduce the emissions blamed for global warming won’t be sufficient to meet the cuts required under the international treaty by 2012, they argue.
Oil and gas companies expect they will have to spend millions of dollars buying other countries’ “surplus” emission-reduction credits if the treaty goes forward.
“Ratifying Kyoto would just force us to buy foreign credits to fill the gap,” says Rick Hyndman, senior policy adviser on climate change for the Canadian Association of Petroleum Producers. “We’d be better off putting money into (developing) our own technology.”
The Kyoto Protocol obligates Canada to reduce its greenhouse gas emissions to six per cent below 1990 levels.
Because emissions have risen steadily since 1990, the actual reduction required by 2012 is predicted to be about 33 per cent or 240 million tonnes.
The federal government intends to ratify Kyoto next month. Yet Ottawa has yet to specify how many tonnes of greenhouse gases the oil and gas industry will have to cutt.
Canadian Natural Resources Ltd., citing uncertainty over the Kyoto implementation plan, last week chopped the pre- engineering budget for its Horizon oilsands project to about $200 million in 2003, down from $300 million.
Production startup for the three-phase, $4.9-billion project near Fort McMurray will be delayed at least a year to 2008, CNRL said.
While not solely blaming Kyoto, TrueNorth Energy LLP and Husky Energy Inc. have deferred millions in spending on their, respectively, new $3.3-billion Fort Hills oilsands mine and $1.5-billion expansion of the Lloydminster, Sask. heavy oil upgrader.
Shell Canada, on the other hand, is moving full steam ahead with its Alberta Oil Sands Project – and plans to slash greenhouse gases while doing so.
The $5.7-billion project is a joint venture between Shell, which owns 60 per cent, and Chevron Canada Limited and Western Oil Sands LP, which each own 20 per cent.
The nearly finished oilsands mine near Fort McMurray, and Shell’s Scotford refinery in Fort Saskatchewan which it will feed, will together emit a total of 3.5 million tonnes of greenhouse gases at startup next year.
But Shell is committed to cutting those emissions in half by 2010, says Neil Camarta, senior vice-president of oilsands.
“Our objective is to produce less carbon dioxide per litre of gasoline at the pump than the alternative, which is imported oil.”
The oilsands project includes two cogeneration (generating both heat and power) plants, a 172-megawatt (MW) facility at the minesite and a 150-MW plant at the Scotford refinery. Compared with standalone steam and power production, gas-fired cogeneration can deliver fuel efficiency increases of 50 to 60 per cent and carbon dioxide reductions of 50 to 80 per cent.
The new upgrader will utilize a state-of-the-art, hydrogen-based refining process that creates additional heat for use in generating electricity.
Shell also plans to offset greenhouse gases by reducing emissions elsewhere in the company’s business, and buying emission-reduction credits either within Canada or abroad, Camarta said.
The company, while neither supporting nor opposing Kyoto until more details are known, recognizes the need to manage the long-term business and environmental risks of climate change, he said.
“We know that if you’re in the energy business, you’re in the carbon (production) business. If there is a cost to carbon – and that’s a pretty high likelihood – then you want to be proactive about that.”
Oilsands operator Suncor Energy’s total greenhouse gas emissions increased by about 12 per cent to 6.4 million tonnes in 2000, compared with 5.7 million tonnes in 1996.
During the same period, however, the company’s total oil production rose 21 per cent.
That means Suncor has managed to reduce “emissions intensity” – the amount of greenhouse gases emitted for each barrel of oil produced, spokeswoman Darlene Crowell says.
The company constantly upgrades to more energy- efficient equipment and also built a cogeneration plant at the Suncor site.
The cogen plant “is actually so efficient that there’s surplus electricity that goes back into the Alberta grid,” Crowell said.
Suncor is now researching the use of lower temperatures in the bitumen extraction and refining processes, to bring per-barrel emissions down even more.
To help offset its future emissions in Alberta, the company has acquired and preserved rainforest in the Central American country of Belize.
The trees in the rainforest act as a carbon sink, absorbing greenhouse gases. The initiative is expected to prevent the release of 500,000 tonnes of carbon dioxide into the atmosphere over the project’s 40-year life.
Energy giant BP says it has reduced its greenhouse gas emissions by more than nine million tonnes over the past four years, at no net cost to the company.
BP’s carbon dioxide emissions have fallen to about 80 million tonnes, or 10 million tonnes below 1990 levels. The company plans to stabilize its future net emissions at the 80-megatonne level through the next decade, despite plans to grow its oil and gas production by 5.5 per cent a year.
BP plans to use energy efficiency upgrades and more cogeneration plants, expand its worldwide solar energy business, and reduce routine gas flaring on offshore oil platforms.
Alberta currently produces about 205 million tonnes of greenhouse gases. Fossil fuel production accounts for most of the emissions – 34 per cent, or about 70 million tonnes.
Meeting the increasing consumer demand for energy is expected to drive up production emissions to 145 million tonnes by 2010, says CAPP’s Hyndman.
