According to new analysis from the Pembina Institute, a renewable energy think tank, Canadian oil and gas companies are not using their record profits to invest in decarbonization and are instead pursuing share buybacks and dividend payments.
In June of last year, five of Canada’s largest oil producers – Canadian Natural Resources, Cenovus Energy, Imperial, MEG Energy and Suncor Energy – announced they were forming the Oil Sands Pathway to Net Zero Alliance, in the goal of achieving zero greenhouse gas emissions from oil sands operations by 2050.
The organization was later renamed Pathways Alliance and added ConocoPhillips Canada to its ranks. It has set a target for the oil sands sector to achieve an annual reduction of 22 million tonnes by 2030.
Jan Gorski, program director for oil and gas at the Pembina Institute, said the purpose of the report, which was released on Friday, was “to examine the difference between Pathways’ words and actions” since his creation.
“We’re in a place right now where the industry is making record profits. There are things they can do right now to reduce emissions,” Gorski said.
Despite this, the Pembina Institute said most details of Pathways Alliance members’ decarbonization plans remain undisclosed. Since the group’s inception, the institute has said that no significant decarbonization investment decisions have been made by its members.
Kendall Dilling, president of the Pathways Alliance, wrote in a statement that the group is moving as quickly as possible on its plans to reduce emissions while seeking economic and regulatory certainty from governments.
He said such certainty would enable companies to deploy billions of dollars of capital by 2030 and beyond.
“The Pembina Institute’s expectation that Pathways Alliance companies make final investment decisions on these multi-billion dollar projects before governments have finalized the regulatory frameworks to support them is unrealistic,” said wrote Dilling.
Gorski said he recognizes carbon capture and utilization projects have a longer lead time. But other projects, such as energy efficiency projects, can progress more quickly.
In 2022, free cash flow for Canadian oil and gas companies is expected to hit $152 billion, according to the Pembina Institute, the highest level of earnings on record.
The report released on Friday examines the Pathways Alliance’s public decarbonization pledges and compares them to the actions each company is currently taking on decarbonization.
For example, the report cites an announcement by Cenovus that it would invest $1 billion over the next five years in emissions reductions, but it has not announced any project details on this to date. This year, Cenovus spent the same amount of money repurchasing shares over a 90-day period. A Cenovus spokesperson deferred comments on the report to Pathways Alliance.
Dilling with the Pathways Alliance cited various works underway at the moment, including a request submitted to the Government of Alberta for underground storage space for its proposal to build “one of the largest” CCS projects. in the world. The results of this competition are expected in October.
“We remain confident that continued collaboration with governments will provide the necessary fiscal and policy framework for our industry to make final investment decisions,” Dilling said.
“However, to do so prematurely without having this framework in place would jeopardize climate goals, jobs, investment and energy security.”
Progress in carbon capture
The report also suggests that jurisdictions not currently making rapid emissions reductions could be left behind if the long-term outlook turns out to be correct that demand for oil will decline by 2030.
“The oil production market will become much more competitive,” Gorski said. “And that competitiveness will not only be determined by cost, but also by carbon intensity. So by acting faster, these companies can better position themselves to be competitive in the future.”
Richard Masson, executive fellow of the University of Calgary’s School of Public Policy and president of the World Petroleum Council, argued that companies are currently returning profits to shareholders because they have nothing concrete yet to invest in. .
“I think companies in Canada, driven by shareholders, investors and other stakeholders, are really serious about trying to reduce their carbon footprint and the technologies available to do that through carbon capture,” said- he declared.
“So I expect we’ll see a lot of progress here over the next few years once we get some momentum.”