Canadian oil companies envy US incentives for decarbonization
The CEOs of Suncor, Cenovus and ConocoPhilipps Canada presented their decarbonization project under the New Paths Alliance grouping at CERAWeek by S&P Global.
At the high mass of the energy world, in Houston, the American law on the reduction of inflation is on everyone's lips. Canadian companies in particular are urging Ottawa to match it or risk losing billions of dollars in decarbonization investments.
Passed last summer, the Inflation Reduction Act, (IRA), provides financial incentives for a range of technologies to reduce greenhouse gas emissions. According to TC Energy President and Chief Executive Officer (CEO), François Poirier, this law encourages him to look to the United States when he thinks about future investments for his company.
Money always chooses the path that presents the fewest obstacles. Clearly the size and nature of the incentives present a huge investment opportunity for us in the United States. Provincial and federal governments need to realize this.
According to Mr. Poirier, TC Energy has approximately $34 billion worth of projects, first in gas infrastructure and then, when technologies will be in place, in hydrogen and carbon capture and storage.
For this latest technology, the subsidies offered by the United States are unequaled in the world and particularly attract the six oil sands oil companies united under the New Pathways Alliance. They proposed a carbon capture and storage project in northern Alberta.
Undoubtedly, the IRA has offered a level of support that will be difficult for Canada to achieve, says alliance chairman Kendall Dilling. He does, however, want Ottawa to align with the United States in areas where the country already has a geological and technological advantage, namely carbon capture and storage, rare minerals and hydrogen.
Oil companies are in discussions with the federal government to improve the tax credits already announced. What if an equivalent is not found in the spring budget?
People need to think about what a failure [of the New Paths Alliance project] would mean. This industry represents 10% of the Canadian economy and employs up to 500,000 Canadians. We are extremely important [to] the Canadian economy and all we are asking for is some help like the Inflation Reduction Act, says Alex Pourbaix, CEO of oil company Cenovus.
< p class="e-p">So far, the consortium has invested $500 million in design and engineering work for the project, but the total bill is valued at more than $16 billion.
Several academics and environmentalists urged Ottawa not to accept the request of Canadian companies, denouncing the lack of scientific evidence for the large-scale application of such technology.
Many also point to huge industry profits in 2022. Suncor Interim CEO Kris Smith responds by highlighting the ups and downs the industry has been through.
We are not talking about investments over one or two years, but about billions of dollars over several decades and several generations. So even if the industry is profitable today, we have to think long term, he justifies.
The CEO of Cenovus, Alex Pourbaix, believes that if his company and his counterparts manage to establish their decarbonization project, Canadian oil production will manage to carve out a place of choice in the world.
The issue is important for Canadian oil companies because this carbon capture and storage project is part of their discourse to promote their production on the international scene.
The idea behind the alliance is to decarbonize the production of our barrel of oil and if we manage to do this, we should be the preferred barrel of oil in the world, said Alex Pourbaix in a presentation at CERAWeek.
Canadians are not the only ones who are jealous of this law. Not a discussion takes place at CERAWeek without mentioning the effect of the IRA.
Repsol company CEO Josu Jon Imaz has widely welcomed the law as a model of decarbonization policy. What you have here is a carrot, while what we have in Europe to drive the energy transition is a stick.
He said his company will invest more money in the United States because of these incentives. However, several American companies are calling for an improvement in the regulatory process to ensure that the investments allowed by the IRA see the light of day.