The Blackrod thermal project in northern Alberta, Canada has had its first phase approved by International Petroleum Corp. The company becomes the first foreign oil company to approve a project in the country’s oil sands in over a decade. IPC, could add carbon capture and storage (CCS) to the plant if additional public funds are available. Industry says CCS projects need more government support to be financially viable, while Ottawa and oil-rich Alberta disagree on who should provide more funding.
The Blackrod thermal project
IPC, a 50,000 b/d producer with assets in Canada, France and Malaysia, will spend $850 million to develop the first phase of Blackrod. IPC is expected to produce its first oil in 2026, and the regulatory authorities have given their approval for a maximum production of 80,000 bbl/day. The plant is the first new oil sands project to be approved since Imperial Oil Ltd’s Aspen plant was permitted in 2018, but suspended indefinitely a few months later.
CEO Mike Nicholson supported IPC’s decision based on new Canadian export pipeline capacity and the company’s strong financial position. The oil industry’s recent focus on debt repayment and share buybacks has also left the global oil supply extremely tight, he added. However, the investment in Blackrod underscores the importance of Canada’s vast bitumen deposits, the third largest oil reserves in the world, amidst global concerns about energy security following Russia’s invasion of Ukraine.
Carbon capture and storage for the Blackrod thermal project
Carbon capture and storage is a technology that captures carbon dioxide emissions from power plants and industrial processes and stores them in deep geological formations. Professionals see this tool as essential to reducing carbon emissions from the carbon-intensive oil sands. Industry says CCS projects need more government support to be financially viable, while Ottawa and Alberta disagree on who should provide more funding.
In February, Mike Nicholson said that carbon capture throughout the production chain could still be considered if governments made reasonable decisions and took climate goals seriously. In the meantime, the company will pay Canada’s carbon tax, which is expected to reach CAD 170 per tonne by 2030.
The challenges of CCS development in Canada’s oil sands
The development of CCS for the Blackrod thermal project in Canada’s oil sands has faced several challenges, including high initial capital costs and crippling export pipeline congestion, which has reduced production. Concerns about the high carbon intensity of bitumen have also discouraged international companies from investing in the oil sands.
In addition, increased oil sands production could derail Canadian Prime Minister Justin Trudeau’s emissions reduction targets and solidify Canada’s position as a climate laggard. In 2022, Canada’s oil sands produced a record 3.15 million b/d and are expected to reach 3.7 million b/d by 2030, according to S&P Global Platts Analytics. It is therefore essential to develop effective strategies to reduce emissions from the oil sands and meet climate goals.
In conclusion, IPC’s Blackrod thermal project is a critical investment in Canada’s oil sands, but it also highlights the challenges of developing CCS technology in the country. IPC could add CCS to the plant if government funding were available, but the industry needs more government support to be financially viable. Canada’s oil sands are critical to the country’s energy security, but increasing their production could compromise its climate goals. It is therefore essential to develop effective strategies to reduce emissions and meet climate goals.
