IEA/ABCM International Seminar

Fossil Fuels in CanadaOpportunities and Challenges

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Opportunities and Challenges

Kim I.M. Smith

Office of Energy Research and DevelopmentNatural Resources Canada

June 27th, 2007Brasilia, Brazil

Outline of Today’s Presentation

Canadian Policy Context

Canada’s Fossil Resource Endowment – the Opportunity

The Challenges

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CO2 Capture and Storage (CCS) in Canada –Latest Developments

Key Messages

Conclusion

Policy Context – Supply/Demand

Supply-Demand ConsiderationsSupply: Canada has substantial endowment of a

diversified set of energy resourcesoil, gas, coal, uranium, water, wind, solar, etc.

Demand: Canada is an energy intensive country

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Demand: Canada is an energy intensive countrycold climate: space heating of housing and buildingslarge landmass: transportation of people and goodsenergy-intensive industrial base: process energy for

industries for resource extraction and primarytransformation/manufacturing

Federal/Provincial Jurisdiction

The direct ownership, management and regulation ofmost natural resources fall under provincial jurisdiction(largely ‘local’ concern)

Issues of interprovincial, national, or internationalconcern fall under federal jurisdiction

Federal JurisdictionProvincial Jurisdiction

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Federal Jurisdiction

•International and interprovincialissues

•Uranium/nuclear power•North, offshore and Crown lands•Works declared to be for the generalbenefit of Canada (e.g. science andtechnology)

Provincial Jurisdiction

•Resource ownership,management and royalties

•Land-use planning and allocation•Laws regarding the exploration,development, conservation anduse of natural resources withinprovincial boundaries

Energy Economy in Canada

Highlights for 20056% of GDP$86 B in exports,

primarily oil and gas21% of Canada totals

Exp ortsInves tment

20

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Energy as % of Canadian Total (2005)

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$51 B net surplus$56 B in capital

investments, primarilyoil/gas and electricity21% of Canada totals

direct employment ofover 250,000 people

Emp lo yment

GDP

0

5

10

15

20

Canada’s Fossil ResourceEndowment

Coal

Oil – onshore, offshore, northern

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Bitumen – the oil sands

Gas – conventional WCSB, offshore, northern,unconventional (CBM, shale, tight, hydrates)

Coal

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Coal

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Crude Oil

Canada already a large producer and exporter2nd largest oil reserves after Saudi Arabiagrowing importance of oil sands, leading to increased air emissions

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Bitumen – the Oil Sands

The oil sands are containedbeneath 140,800 squarekilometres of north-easternAlberta

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Depending on depth can beextracted in several ways

The total area covered bythe resource is larger thanthe state of Florida

Oil Sands - Location

The oil sands resourceis located in threeareas of Alberta: ColdLake, Athabasca and

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Lake, Athabasca andPeace River District

Extraction Processes

Two types ofoperations currently inuse:Open pit mining using

shovels and trucksIn Situ operations

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In Situ operationsusing cyclical steamstimulation

New technologies for insitu include SteamAssisted GravityDrainage, Toe-to-HeelAir Injections andVAPEX

Future Oil Sands Production

million barrels per day

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5

4

•Canada is currentlylargest crude oil andproduct supplier tothe US market

•If 80% of the

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2000 2010 2020 2030

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3

2

1

energy/power/H2

•If 80% of theincreased productionfrom oil sands isexported to the USA,Canada’s exports tothe US wouldincrease by three fold

Investment in Oil SandsDevelopment

Thirty-five major oil companies active in oil sands

Thirty-seven major projects underway or underconsideration

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Announced investments 2006-2015 total C$125 Billion

Anticipate continued strong investment over the next10 years

Issues With Expanded Production

Market AccessNorth America and beyond

Natural gas availability and pricePremium fuel for all aspects of operations

North American pipeline capacity

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North American pipeline capacityNew lines needed to access new markets

North American refinery capacityChanging crude slate

Labour availabilitySkilled labour supply

Natural Gas

Canadian production leveling off as WCSB matures New sources of supply: coal bed methane, Mackenzie Valley gas Expected increase of LNG in North America (to 17% of supply in

2020)

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Gas Hydrates

Methane molecule held in an icelattice

Immense resource, but how

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Immense resource, but howmuch can be produced?

