Oil and gas industry struggles to balance costs and environmental pressures

Crude oil
FILE: Pumpjacks pump crude oil near Halkirk, Alta. THE CANADIAN PRESS/Larry MacDougal

CALGARY – Canada’s oil and gas industry is facing increased environmental and budgetary pressures, with experts saying the sector is struggling to balance the two.

Oilsands companies have, in recent years committed billions of dollars to pilot projects that promise to reduce environmental impacts, says Eddy Isaacs, chief executive of the energy and environment wing of Alberta Innovates, a provincial organization that fosters research.

But Isaacs notes that as low oil prices drag on, companies are having to give more scrutiny to those programs.

“Everything is a lot more scrutinized to make sure it has the impact it intended, whereas previously companies said: ‘Well we’ll give it a try and see how much value it has’.”

And while many projects are still underway, Isaacs has noticed that fewer companies are coming forward to talk about new ones.

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As well, more of the projects that are going ahead are relying on collaboration, a trend that started before the downturn but now getting more popular.

“People do want to leverage their resources,” Isaacs said. “I think the downturn is allowing companies to collaborate a lot more than they would otherwise.”

Suncor Energy, for one, has partnered with Devon Energy Corp, Nexen Energy, Harris Corp. and the Climate Change and Emissions Management Corp (CCEMC) on a $44-million pilot project it launched this past summer to use radio waves rather than energy-intensive steam in underground heavy oil extraction.

The project has the potential to reduce energy use by up to 75 per cent and cuts the need for process water, which together would lower both capital costs and the environmental impact.

Gary Bunio, general manager of strategic technology at Suncor, said that while he knows some companies have cut back, Suncor has maintained its research budget of about $150 million and he doesn’t expect it to be cut next year.

“In this kind of price environment…technology becomes more important to our business, because you can no longer sustain business as usual,” said Bunio.

READ MORE: Outlook cut for Big Oil firms Cenovus and Husky

Kirk Andries, managing director of CCEMC, which distributes funds from Alberta’s carbon levy for environmental projects, said he has seen some companies pull out of projects even after their funding was approved.

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“We’ve had some projects in our last round that we were prepared to fund, and they came back and said well, under the current economic circumstance, we’re no longer able to proceed,” said Andries.

He said that in this economy companies are looking at ways to boost efficiency and reduce costs, rather than find breakthrough transformative technologies, but the narrower focus still helps the environment.

“In our world, if you increase efficiency you typically have a reduction of greenhouse gas emissions,” he said.

One of the larger projects CCEMC has partially funded is a $103-million pilot project with Imperial Oil Ltd. that will test using solvents at its Cold Lake, Alta., operation to boost oil recoveries from around 30 to 40 per cent to a hoped-for 50 to 60 per cent.

But while some companies are focusing on more incremental gains, research groups are still trying to encourage more breakthrough solutions.

Both CCEMC and Canada’s Oil Sands Innovation Alliance (COSIA) have launched major competitions to attract ideas and innovation from other industries and around the world, with CCEMC’s $35-million Grand Challenge and COSIA helping launch a US$20-million XPrize, both focused on finding uses for captured carbon dioxide.

READ MORE: XPrize offers $20M to find new, innovative uses for carbon emissions

And COSIA, which was founded on the idea of encouraging collaboration on oilsands environmental research, is helping develop unconventional projects like using algae to convert carbon dioxide into biofuels, satellites to monitor carbon emissions and molten carbonate fuel cells to generate electricity from oilsands CO2 emissions.

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Soheil Asgarpour, president of the Petroleum Technology Alliance Canada, says he’s hopeful the energy industry can balance environmental and budgetary pressures.

“There was this conventional wisdom that there’s a trade-off between environmental performance and financial performance. We see that innovation will enable you to deliver both,” said Asgarpour.

As examples he pointed to a synthetic replacement for sand in fracking that is much lighter so cuts down on water use and energy costs, and the improved capture of leaking methane at natural gas wells that cuts emissions and increases the amount of gas companies can sell.

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