CALGARY - Royal Dutch Shell and its partners aim to be the first to capture and store carbon dioxide emissions from the oilsands — a project that relies heavily on government funding and that the companies aren't counting on to generate financial returns.
"As an oilsands operator, I firmly believe that the sustainability of our business depends not only on our ability to compete economically, but also to keep raising the standard in environmental management," John Abbott, Shell's executive vice president of heavy oil, said in a speech Wednesday.
The Anglo-Dutch energy giant plans to capture one million tonnes of CO2 annually from its Scotford oilsands upgrader northeast of Edmonton.
The gas will then be injected deep into a porous rock formation about 80 kilometres away, thereby preventing it from entering the atmosphere and contributing to climate change.
The upgrader part of the Athabasca Oil Sands Partnership, of which Shell is a 60 per cent owner. Marathon Oil and Chevron evenly split the remaining stake. The companies also have a vast mining operation north of Fort McMurray, Alta.
Shell estimates the project, called Quest, will cut direct emissions from the upgrader by 35 per cent — the equivalent of taking 175,000 cars off the road.
But the overall CO2 reduction is expected to be about 15 per cent, taking into account the mining of the ore, its transportation to Scotford and its upgrading into a type of crude refineries can handle.
The Alberta and federal governments are kicking in a collective $865 million toward Quest, which is expected to start up in 2015. The cost of constructing the project and operating it for 10 years is expected to be $1.35 billion.
Although the government is defraying a considerable portion of the cost, it's not clear Shell will actually make money from the Quest project — nor is that necessarily its intent.
Down the road, Shell may financially benefit from receiving carbon credits or from selling the carbon dioxide to oilfield operators who use the gas to boost output from mature reservoirs.
But its focus is mainly on improving the long-term environmental performance of the industry, Abbott told reporters.
"I would still say that if oilsands is to continue in the longer term as an important part of the energy mix — which it will be — it's critically important that we continue to do everything we know how to do to reduce the environmental footprint," he said.
"This is one of the of the technologies that we believe can have the biggest impact in the shortest period of time, and that's why we're doing it."
Shell, which has somewhat similar projects in Australia and Norway, sees Quest as its "flagship" carbon capture project. It hopes Quest will demonstrate the technology works on a commercial scale, and that industry as a whole will be able to learn from it.
Earlier this year, Calgary-based power generator TransAlta Corp. (TSX:TA) scrapped a $1.4-billion carbon capture project at its Keephills 3 coal plant in Alberta because the economics didn't work.
The problem, it said, was that there weren't enough customers to buy the CO2 to make it worth the company's time and money. It was to receive some $800 million in funding from Ottawa and from the province.
The Quest project will help Alberta reach its carbon-cutting goals, aid provincial Energy Minister Ken Hughes.
There aren't currently any plans to make it mandatory for other oilsands players to use similar technology at their operations.
"There's no consideration of that at this point, but obviously everybody will learn from this experience," he said.
"This is a big downpayment on our commitment to reducing greenhouse gases across the board."
Alberta is contributing the lion's share to Quest, investing $745 million from its $2-billion carbon capture fund. Ottawa is contributing $120 million through its Clean Energy Fund.
Natural Resources Minister Joe Oliver said Canada can be a "world leader" in carbon capture and sequestration technology.
He said there's a role for government in cases where the private sector is reluctant to invest before the technology is proven.
"We don't think it's the role of government to continue to support a technology which is not otherwise economically sustainable," he said
Ed Whittingham, executive director of environmental think tank the Pembina Institute, said carbon capture can play an important role in tackling climate change and that it's a good thing governments are investing in it in its early stages.
"What's important is that quickly, once we have projects going, that we step back from subsidies and we just give producers or developers the incentive they need through a good robust carbon price," he said.
The technology has worked when applied elsewhere, he said.
"But putting it all together connected to an upgrader — that's what's novel. I do have confidence that it's going to work out as planned."
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Syncrude Upgrader and Oil Sands
The refining or upgrading of the tarry bitumen which lies under the oil sands consumes far more oil and energy than conventional oil and produces almost twice as much carbon. Each barrel of oil requires 3-5 barrels of fresh water from the neighboring Athabasca River. About 90% of this is returned as toxic tailings into the vast unlined tailings ponds that dot the landscape. Syncrude alone dumps 500,000 tons of toxic tailings into just one of their tailings ponds everyday.
