Canada’s Pathways Alliance: Decarbonizing the Oil Sands
By Andre-Philippe Hardy and Greg Pardy
Published February 21, 2023 | 10 min listen
Greg Pardy, Head of Global Energy Research at RBC Capital Markets, discusses with the Head of Canada and APAC Research, Andre-Philippe Hardy, initiatives to decarbonize the oil sands, as featured in the recent RBC ESG Stratify™ report: Pathways Alliance—Steering the Future. The podcast explores Canada’s Pathways Alliance, how it will work, timing, cost and why it is unique globally.
The oil sands were a game changer for Canada—and Pathways could be just as big. We know of no other jurisdiction in the world where a half-dozen leading producers have chosen to collaborate with a comprehensive goal of net zero scope 1 and 2 GHG emissions.
Disclosures and Disclaimers
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Steering the Future
The Pathways Alliance has roots that stretch back to the pandemic as Canada’s leading oil sands producers discussed their individual decarbonization initiatives. What seemed abundantly clear was that collaboration would trump solo efforts. Informal discussions gave way to more formal ones, and in 2021, Canadian Natural Resources, Suncor Energy, Cenovus Energy, Imperial Oil, MEG Energy and ConocoPhillips Canada, which collectively operate about 95% or 3.0 million bbl/d of oil sands production, joined forces under what is today the Pathways Alliance.
At an estimated price tag of roughly $75 billion, Pathways will be executed in a three-phase approach. It is anchored by Carbon Capture, Utilization & Storage (CCUS) and a 400 km pipeline that will connect the oil sands to a carbon sequestration hub near Cold Lake, Alberta. CCUS projects within the Cold Lake storage hub area are slated to start-up in late 2026, while those capture projects requiring the pipeline are set to commence in early 2029. Phase 1 has been estimated at $24.1 billion. Physically, CCUS accounts for up to 60% of Pathways’ overall decarbonization game plan.
The sheer scale of decarbonization investment pending in Alberta means that there will be massive generation of carbon credits, but Canada’s carbon market lacks fungibility in trading allowances and offsets nationally. Accordingly, Pathways is seeking expansion of Canada’s CCUS investment tax credit (ITC)—or some other federal mechanism to shore up the carbon credit value of CO2 sequestered. Canada’s CCUS ITC may be enhanced with release of the federal budget to ensure competitiveness with the United States following passage of the Inflation Reduction Act of 2022, which supercharged 45Q incentives. Alberta’s CCUS incentives will likely wait until after its provincial general election on May 29, 2023.
André-Philippe Hardy
Head of Canadian & APAC Research
André-Philippe Hardy is Head of Canadian & APAC Research at RBC Capital Markets, a premier investment bank that provides a focused set of products and services to corporations, institutional investors and governments around the world. RBC Capital Markets’ Canadian equity research team is consistently top-ranked by institutional investors, as per the Brendan Wood International, Greenwich and Institutional Investor surveys. Prior to becoming Head of Canadian Research in November 2013 (he was appointed Head of APAC Research in November 2019), André led RBC Capital Markets’ Canadian financial services Equity Research team for six years, with direct coverage of banks and insurance companies. Throughout his career as an equity analyst, Andre was ranked consistently as a top analyst in his sectors in industry surveys, while his stock-picking success was validated by his StarMine rankings and his work was often quoted in the financial press. His primers on banking and insurance were unique products, which were widely read by investors as well as management teams. Andre joined RBC Capital Markets in 2007 after almost a decade in the equity research departments of Merrill Lynch Canada and TD Securities.
Greg Pardy
Head, Global Energy Research, RBC Capital Markets
As Head of Global Energy Research, Greg is responsible for leading a team of more than 30 professionals in Canada, the United States, Europe and Australia who cover E&Pand Integrated oil companies, Oilfield Services, as well as Energy Infrastructure, MLPs and Power &Utilities companies. He is also directly responsible for coverage of Canada's Senior E&Pand Integrated Oil companies. Prior to joining RBC Capital Markets in 2009, Greg was the Director of Equity Research at Scotia Capital for two years. Prior to this, he provided research coverage of the Canadian energy sector for 15 years at Scotia Capital and Goldman Sachs in New York. He was the top-ranked Analyst covering the Canadian Integrated &Refining sector in 2020 as per independent investor surveys. Greg is a Managing Director at RBC Capital Markets.
André-Philippe HardyCarbon EmissionsDecarbonizationEnergy Transition MomentumGreg PardyIndustries in MotionNet ZeroOil SandsPathways Alliance
