Despite Copenhagen’s failure to reach legally binding treaty, companies get on with climate job

Norway’s Statoil presses ahead for answers to oil sands emissions

BY GARY PARK FOR GREENING OF OIL

Against a backdrop of crumbling international unity and the acrimony that accompanied the Copenhagen Accord, branded by many as a toothless deal, some might draw comfort from a dose of pragmatism delivered by Statoil, the Norwegian oil giant.

Having set up shop in the Alberta oil sands in 2007, with control over leases holding

an estimated 2 billion barrels of recoverable oil in its Kai Kos Dehseh project, Statoil’s Canadian unit is ignoring the global wrangling and plugging ahead with its own efforts to balance environmental, social and economic concerns.

It has completed almost three-quarters of its Northern Alberta Leismer oil sands demonstration project, targeting an initial 10,000 barrels per day in 2011 and another 10,000 bpd in 2012.

Leismer contains the world’s largest known reserves of oil-bearing sands.

In a typically calm, unemotional Norwegian manner, the company is applying its global strategy in Canada to develop the means of reducing land use, water handling and emissions from greenhouse gases, or GHG, all of which are targets of worldwide oil sands critics.

Statoil hopes to achieve a minimum 10 percent saving on its steam-to-oil ratio to extract bitumen, with an eventual goal of 25 percent; it hopes to recycle more than 75 percent of the water it uses; and a steam-solvent co-injection is being tested on several wells in hopes of reducing carbon dioxide and water consumption.

As a pioneer in developing carbon capture and storage, or CCS, technology—with four large-scale commercial projects operating in its Norwegian and Algerian projects—Statoil is hopeful it can introduce CCS at an early stage of its oil sands development.

It has also established a heavy oil research center in Calgary, the company’s first technology hub outside Norway, and one that will support research and development for Statoil’s heavy oil business worldwide. The emphasis at the Heavy Oil Technology Centre is on the development of a sustainable value chain for heavy oil.

The new Canadian Statoil president, Lars Christian Bacher, has told reporters that the company will “work every day to reduce greenhouse gas emissions from our

operations and help the world get access to sufficient energy.”

And it’s far from alone in these efforts. Across the spectrum, from small upstarts to global superpowers, companies in the oil sands are running pilot programs and engaging in research to cut back on GHGs as they try to add a touch of green to their tarry black image.

For the most part, they are being driven by a sense of urgency, unsure how far Canadian and U.S. governments might go in regulating their industry.

Gap between factions growing

Copenhagen was just another example of how quickly the gap is growing between their efforts and the scorn being heaped on the oil sands.

Through the two weeks of the climate-change summit, Canada was awarded several Fossil of the Day awards by a coalition of environmental groups, ending with the “Colossal Fossil” award, making it the fossil leader for the entire conference.

The environmentalists took aim at reports that Canada would set special cap-and-trade rules for certain industrial sectors, such as the oil sands.

Alberta Environment Minister Rob Renner, who attended the Danish gathering, brushed off the award as “pretty predictable.”

Less easily dismissed was the rift between Canada’s energy-producing and consuming provinces.

Despite previous assurances from Ontario and Quebec, representing almost two-thirds of Canada’s 33 million population, that they would refrain in Copenhagen from badmouthing the oil and natural gas regions, leaders of those two governments wasted no time taking dead aim at the oil patch in general and the oil sands in particular.

Federal Environment Minister Jim Prentice, slow to anger, said it was “unhelpful and not good for our country” to have podium comments by Quebec and Ontario delegates that they were not prepared to lower their own GHGs to offset rising emissions from the oil sands.

“No one has ever said the oil sands will get a free pass,” he said.

Alberta Premier Ed Stelmach opted for an even tougher line, warning that “no one should ignore the economic stakes of this debate.”

“Slowing our economy is a guaranteed way to reduce emissions,” Stelmach said. “But if Alberta’s economy stops growing all Canadians will feel the pain.”

He noted that the people and businesses of Alberta send C$21 billion in taxes each year to the Canadian government—roughly C$5,700 for every Albertan—to support federal programs and services.

Stelmach said the “Alberta bashing” is causing a growing number of Albertans to revive the threat of separation from Canada, an assertion backed by an Angus Reid Public Opinion survey showing that about half of Albertans felt the provincial and federal governments should have mounted a more vigorous defense of the oil sands.

Cutting cap in half in 2010

Underscoring Alberta’s own resolve to introduce tougher GHG regulations, Eric Newell, chairman of the government’s Climate Change and Emissions Management Corp., told the Edmonton Journal the province will likely start collecting penalties from more CO2 emitters by lowering the cap from 100,000 metric tons a year to 50,000 metric tons in 2010.

He said the current limits apply to about 100 companies, a number that would quadruple if the government set 25,000 metric tons as its cutoff point.

Newell also said Alberta may also toughen its rules that currently require companies emitting more than 100,000 metric tons to improve their performance by 12 percent.

The government currently collects C$15 per metric ton from companies that fail to make improvements or purchase carbon offsets from farmers.

Newell said the U.S. government is contemplating a penalty of $28 per metric ton, which could result in a higher penalty in Alberta.

While world leaders now attempt to set legally binding targets for GHGs and impose a timetable and monitoring system, the Canadian oil and gas industry said it views the Copenhagen Accord as a “further step on a longer environment, economic and political journey.”

A spokesman for the Canadian Association of Petroleum Producers, or CAPP, said the accord contributes to reshaping the discussion on climate change policy and direction by shifting the focus from global targets to targets that reflect special national circumstances, such as Canada’s role as an energy exporter.

There was also recognition of the role that technology can play in achieving long-term GHG goals, the spokesman said, noting that CAPP views technology as the key leveler in lowering emissions.

The Small Explorers and Producers Association of Canada said the failure to reach legally enforceable targets at Copenhagen gives Canada time to develop a national consensus on “workable” reductions and to negotiate continental targets with the United States that will protect the Canadian economy and exports.

Following Copenhagen, Prime Minister Stephen Harper said, “What will be most critical for Canada in terms of filling out the details of our regulatory framework will be the regulatory framework of the United States.”

“If the Americans don’t act, it will severely limit our ability to act. But if they do act it is essential that we act in concert with them,” he said.

“The nature of our integrated energy markets is such that Canada and the United States need to be harmonized.”

Michael Ignatieff, leader of the opposition Liberal Party, rejected linkage with the United States, arguing Canadian environmental policy can’t be “entirely dependent on American politics. We need an aggressive, made-in-Canada climate-change plan. And we’re willing to work with Mr. Harper if his government brings forward a serious plan and treats our provinces fairly.”

However, the uncertainties and delays spawned by Copenhagen make it more difficult for Canada to pursue its goal of cutting GHGs by 20 percent from 2006 levels by 2020, and for companies to invest in emissions-curbing technology without knowing what limits they will face.

Editor’s note: Sleipner West is a Statoil-operated natural gas and condensate field in the North Sea. Between 1996 and the end of 2008, using a conventional amine process, Statoil has captured 1 million tonnes of carbon dioxide from gas production at Sleipner West and stored it in geological layers within an aquifer that is more than 800 meters below the seabed. On a platform 250 kilometers from land, Sleipner’s carbon storage has cost an extra US$100 million through 2008.

Links of interest

Sustainable development in the Canadian wilderness

Leismer project targets lower carbon emissions

Statoil’s Sleipner West

Contact Gary Park through publisher@greeningofoil.com