EXPROPRIATE BIG OIL DON'T SUBSIDIZE THEM
Enbridge CEO says federal tax credit needed to boost carbon capture/cloudfront-us-east-1.images.arcpublishing.com/tgam/IDB26JXTBBJG3ENTDUL7LLBCXE.jpg)
Enbridge CEO of Monaco.Jeff McIntosh/The Canadian Press
Carbon sequestration should be one of the energy sector’s biggest priorities, says the CEO of pipeline giant Enbridge Inc. But Canada needs a tax credit for the technology if it is to attract the vital investment dollars needed to boost the number of emissions. Reducing projects in the country.
Monaco made the comments at Enbridge Investor Day on Tuesday, as Ottawa continues work on the Carbon Capture, Use and Storage (CCUS) investment tax credit promised in its 2021 budget. The federal government finished consultations on December 2, and says it intends to make the tax credit available starting in 2022. , hoping to reduce Canada’s carbon emissions by at least 15 megatons per year.
Calgary-based Enbridge also raised its quarterly dividend to 86 cents a share on Tuesday, up from 83.5 cents, and said it plans to buy back up to $1.5 billion of its stock.
In addition, the company announced the approval of $1.1 billion in new capital projects, including a $500 million expansion of the Valley Crossing pipeline in Texas. It will also spend $300 million on expanding the Dawn pipeline to Parkway, Ontario.
Near Down Center to the petrochemical industry In Sarnia, Ontario, it positions it as a natural hydrogen hub and CCUS, said Mr. Monaco.
Carbon capture projects are facilities that push carbon dioxide emissions deeper into the Earth to keep them out of the atmosphere. Besides injecting carbon trapped underground to boost oil production, the technology can be used in other key industrial sectors, including power generation and manufacturing.
Mr Monaco said technology would “be a necessity” when it came to achieving emissions reduction targets, adding that he expected to see a “very sharp increase” in technology soon.
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The US first implemented the CCUS tax credit in 2008, which was reorganized in 2018. Mr. Monaco said this put the US at the forefront of the sector, but said Canada was behind in developing a similar tax credit.
“We need that to really attract private capital to move forward with CCUS,” he said. “I see this as one of the biggest priorities in terms of energy overall.”
Enbridge last week agreed to partner with Edmonton-based Capital Power Corp on a CCUS project for the energy company’s Genesee Generating Station in Warburg, Alta, that aims to capture up to three million tons of carbon dioxide emissions annually.
Enbridge Vice President Bill Yardley told investors that while Alberta is home to Canada’s most pressing carbon capture opportunity, his company’s appetite for CCUS projects extends across the continent.
He added that Enbridge is evaluating various carbon sequestration projects on the US Gulf Coast.
As for what the sector might look like in the coming years, Mr. Yardley said, given that CCUS’s business model aims to avoid costs while increasing carbon emissions taxes, projects will need to be cost-effective, from their financing to their design.
Enbridge’s focus on carbon capture plays a role in its opportunities in the hydrogen sector – a fuel that has experienced a renaissance in recent years.
Hydrogen emits no pollution when burned as a fuel, making it an attractive opportunity for companies and countries targeting net zero emissions. Hydrogen production using natural gas is a heavy polluter, but emissions from this process can be reduced or eliminated.
With growing demand for the fuel, Mr. Yardley told investors: “Hydrogen blending and a new autonomous hydrogen pipeline and storage present a multibillion-dollar opportunity for us just this decade.”
Enbridge has 10 to 15 hydrogen projects on the go, including several pilot projects to blend hydrogen with natural gas for home and commercial heating.
The company is also evaluating how long-range pipelines can transport hydrogen more efficiently, and ways to route some pipeline assets to carbon dioxide and ammonia (which can be converted to hydrogen at their destination).
In its forecast, Enbridge reaffirmed its full-year 2021 guidance range for EBITDA (earnings before interest, taxes, depreciation, and amortization) of $13.9 billion to $14.3 billion, and distributable cash flow per share of $4.70 to $5.00.
For 2022, the company said it expects an EBITDA of $15.0 billion to $15.6 billion, and distributable cash flow per share of $5.20 to $5.50.
While fluid pipelines are expected to make up the vast majority of Enbridge’s asset portfolio through 2022, at 58 per cent, Mr Monaco said renewables were likely “to become a larger part of the pie”.
“There is a lot of abundance in renewables,” he said, adding that he expects Enbridge to spend about $1 billion annually on them.
However, he said Enbridge won’t set a fixed number for renewables growth “because the second you do that, you start to feel the need to invest in order to hit a random target.”
