The world is becoming increasingly carbon conscious and Alberta is a prime example of a jurisdiction attempting to walk the tightrope between adhering to responsible emissions legislation and attracting spend and development.
Although it boasts an abundance of oil and natural gas resources, the province is taking a more aggressive path on reducing emissions with the Climate Leadership Plan. This includes the implementation of a new carbon price on greenhouse gas pollution for all emitters, a legislated annual oil sands emission limit of 100 Megatonnes (Mt), and a 45% reduction of 2025 methane emissions from oil and gas.
While the plan provides comfort to local citizens and international buyers, it also raises meaningful questions for oil sands asset owners and investors.
Limited room to grow
In 2016, oil sands emissions were approximately 66 Mt CO2e, leaving 34 Mt CO2e for future growth. We expect production from the 80+ development phases in our commercial outlook will reach 3.9 million b/d in 2025, emitting 90 Mt of greenhouse gases.
Development levels beyond our expectations are required for the cap to be reached but the potential does exist, with the oil sands boasting 170+ billion remaining recoverable reserves. More than 50 projects have also been excluded from our commercial outlook as we await greater certainty on project scheduling, financing or regulatory approvals.
The impact of technology
Development go-ahead for just a small portion of these potential projects would result in the cap being exceeded as early as 2027. However, given the track record of technological improvements and the renewed industry-wide focus on emissions reduction, we don't foresee the cap being reached until the end of the next decade at the earliest.