So even with the industry’s planned annual improvements in energy efficiency, “ultimately we have to come up with an energy supply that doesn’t emit,” Hyndman said.
And under the Kyoto accord, he added, “we’re not going to do it in that time frame.”
But Tom Marr-Laing, director of the Energy Watch program at the Pembina Institute, an Alberta-based environmental policy group, argues that Kyoto’s legally binding targets are just what’s needed to spur the entire oil and gas industry to cut greenhouse gases.
“Our own sense is that industry can make substantive headway without incurring huge, break-the-bank costs,” Marr-Laing said.
Allan Amey, president and chief executive of Climate Change Central in Alberta, says current technologies undoubtedly can be used to economically reduce more greenhouse gases in the province.
But costs for the energy industry rise dramatically when it comes to achieving Kyoto-level reductions using solely existing technologies, Amey noted. “There’s a huge investment needed in developing the next generation of clean-energy technologies.”
The Clean Air Strategic Alliance, which includes provincial government, industry and environmental group stakeholders, has led a successful effort to reduce oilfield flaring emissions by 53 per cent compared with flaring levels in the 1996 “baseline” year.
However, oil and gas producers still emit about 15 per cent of the total greenhouse gases in Canada, Marr-Laing points out.
About half of these emissions come from thousands of relatively tiny leaks and energy inefficiencies along the entire production pathway, from the wellhead to the sales gas pipeline.
Methane gas worth between $400 and $800 million a year is vented – allowed to escape – into the air from upstream production sites, according to a report by Edmonton-based New Paradigm Engineering Ltd.
Methane is a potent greenhouse gas, with an impact 21 times greater than carbon dioxide in heating the Earth’s atmosphere.
Eliminating routine methane venting from one wellsite facility is like taking more than 100 automobiles off the road. And there are about 70,000 gas wells in Alberta. Putting a plug in methane venting from heavy oil production in eastern Alberta also represents “a huge source of potential (greenhouse gas) reductions,” Marr-Laing said.
Nexen Inc., in a project to capture and utilize vented methane from heavy oil production in Luseland, Sask., has saved more than $3.5 million in energy costs over the past four years. The project has reduced greenhouse gas emissions by almost 400,000 tonnes, according to a Nexen report.
Emission leaks from some 3,000 compressor stations across Western Canada amount to 2.8 billion cubic metres of wasted gas a year, worth more than $450 million, according to Calgary-based Clearstone Engineering.
The total leakage from about 730 natural gas-processing plants amounts to a further 0.85 billion cubic metres a year – worth more than $150 million. In the pipeline sector, a systematic leak detection and repair program reduced methane venting from pipelines by 346,000 tonnes of equivalent greenhouse gases in 2000. That’s a 22-per-cent improvement compared with the previous year, says the Canadian Energy Pipeline Association.
Among the most promising emerging technologies to reduce greenhouse gases is tapping carbon dioxide for enhanced oil recovery.
CO2 flooding, as it’s known, involves pumping otherwise vented carbon dioxide underground to help push out more oil from aging reservoirs. A significant portion of the gas remains sequestered or permanently stored underground.
In the U.S., CO2 flooding now produces nearly 200,000 barrels of oil a day, says Derril Stephenson, president of Calgary-based Vikor Energy Inc.
Stephenson helped pioneer CO2 flooding in Alberta in 1984 in the Joffre oilfield, northeast of Red Deer.
The project, now owned by Penn West Petroleum Ltd., is relatively small-scale, injecting some four million cubic feet of CO2 per day. A nearby petrochemical plant supplies the gas.
EnCana Resources operates the only large-scale CO2 flooding operation in Canada, at its heavy oil reservoir in Weyburn, Sask.
The $1.1-billion project uses carbon dioxide that’s pipelined 325 kilometres from the Dakota Gas coal gasification plant at Beulah, North Dakota. The CO2 flooding has helped boost oil production at Weyburn from a low point of 11,000 barrels a day to a current level of 23,000 bpd.
EnCana’s project is designed to consume 14 million tonnes more carbon dioxide per year than it produces – all of which would otherwise be vented to the atmosphere.
Stephenson estimates that CO2 flooding in Alberta could accommodate about 1.3 billion tonnes of the greenhouse gas.
However, not many industrial sources in the province contain a pure enough stream of CO2 to make projects economical, he said. Improvements in the technologies used to capture and transport the gas could lower the costs.
Also, depending how Kyoto is rolled out, the cost of directly reducing greenhouse gases, or of buying emission-reduction credits, could make CO2 flooding an attractive option.
With a focused research-and-development effort and some key government incentives, “I think a lot could be done by the end of that 2012 (Kyoto) timeframe,” Stephenson said.
Amey, at Climate Change Central, said both the Alberta and federal governments have pledged to make significant investments in greenhouse gas-reduction technologies.
“The problem I’ve seen to date is there’s been a lot of talk but no action yet,” Amey said. “I’m hopeful that there will be some action.”
