Oilsands needs pipelines to continue improving environmental performance: Imperial CEO

Incoming Imperial Oil CEO Brad Corson (left) listens to outgoing CEO Rich Kruger (right) at a news conference in Calgary, Wednesday, Dec. 4, 2019. Image: Todd Korol/The Canadian Press

Outgoing Imperial Oil CEO Rich Kruger says the market access challenges that continue to weigh on Canada’s oilsands industry are making it harder for companies to deploy innovations that could significantly reduce environmental impacts.

A key example is solvent-assisted SAGD, which is expected to reduce both emissions intensity and water use by approximately 25 percent compared to conventional SAGD, the technology responsible for approximately half of current oilsands production.

Commercialization of the technology was on the horizon in 2013 when Cenovus Energy started building the first phase of its Narrows Lake project, which would have been the industry’s first large-scale application of what the company calls solvent-aided process. But construction came to a halt with the oil price collapse in 2014, and Cenovus has since changed and delayed its plan for the technology rollout.

In November 2018 Imperial announced it would proceed with the 75,000-bbl/d Aspen solvent-assisted SAGD project, renewing hope for commercialization of the technology. The project was going to start operating in 2022, but this March Imperial announced a delay of at least one year due to the impacts of Alberta’s oil curtailment and ongoing market uncertainty.

“The pipelines are full; there’s no more room. It intuitively doesn’t make sense to develop new production capacity when existing production capacity is shut in,” Imperial CEO Rich Kruger told reporters on Wednesday during a press briefing with incoming CEO Brad Corson, who takes over from Kruger effective Jan. 1.

The Kearl mine was the last major oilsands project Imperial completed, in the second quarter of 2015. Like Suncor’s new Fort Hills project, which started operating in late 2017, Kearl uses a paraffinic froth treatment process that eliminates the need for upgrading, significantly reducing upstream GHG emissions.

As a result, both Imperial and Suncor report that production from these projects has essentially the same carbon intensity as the average barrel of oil currently refined in North America.

“The solvent technologies will be more of the same improvement," Kruger said on Wednesday.

"Every new barrel in Alberta, whether it’s from Imperial or the rest of the industry, is an improved environmental performance over the historical barrels. That’s how you get better. And for the industry to continue to improve, we have to be able to grow, and to grow we need expanded market access."

Global oil forecasts continue to project ongoing growth for the industry. The 2019 edition of Canada's Energy Future, issued last week by the Canadian Energy Regulator, forecasts that oil output will grow by nearly 50 per cent, to around seven million barrels per day by 2040.

A lot of the improvements the oilsands industry has made are being masked by the market infrastructure issue, Kevin Birn, IHS Markit’s vice-president of North American crude oil markets, said in a publication this fall marking the 30th anniversary of the Canadian Heavy Oil Association.

“The industry cannot demonstrate these changes other than statistically, which doesn’t really matter in terms of driving jobs and investment,” he said.

“Resolution of these barriers will allow the industry to demonstrate transformational, next generation type technologies, and in that environment I think the oilsands is a quite unique resource in the world.”

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