Suncor Proposes to Leave Some Bitumen in the Ground
Calgary-based Suncor Energy is in talks with the Alberta government about a plan to leave some of its tar sands/oil sands resources in the ground, with emphasis on the portion of its 8.7 billion barrels of reserves that would be most expensive and carbon-intensive to extract.
“We are advocating, in a modest way, to work with government so that we can strand some of the oil in the oil sands,” CEO Steve Williams told analysts last Thursday. Those comments “come amid mounting pressure on oilsands producers to reduce their carbon footprints as tighter provincial and federal regulations are put in place to curb emissions,” the Financial Post reports.
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The announcement reflects a shift in regulatory assumptions, as Alberta and Canada both come to grips with the need to control greenhouse gas emissions in a declining global fossil market.
“Under the provincial energy regulator, oilsands operators are currently expected to produce the entirety of their assets regardless of their respective emissions intensity—essentially a ‘no bitumen left behind’ policy,” the Post explains. But the province’s new climate plan features a 100-megatonne cap on the tar sands/oil sands’ annual emissions, coupled with higher carbon levies on large emitters.
“By selecting only the lowest emissions assets, a procedure known as ‘high grading,’ Williams said Suncor’s oilsands operations could be between 10 and 20% more efficient,” the paper reports.
The product left behind “tends to be the most expensive, both economically and environmentally,” Williams said. “What we would like to do is leave that last piece in (the ground).”
The Pembina Institute’s Simon Dyer welcomed the move to view tar sands/oil sands resources in more finite terms. “It’s inconceivable that the entire oilsands can be developed under both the global commitments around greenhouse gas reductions and Alberta’s obligations to reduce emissions under a 100-megatonne limit,” he told the Post.
“Clearly there’s an enlightened self-interest aspect to this,” he added. “I think if companies can preferentially access the highest-grade bitumen, they’re going to be more profitable.”
Greenpeace campaigner Mike Hudema “welcomed the Suncor proposal but said producers will have to leave behind more than just the oil that’s difficult to produce if they’re sincere about reducing emissions,” Canadian Press reports.
In a post for JWN Energy, analyst Mark McLennan says the Suncor announcement points to issues some other tar sands/oil sands producers might face as they adapt to the 100-Mt annual emissions cap. “It is better for all involved to devote development resources to the areas where they will have the highest return on investment,” he writes. “Adding additional phases to an existing project also allows the producer to benefit from existing infrastructure, as well as potentially realize reductions in engineering and construction costs.”
However, “if further oilsands growth is derived from expansions of existing projects, it raises an interesting question regarding the value of the massive land holdings in some companies’ portfolios.”