Reported by the Canadian Press
Feds expected to release details of carbon capture tax credit soon, says Cenovus
Cenovus Energy Inc. says Ottawa's forthcoming release of details about its proposed tax credit for carbon capture, utilization and storage projects (CCUS) should be followed by "significant government support" so the industry can widely adopt the technology.
The Calgary-based oil producer has been involved in ongoing discussions with Ottawa over the tax credit, which was announced in this year's federal budget. On Wednesday, Rhona DelFrari, the company's chief sustainability officer, said the talks have been going well.
"Everyone is in a very collaborative mood," DelFrari told reporters following Cenovus' annual investor day event. "We continue to have a lot of ongoing dialogue with them as the government works toward its investment tax credit that they intend to provide more detail about soon."
CCUS is a technology that captures greenhouse gas emissions from industrial sources and stores them deep in the ground to prevent them from being released into the atmosphere.
Proponents say vastly scaling up CCUS across the oil and gas industry will be necessary if Canada is to have a shot at meeting its climate targets. However, some environmentalists are critical of the technology that does nothing to curb overall production of fossil fuel products.
In its five-year plan released Wednesday, Cenovus includes smaller, near-term CCUS projects in the works at its Lloydminster Upgrader, Minnedosa Ethanol Plant, and Elmworth gas plant.
Longer-term, Cenovus is part of the Oil Sands Pathways to Net Zero Alliance, a group of Canadian oilsands producers whose vision of getting the industry to net zero greenhouse gas emissions by 2050 is anchored by a proposed major CCUS transportation line that would capture CO2 from oilsands facilities and transport it to a storage facility near Cold Lake, Alta.
Cenovus itself has set a target to reduce emissions by 35 per cent by 2035 from 2019 levels.
However, Cenovus chief executive Alex Pourbaix said he reminds people all the time that CCUS technology is still in its infancy.
"Right now, on its own, CCUS is not an economic technology on its own. It is a pretty significant incremental cost to any energy producer," Pourbaix said.
"Anywhere you have seen CCUS undertaken at scale, it is almost inevitably undertaken with significant government collaboration and support."
Cenovus declined to see what specifically the company wants to see in a CCUS tax credit, but DelFrari said that projects in other parts of the world that have been successful have been anywhere from two-thirds to three-quarters supported by government.
The company has also been encouraging Ottawa to make enhanced oil recovery projects eligible for the tax credit, something the government had originally ruled out. Enhanced oil recovery, or EOR, is a process that can significantly enhance a site's oil production through the process of injecting carbon dioxide underground to extract additional oil from older wells.
"We would be very big proponents and would encourage the government, as these consultations around the investor tax credit go on, to really consider having an open mind about the inclusion of EOR," Pourbaix said.
Cenovus announced a capital spending budget Wednesday between $2.6 billion and $3 billion for next year, up from its guidance for between $2.3 billion and $2.7 billion this year.
The company also said it plans to allocate about 50 per cent of its excess cash flow in 2022 to shareholder returns. Remaining excess cash flow will be put toward the goal of reducing the company's net debt to below $8 billion.
Cenovus said capital spending on its upstream assets next year is expected to be between $1.7 billion and $2 billion, including $1.35 billion to $1.55 billion for its oilsands operations.
Downstream capital investments in 2022 are expected to total between $850 million and $950 million, including $200 million to $250 million for its Superior Refinery rebuild project, which Cenovus expects will be largely offset by insurance.
In its guidance for 2022, the company says it expects total production of between 780,000 and 820,000 barrels of oil equivalent per day and downstream throughput between 530,000 and 580,000 barrels per day.
Cenovus said its capital programs and current base dividend are sustainable at a West Texas Intermediate crude price of US$45 per barrel. WTI closed at US$72.05 on Tuesday.
Cenovus Energy plans $2.6B-$3B capital
spending budget for 2022
Amanda Stephenson, The Canadian Press
CALGARY -- Cenovus Energy Inc. has increased its capital spending budget for next year, against the backdrop of a global commodity boom that has pushed Canadian oil production to all-time record levels.
As part of its annual investor day Wednesday, the Calgary-based energy company announced a capital spending budget between $2.6 billion and $3 billion for next year. It said it will also reduce emissions by 35 per cent by the end of 2035, with the long-term goal of getting to net-zero greenhouse gas emissions by 2050.
Cenovus' capital spending plan is up from its guidance for between $2.3 billion and $2.7 billion this year.
The company also said it plans to allocate about 50 per cent of its excess cash flow in 2022 to shareholder returns. Remaining excess cash flow will be put toward the goal of reducing the company's net debt to below $8 billion.
