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Carbon Pricing

Alberta Oil Sands Emissions Alone Are 3 Times The Global Market For CO2

Alberta’s crude oil from steam-assisted gravity drainage has a carbon debt just for extraction and in province processing that’s as large as the total annual global consumption of CO2. Shipping, refinement and use make that three times bigger.

Alberta and its oil and gas sector are betting big on carbon capture, sequestration, and use to cut their carbon emissions. Too bad the emissions are more than the current global commodity market for CO2 today.

Let’s start with that commodity market. Carbon dioxide is actually used for a bunch of things today. The global market for bulk CO2 is about 230 million tons a year, which sounds like a lot, except that it’s vastly smaller than the excess CO2 we emit annually and even smaller than the excess in the atmosphere. About 130 million tons is used in fertilizer. Another 70-80 million tons is used in enhanced oil recovery per IEA. As I’ve pointed out in CleanTechnica a few times, every ton of CO2 that gets pumped into tapped out oil wells for enhanced oil recovery results in 0.25 to 1.0 tons of new petroleum, and when that petroleum is refined and used, that results in 1.0 to 3.0 tons of CO2. That only leaves 30 million tons for things which aren’t fertilizer and enhanced oil recovery.

The biggest providers of CO2 for enhanced oil recovery are natural gas wells that have too high a concentration of CO2, so they strip it off and use it in enhanced oil recovery. Attempts to bolt carbon capture onto coal generation plants in Canada and the USA with the goal of doing enhanced oil recovery to make it viable have failed. Obviously, in a sensible future world, enhanced oil recovery will go away.

That only leaves a 150-160 million ton per year market for CO2. As a commodity it is cheap, plentiful, and trivial to manufacture. We’ve been doing it at industrial scale since at least the 1870s as part of the Solvay process for carbonate manufacturing, for example. The last time I looked, it was a $30-$50 per ton commodity, and up to $100 per ton delivered, which is why a lot of it is generated onsite by burning fossil fuels with small CO2-capture bolt-ons. If there were a big market for non-subsidized CO2 use, it already would have been filled, because there’s exactly no shortage or cost constraints to speak of in its use.

Behavioral economics talks about induced demand, where making something cheaper and more available creates a surge in use of that thing. That’s the basis of Jevons Paradox, where increasing efficiency doesn’t reduce usage, but actually leaves consumption the same because people just use more. But it doesn’t apply here. CO2 is already dirt cheap and plentiful.

Let’s suppose that market for actually beneficial CO2 usage increases by 50%. That’s still only 240 million tons a year. Imagine that a bunch of governments give away money to do something with excess CO2, and that doubles CO2 global annual usage. We’re still around 300 million tons a year, when the scale of the annual emissions problem is 40 billion tons a year, several orders of magnitude higher.

Then there’s CO2 sequestration. As I pointed out earlier, most of that is actually enhanced oil recovery, producing more net CO2 than is sequestered, usually much more. When I looked at the global list of the 19 highest volume sequestration facilities maintained by the Global Carbon Capture and Sequestration Institute a couple of years ago, 14 of them were doing enhanced oil recovery. The biggest, ExxonMobil’s Shute Creek Facility, extracts natural gas with too much CO2 in it in one place, strips off the CO2 they just pumped up from underground, then puts that excess CO2 underground somewhere else for enhanced oil recovery, a complete shell game and not the only one in the list. The claimed CO2 sequestration for the recovery sites was 29 million tons a year of the 33 million tons in the list, and as I’ll repeat, that means each ton of CO2 resulted in 1-3 tons of new CO2.

Diagram of SAGD site

Diagram courtesy Idaho National Laboratory

So what does this have to do with Alberta, and its carbon capture, usage, and storage strategy? Well, about 93% of Alberta crude these days comes from steam-assisted gravity drainage (SAGD). That process pumps steam into oil sands beds 1000-2000 ft underground in order to loosen the sticky sludge and allow a slurry of crude and sand to be pumped out. Then it’s further cleansed of sand with more steam and water before it’s mixed with chemicals and trucked, trained or piped, mostly to Texas, for refinement.

It’s another enhanced oil recovery technique in other words, and one with its own carbon debt, one Alberta’s companies have been working hard on, recognizing the freight engine barreling at their bottom lines. SAGD emissions have improved 22% to 67 kg CO2 per barrel over the past few years. That sounds pretty good, but extraction is over a billion barrels a year, so that’s still 72 million tons of CO2 per year. In other words, the Alberta CO2 emissions just from extracting and initial processing of its crude oil product are in the range of the global annual enhanced oil recovery use of CO2 per year.

