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 HardyCarbon EmissionsDecarbonizationEnergy Transition MomentumGreg PardyIndustries in MotionNet ZeroOil SandsPathways Alliance

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