Oil sands producers need to invest their money when it comes to net zero carbon emissions


More fossil fuel industry delegates than ever – 600 – are attending the UN climate talks in Egypt. And among them are Canada’s tar sands operators, often cited by environmentalists as producing some of the “dirtiest” oil in the world.

COP27 offers these companies the opportunity to show these environmentalists that they too are working towards the goal of net zero carbon emissions by 2050, even if they continue to produce bitumen – a thick, tarry and carbon-intensive.

But back home, credible critics point out that so far they haven’t done much except brag about their good intentions.

Detailed plans — including project details, project timelines, capital allocations or timelines for final investment decisions — have yet to be revealed, says a recent report from the Pembina Institute, a group of Calgary-based clean energy think tank.

In April, when the federal government announced its plan to cut carbon emissions from the oil industry, those same companies confirmed they were happy to get on board. They wanted to work with governments to achieve climate goals, a spokesperson said.

They were “certainly excited about the $2.7 billion in tax credits over the next five years” for carbon capture, utilization and storage (CCUS) facilities revealed in the federal budget, as I wrote it at the time.

These tax credits were intended to encourage a group of oil sands producers — the Pathways Alliance — to launch its $1.5 billion pipeline project that would transport carbon dioxide from the oil sands region to the northeast. from Alberta to an underground facility 400 kilometers to the south, reducing emissions while still allowing oil production. 50 to 60% of the cost of the project would qualify for tax credits.

But now it looks like Pathways Alliance isn’t as keen. They want the federal and Alberta governments to get more money, even if they are raking in the biggest profits ever from the limited oil supply following the Russian invasion of Ukraine.

Alliance members — Canadian Natural, Cenovus, ConocoPhillips, Imperial, MEG Energy and Suncor — account for 95% of bitumen production in northeastern Alberta. Extracting and refining bitumen requires a lot of energy, which means higher costs and carbon emissions.

If oil sands producers want to remain globally competitive, they’re going to have to do something about all that carbon, and do it over the next few years.

But so far they seem more interested in increasing shareholder dividends or buying back shares, which enriches shareholders but does nothing to reduce carbon emissions and curb climate change.

These companies are well aware that the long-term future of oil is not encouraging. International agencies, governments and some oil companies predict that even if climate action remains at its current rate, demand for oil will start to decline before 2030.

So it’s understandable that oil sands producers don’t want to invest their huge profits in projects that would produce more oil and take a lot of upfront money and time to complete.

But this year oil is in demand, with gas sometimes reaching the highest prices ever. But while oil sands companies aren’t spending their profits on new production projects, they’re also withholding financial commitments to the expensive technology needed to dramatically reduce carbon emissions.

That’s an indication, the Pembina report says, that they’re prioritizing short- and medium-term financial gains for shareholders because the long-term outlook is so bleak.

In an effort to discourage this sort of thing, the federal government introduced a 2% tax on stock buybacks that would take effect in early 2024. Environment Minister Steven Guilbeault was so frustrated with the attitude of the big oil companies that he recently called on them not to put their money in their mouths when it comes to climate change initiatives.

Maybe tar sands producers will change their minds after being exposed to thousands of COP27 delegates who want more than just talk when it comes to climate change.

Or, more likely, they’ll stick to greenwashing while the money keeps rolling in.

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