First big oil sands CCS project may also be one of the last

By Christa Marshall | 11/09/2015 12:59 PM EST

The world’s first commercial-scale carbon capture and sequestration project in the Canadian oil sands has opened, but it could be one of the last such initiatives — at least for the next decade.

The world’s first commercial-scale carbon capture and sequestration project in the Canadian oil sands has opened, but it could be one of the last such initiatives — at least for the next decade.

Last week, Royal Dutch Shell PLC opened its Quest project, which would capture and store more than a million metric tons a year of carbon dioxide from an upgrader that turns oil sands bitumen into synthetic crude for refining.

It’s the first large-scale carbon capture and storage (CCS) project in the oil sands, raising speculation that the Canadian oil industry — whose climate impact is under intense scrutiny with Friday’s rejection of TransCanada Corp.’s Keystone XL pipeline — may have a sustainable technology pathway for growth.


But the new premier of Alberta, Rachel Notley, campaigned to end support for CCS, and many say the province’s carbon price would have to more than double for similar projects to gain traction, unless there is a massive government infusion of cash.

"No (additional) CCS projects are planned. Though we will await the advice of the climate change panel before we decide our strategy moving forward, we did run on a campaign commitment to end CCS," said Cheryl Oates, a spokeswoman for the premier’s office.

Without CCS, curbing greenhouse gas emissions in the oil sands will hinge on curbing industry growth — and likely cutting back on oil pipeline proposals — or finding some yet-undeveloped technology breakthrough. The oil sands are Canada’s fastest-growing greenhouse gas emissions source, a factor that fueled protests against Keystone XL.

The $1.3 billion Shell Quest project benefitted from 745 million Canadian dollars from the Albertan government and CA$120 million from the Canadian government.

"It would be quite a challenge to build another CCS plant without that [government} support," said Lorraine Mitchelmore, president and country chairwoman of Shell Canada on a conference call with reporters last Friday.

Currently, Alberta’s carbon fee of $15 per metric ton of CO2 is set to rise to $30 per metric ton in 2017. Notley established a panel to release further recommendations later this year on provincial climate policy. Oates said that the premier would make a decision about CCS policy after those recommendations are released, but few analysts believe that incentives will rise to the level needed to spur widespread use of the technology anytime soon.

The Pembina Institute, for example, released a report last year concluding that installing CCS on 40 percent of oil sands facilities could stabilize oil sands emissions at roughly twice current emissions levels, but the carbon price would need to be closer to $60 to $80 a ton.

"I doubt Notley will start her carbon pricing regime at $60," said Keith Stewart, head of the energy campaign at Greenpeace Canada, although he said she could commit to raising it to that level over time, which eventually "would give investors a clear signal that they need to put this into their calculations for new projects."

Which is not to say that CCS supporters don’t consider the Shell Quest project pivotal for development of the technology now — including for coal and natural gas — as it offers an opportunity to study how captured CO2 behaves deep underground in rock formations, outside of oil fields (ClimateWire, Sept. 6, 2012). At the official opening of the project, Shell’s CEO Ben van Beurden called it "a blueprint for future CCS projects globally."

"We need to learn from it … and then we will look at opportunities in the future. But the second part of this, of course, is we need a price on carbon to actually — to be able to justify further investment," Mitchelmore added.

Shell will be working with the U.S. Department of Energy at the site to test advanced monitoring technologies for underground CO2 storage in a quest to lower costs, Mitchelmore said.

There also will be technology collaboration with entities such as the British government and the University of Birmingham. The project will capture equivalent emissions of 250,000 cars and store it more than 1.2 miles underground after the greenhouse gas travels through a 40-mile pipeline.

Last week, the Global CCS Institute reported that the number of global CCS projects rose internationally this year partly because of Shell Quest (Greenwire, Nov. 5.)

There is another CCS project in the Canadian oil sands set to come online in the next 18 months, although it is different from Shell Quest. The Alberta Carbon Trunk Line (ACTL) would transport CO2 from several sources in Alberta — including a fertilizer plant and a bitumen refinery — to oil fields for long-term storage.