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Canada’s government-backed Canada Growth Fund (CGF) announced the creation of a new strategic partnership with […]]
Canada to Invest up to $1 Billion in Oil Sands Carbon Capture Projects – ESG Today
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Canada to Invest up to $1 Billion in Oil Sands Carbon Capture Projects
Mark Segal
July 12, 2024
Canada’s government-backed Canada Growth Fund (CGF) announced the creation of a new strategic partnership with oil and gas producer Strathcona Resources agreement to jointly invest up to C$2 billion (USD$730 million) for the development of carbon capture and sequestration (CCS) infrastructure on Strathcona’s Saskatchewan and Alberta oil sands facilities.
CGF commenced operations in 2023, capitalized with $15 billion for deployment over five years, aimed at helping develop a clean economy in Canada, and attracting private capital to help absorb risks and encourage investment in low carbon projects, technologies, businesses, and supply chains. The new agreement marks CGF’s sixth investment to date, with other investments including $200 million in Calgary-based carbon capture startup Entropy, and $90 million in Calgary-based geothermal energy company Eavor Technologies.
Patrick Charbonneau, President & CEO of CGF Investment Management, said:
“This partnership is a breakthrough in Canada’s journey towards decarbonizing the oil and gas sector. Alongside CGF, Strathcona intends to advance Canada’s first CCS projects in the heavy oil sector. Given the economic and environmental importance of the oil and gas sector–which represents 9% of Canada’s nominal GDP and 31% of its emissions–Strathcona’s leadership is essential and worth celebrating.”
Under the new partnership, CGF and Strathcona will each fund 50% of the capital costs to build CCS infrastructure on Strathcona’s oil sands facilities, with CGF initially committing $500 million, with the option to upsize to $1 billon.
Strathcona operates seven major oil sands facilities across Saskatchewan and Alberta, which generate approximately 3 million tonnes of production-related CO2 emissions. The new CCS partnership is anticipated to capture and permanently store up to 2 million tonnes of CO2 annually. Strathcona will retain full ownership of the CCS infrastructure and associated carbon credits, while CGF will earn a return over time through cash flows generated by the CCS infrastructure, based on actual captured volumes and costs.
Strathcona said that its rationale for investing in CCS is to mitigate its current and future carbon tax obligations, which the company said form a significant part of its operating costs, totalling approximately $65 million per year, and increasing over time based on current legislation. The company also pointed out that the agreement was made possible by the positioning of its oil sands assets directly over suitable CO2 storage reservoirs, allowing for local injection, compared to other oil sands sites in the region which would require additional CO2 transport prior to sequestration.
Adam Waterous, Executive Chairman of Strathcona, said:
“Strathcona is proud to be leading the Canadian oil and gas sector towards reducing our carbon intensity, prudently and profitably. We hope this innovative partnership with CGF will serve as a template for other producers and serve notice to the global oil and gas industry that Canada not only has one of the largest and most profitable oil resources in the world, but soon through these CCS projects, on a path toward becoming the least carbon intensive.”
Mark founded ESG Today following a 20 year career in investment management and research. Prior to founding ESG Today, Mark worked at Delaney Capital Management (DCM) in Toronto, Canada, most recently as the firm’s head of U.S. equities. While at DCM, Mark was part of the firm’s ESG team, responsible for evaluating and tracking the sustainability factors impacting portfolio companies, and assessing the suitability of companies for portfolio inclusion. Mark also spent several years in the sell-side research industry, covering the technology and services sectors. Mark holds an MBA from Columbia University in New York, a BBA from the Schulich School of Business at York University in Toronto, and is a CFA charterholder.
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