"Building on our upstream production strength in 2021 and the continued optimization of our business, I am confident in our ability to grow free funds flow and deliver sustainable, increased returns to our shareholders," said Cenovus chief executive Alex Pourbaix in a news release.
Capital spending in Canada's oil and gas sector has so far remained subdued this year, in spite of oil prices that are at seven-year highs.
According to Statistics Canada, oil and gas capital spending over the first three quarters of 2021 was $8.5 billion, 32 per cent below the same period during 2019 pre-pandemic.
The industry also spent less than a third of what it did during the same period of 2014. That year, capital investment in the Canadian oilpatch hit an all-time record high of $81 billion.
However, companies are using existing assets to ramp up production to meet global demand. Alberta oil production in October was 119 million barrels, an all-time monthly record, according to Statistics Canada.
Cenovus said capital spending on its upstream assets next year is expected to be between $1.7 billion and $2 billion, including $1.35 billion to $1.55 billion for its oilsands operations.
Downstream capital investments in 2022 are expected to total between $850 million and $950 million, including $200 million to $250 million for its Superior Refinery rebuild project, which Cenovus expects will be largely offset by insurance.
In its guidance for 2022, the company says it expects total production of between 780,000 and 820,000 barrels of oil equivalent per day and downstream throughput between 530,000 and 580,000 barrels per day.
Cenovus said its capital programs and current base dividend are sustainable at a West Texas Intermediate crude price of US$45 per barrel. WTI closed at US$72.05 on Tuesday.
How much Suncor and its peers need to spend to hit net-zero
Jeff Lagerquist
Mon., December 6, 2021
Decarbonizing Canada's oil patch will cause a material hit to the free cash flows of producers, but it won't be a "death blow," according to analysts at Scotiabank who worked up rough cost estimates for six of the largest companies.
The bank looked at the Oil Sands Pathways to Net Zero initiative, a partnership between Suncor (SU.TO)(SU), Canadian Natural Resources (CNQ.TO)(CNQ), Cenovus (CVE.TO)(CVE), Imperial Oil (IMO.TO)(IMO), MEG Energy (MEG.TO), and ConocoPhillips (COP) to use carbon capture and other technologies to cut greenhouse gas emissions from operations to net-zero by 2050.
The companies collectively account for 95 per cent of oil sands production. Those firms estimate it will cost $75 billion over 30 years, or roughly $2.5 billion per year, to eliminate the 68 megatonnes of greenhouse gases they emit annually today.
With no company guidance available, Scotiabank based its own cost estimates on the proportion of oil sands production, and applied metrics for greenhouse gas intensity. Canadian Natural Resources and Suncor are projected to spend the most, at $765 million and $760 million per year, respectively, followed by Cenovus at $470 million, Imperial at $380 million, MEG at $65 million, and ConocoPhillips at $60 million.
The figures represent the largest increase in capital spending compared to expected levels in 2022 at Imperial, Canadian Natural, and MEG, at 23.5 per cent, 16.7 per cent and 16.3 per cent, respectively. These numbers assume all costs are borne by industry.
In July, Ottawa formally committed to reducing its greenhouse gas output by 40 to 45 per cent below 2005 levels by 2030. The government plans to hit net-zero emissions by 2050.
"Discussions continue between industry and the government on [the] level of financial support," analyst Jason Bouvier wrote in the report released on Friday.
"Although difficult to predict when the governments will provide clarity, we expect it sometime over the next year (hopefully in the early part of 2022). In our view, this clarity is required before industry will start spending meaningful capital."
Bouvier estimates a roughly 70 basis point drop in debt-adjusted free cash flow (DAFCF) yields for the oil sands producers, once the costs to decarbonize are included. That assumes $65 U.S. benchmark crude (CL=F), and 50 per cent government funding of projects.
"DAFCF will remain attractive, even with added decarbonization spending," Bouvier wrote. "Decarbonization costs have a material impact on free cash flow, but we still expect free cash flow to be available for shareholder returns."
Oil prices climbed on Monday, after booking the longest stretch of weekly declines since 2018 last week. Both West Texas Intermediate and European Brent crude have climbed more than 40 per cent year-to-date.
That strength will come in handy as companies ramp up spending to shrink their carbon footprints, according to Deloitte's 2022 oil and gas industry outlook.
"High oil prices are allowing companies to fund their net-zero commitments," the report's authors wrote. "After European oil and gas companies led in net-zero pledges in 2020, many U.S. oil and gas companies, Canadian oil sands producers, and a few national oil companies have joined the net-zero group in 2021."
Deloitte says higher commodity prices have enabled investment in "riskier and expensive green solutions, such as carbon capture, utilization, and storage."
Jeff Lagerquist is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jefflagerquist.
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