CALGARY -- Major players in the oil sands of northern Alberta are in talks to form a consortium to turn carbon dioxide emissions from hot air into cold cash.
EnCana Corp., Shell Canada Ltd. and Suncor Energy Inc. are all part of the discussions, aimed at setting up a co-operative effort to capture, transport and sell carbon dioxide from the oil sands. Those discussions are still in their early stages, but the group is examining options to create the infrastructure to ship carbon dioxide southward, and find customers.
For years, carbon dioxide emissions have been seen as a cost, with the Kyoto Protocol requiring outright cuts -- and significant capital spending -- or the ongoing expense of purchasing credits from others who have made reductions. There has been increasing interest in capturing and then storing carbon dioxide underground.
The oil patch is now turning its attention to how to turn that stored carbon dioxide into a valuable commodity by transporting it south, where it can be used to boost the production of aging conventional oil wells. Oil sands projects, particularly mining operations, emit a large volume of carbon dioxide, but a specialized pipeline would be needed to transport that gas hundreds of kilometres to the mature oil fields of central Alberta, where it could be injected underground and used to push more crude to the surface.
The full roster of participants isn't known, but a growing number of companies are taking part in the talks, including some from the mid-stream part of the oil industry, which includes pipeline operators. EnCana, Shell and Suncor all confirmed that they are participating in the discussions, although each said the talks were in their early stages. "This is the start of the process of getting the players to the table," said Suncor spokesman Brad Bellows.
However, the head of Penn West Energy Trust, one of the biggest potential customers for the shipped carbon dioxide, says he believes there will be a formal agreement struck within the industry, setting up some sort of co-operative venture to operate the carbon dioxide pipeline. Penn West president and chief executive officer Bill Andrew said his company would be willing to scrap its own preliminary plans to build a carbon dioxide pipeline if the embryonic consortium comes up with its own proposal to ship the gas south. "We just want to see it happen," Mr. Andrew said.
The group has not yet decided whether to build and operate a pipeline on its own, or work with an existing pipeline operator and pay tariffs, Mr. Andrew said. (The latter is the business model for many pipelines shipping crude and natural gas, but some -- like the proposed Mackenzie Valley natural gas pipeline -- are operated by producing companies.)
Shell Canada spokeswoman Jan Rowley confirmed that her company and others are looking to create "something in a co-operative fashion" but said it has not been determined whether such co-operation will extend beyond capturing and sequestering carbon dioxide.
The firms involved in the talks are not yet willing to say when an agreement might result, but Mr. Andrew said a commercial system could be up and running before the end of the decade. The group, he said, is making steady progress. "They're just chewing away at it."