What about sequestration in the province? Well, Shell brags about its Quest CCS facility that sequesters about million tons a year — yeah, 1/72nd of just the oil sands extraction and initial processing emissions — and costs $865 million CAD. It claims, optimistically given experiences globally, that learnings would reduce the capital cost for another facility by about 30%. That suggests that around $45 billion CAD in capital would be required for CCS to offset Alberta’s emissions just from its SAGD oil sands. For context, in 2019, the total oil sands capital expenditures were just over $10 billion CAD, so call it four times expenditures on profit making ventures.

Maybe this is reasonable? Possibly? But perhaps we should ask a couple of additional questions. Where does the 67 kg per barrel of CO2 emissions come from? Is there another, different and possibly more reliable number? Is that everything?

The first question is easy. The number comes from Alberta’s Canadian Energy Centre. Sounds reasonable, right? Except it’s a widely derided propaganda arm of the current government which is spending $30 million per year to promote its product and prove that radical environmentalists are the problem, not reality. So the number is subject to some reasonable questioning about its reliability.

Thankfully, there are other sources to consider. My preferred source is the independent Pembina Institute, where a regular collaborator, Tim Weis, used to be a Director, prior to a role at the Canadian Wind Energy Association, prior to a role helping the Notley government figure out how to thread an ugly needle on energy, prior to his current role helping Alberta engineering students understand this mess. The Pembina Institute calculated in 2017 that the real CO2 per barrel of Alberta crude was 174 kg, not 67. Assuming that there were some advances since 2017 that could be lower, but certainly not less than half that number. Picking 150 kg per barrel, that suggests Alberta’s actual emissions were in the range of 160 million tons of CO2 per year.

Wait. That’s about as much as the total CO2 consumption of the world that isn’t related to enhanced oil recovery, from a single oil-producing jurisdiction of a single country of the 200 or so in the world.

Anything else? Yeah, there is. Remember, all we’ve talked about so far is the CO2 required to extract for initial processing on a barrel of oil. But remember, 80% of the barrel is turned into gas, diesel, or burned in other ways. Shipping Alberta’s product to Texan refineries and then refining it adds a lot of CO2 emissions. And when 80% of a barrel of oil is turned into fuel and burned, a lot more CO2 is emitted. Pembina’s numbers have Alberta’s crude at full lifecycle emissions of 709 kg per barrel, far above the still horrific 541 kg per barrel weighted average for North American crude.

We were already at the entire shell-game global amount of CO2 used for enhanced oil recovery when we were looking at 67 kg, the propaganda number. When we were looking at independent and credible numbers just for extraction and initial processing, we were looking at the total annual global CO2 usage by industry ignoring enhanced oil recovery.

At 709 kg per barrel, Alberta’s product alone produces about 3 times the total current market for CO2 as a commodity, including all enhanced oil recovery and sequestration being done today.

Alberta isn’t that big a place. It’s nowhere near the USA’s, Saudi Arabia’s, Russia’s, or the rest of the world’s CO2 emissions regarding oil. And oil is just one of three major fossil fuel sources of CO2.

And yet, there’s good news.

Canada has uncapped its carbon price. It was supposed to peak at a low $30 CAD per ton in 2022, but the federal government, after the last election that it won, albeit with a minority government, an election where it defended its signature climate policy of a price on carbon, raised the cap to $170 CAD per ton, about US$133, as of 2030.

Alberta has been averaging about US$40 per barrel for its crude, given the high cost of refinement and getting it to refineries. It makes money at this price point after all the automation eliminated a great deal of high priced labor. But the carbon price should add almost US$9 to the cost of production at the propaganda price, and almost US$20 at the more likely actual emissions. Assuming Canada’s carbon tax is appropriately applied to oil sands emissions, they won’t be able to sell any of it in 2030.

Alberta’s product was already among the most expensive to extract, refine and ship to market in the world. The sensible carbon price is just going to add to that burden. Canada is a rich country, and as a result, the families currently dependent on oil and gas for their incomes will be taken care of. The oil and gas companies and executives? Hopefully not so much.

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Written By

is Board Observer and Strategist for Agora Energy Technologies a CO2-based redox flow startup, a member of the Advisory Board of ELECTRON Aviation an electric aviation startup, Chief Strategist at TFIE Strategy and co-founder of distnc technologies. He spends his time projecting scenarios for decarbonization 40-80 years into the future, and assisting executives, Boards and investors to pick wisely today. Whether it's refueling aviation, grid storage, vehicle-to-grid, or hydrogen demand, his work is based on fundamentals of physics, economics and human nature, and informed by the decarbonization requirements and innovations of multiple domains. His leadership positions in North America, Asia and Latin America enhanced his global point of view. He publishes regularly in multiple outlets on innovation, business, technology and policy. He is available for Board, strategy advisor and speaking engagements.


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