Boreal Forest and Coast Mountains / Atlin Lake, British Columbia | 2001
This area, located in the extreme northwest of British Columbia, marks the western boundary of the Boreal region. On the border of the Yukon and Southeast Alaska, the western flank of these mountains descends into Alaska's Tongass Rainforest and British Columbia's Great Bear Rainforest. Far from the oil sands, the greatest remaining coastal temperate and marine ecosystem is imminently threatened by the proposal to build a 750-mile pipeline to pump 550,000 barrels per day of oil sands crude to the coast. Once there, it would be shipped through some of the most treacherous waters, virtually assuring an ecological disaster at some point in the future.
Tailings Pond in Winter, Abstract #2 / Alberta Tar Sands | 2010
Even in the extreme cold of the winter, the toxic tailings ponds do not freeze. On one particularly cold morning, the partially frozen tailings, sand, liquid tailings and oil residue, combined to produce abstractions that reminded me of a Jackson Pollock canvas.
Aspen and Spruce | Northern Alberta | 2001
Photographed in late autumn in softly falling snow, a solitary spruce is set against a sea of aspen. The Boreal Forest of northern Canada is perhaps the best and largest example of a largely intact forest ecosystem. Canada's Boreal Forest alone stores an amount of carbon equal to ten times the total annual global emissions from all fossil fuel consumption.
Tar Sands at Night #1 | Alberta Oil Sands | 2010
Twenty four hours a day the oil sands eats into the most carbon rich forest ecosystem on the planet. Storing almost twice as much carbon per hectare as tropical rainforests, the boreal forest is the planet's greatest terrestrial carbon storehouse. To the industry, these diverse and ecologically significant forests and wetlands are referred to as overburden, the forest to be stripped and the wetlands dredged and replaced by mines and tailings ponds so vast they can be seen from outer space.
Dry Tailings #2 | Alberta Tar Sands | 2010
In an effort to deal with the problem of tailings ponds, Suncor is experimenting with dry tailings technology. This has the potential to limit, or eliminate, the need for vast tailings ponds in the future and lessen this aspect of the oil sands' impact.
Tailings Pond Abstract #2 | Alberta Tar Sands / 2010
So large are the Alberta Tar Sands tailings ponds that they can be seen from space. It has been estimated by Natural Resources Canada that the industry to date has produced enough toxic waste to fill a canal 32 feet deep by 65 feet wide from Fort McMurray to Edmonton, and on to Ottawa, a distance of over 2,000 miles. In this image, the sky is reflected in the toxic and oily waste of a tailings pond.
Confluence of Carcajou River and Mackenzie River | Mackenzie Valley, NWT | 2005
The Caracajou River winds back and forth creating this oxbow of wetlands as it joins the Mackenzie flowing north to the Beaufort Sea. This region, almost entirely pristine, and the third largest watershed basin in the world, will be directly impacted by the proposed Mackenzie Valley National Gas Pipeline to fuel the energy needs of the Alberta Oil Sands mega-project.
Black Cliff | Alberta Oil Sands | 2005
Oil sands pit mining is done in benches or steps. These benches are each approximately 12-15 meters high. Giant shovels dig the oil sand and place it into heavy hauler trucks that range in size from 240 tons to the largest trucks, which have a 400-ton capacity.
Oil Sands Upgrader in Winter| Alberta Oil Sands | 2010
The Alberta oil sands are Canada's single largest source of carbon. They produce about as much annually as the nation of Denmark. The refining of the tar-like bitumen requires more water and uses almost twice as much energy as the production of conventional oil. Particularly visible in winter, vast plumes of toxic pollution fill the skies. The oil sands are so large they create their own weather systems.
Boreal Forest and Wetland | Athabasca Delta Northern Alberta | 2010
Located just 70 miles downstream from the Alberta oil sands, the Athabasca Delta is the world's largest freshwater delta. It lies at the convergence of North America's four major flyways and is a critical stopover for migrating waterfowl and considered one of the most globally significant wetlands. It is threatened both by the massive water consumption of the tar sands and its toxic tailings ponds.
Tar Pit #3
This network of roads reminded me of a claw or tentacles. It represents for me the way in which the tentacles of the tar sands reach out and wreak havoc and destruction. Proposed pipelines to American Midwest, Mackenzie Valley, and through the Great Bear Rainforest will bring new threats to these regions while the pipelines fuel new markets and ensure the proposed five fold expansion of the oil sands.
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