Mallik Phase II extendedproduction test underway

The Challenges…

Air issuesGHGsNOx, SOx, VOC, PM, Hg

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Water IssuesFragile environments – produced waterSupply/use for oil sands - volume

Energy production anduse contribute to morethan 80% of Canada’sGHG emissions

Energy is also a majorcontributor to air pollution

Energy contributions to Canadian emissions

60%

70%

80%

90%

100%

Other

Air Issues

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contributor to air pollutionOil sands, electricity

generation andtransportation are leadingsources growth in airemissions

0%

10%

20%

30%

40%

50%

GHGs PM10 PM2.5 VOC NOx SOx Hg

Other

Transportation

Other includes residential wood, commercial, industrial, petroleumrefining,oil sands, upstreamoil & gas and electric power generation

Smog Acid rain

Regulatory Measures on AirEmissions

Regulatory Framework for Industrial Air Emissionsupstream oil and gas33% intensity reduction in GHGs by 2020significant reductions in NOx, SOx and VOCs

electricity (from combustion)

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electricity (from combustion)41% intensity reduction in GHGs by 2020significant reductions in NOx, SOx and PMs

Strengthening of energy performance standards underthe Energy Efficiency Act

Regulation of fuel consumption for motor vehicles

Why is CCS Important to Canada?Three Sectors Account for 50%+ ofCanada’s Share of GHGs

2004 GHG Emissions by Sector (758 Mt)

Transportation25%

Agriculture9%

Other3%

PowerGeneration

17%

Industrial18%

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Fossil FuelIndustry

17%

Residential6%Commercial

5%

Power generation (17%), industrial end-use (18%), fossil fuel supply (17%),dominate Canada’s GHG inventory

Largely point sources – amenable to capture technologiesMajor challenge, and an opportunity, for CCS

NRCan: Canada’s Energy Outlook The Reference Case 2006

ecoEnergy Technology Initiative

$230 million to accelerate the development and marketreadiness of technology solutions in clean energyto increase clean energy supplyto raise energy efficiencyto reduce emissions from conventional energy sources

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to reduce emissions from conventional energy sources

S&T focus: priority areas includeCO2 sequestration and storage; clean coal; clean oil

sands production; renewable energy and other clean-energy sources; advanced vehicles (including hydrogenfuel cells and plug-in electric vehicle technologies); next-generation nuclear; and, bioenergy

Drivers for Widespread CCSRegulatory, Economic, Investment Cycle

Timing is auspicious – emerging technologies are ready fordemonstration, timeline for drivers are coming due

Regulatory Drivers: Government of Canada has announced intentions to regulate GHG

emissions Part of larger “clean air” agenda

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Part of larger “clean air” agenda Signals to utilities, IPPs, industry

Economic Drivers: Experience with CO2 Enhanced Oil Recovery projects has been

very positive Creates first market for CO2 – stringent requirements for purity,

pressure, location

Capital investment in the offing in electricity sector – auspicioustiming for industry

Canada’s CCS ProgramA Suite of Interdependent Initiatives

Assessment

IEA Weyburn-Midale

Storage,Monitoring

StorageRegulations

Sci

ence

and

Tech

nolo

gy

Dev

elop

ing

Fram

ewor

ks,

Reg

ulat

ion

s,P

ract

ices

CCS TaskForce

Str

ateg

icP

lann

ing

,

Inte

rnat

iona

lIni

tiat

ives

“Building Blocks” – Creating the Environment forImplementation of CO2 Capture, Use and Storage in Canada

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Assessmentof StoragePotential

EnhancedRecoveryOil, Gas

CO2 CaptureTechnologies

Measure,Monitoring,Verification

RiskAssessment

PublicAttitudes,

Acceptance

Sci

ence

and

Tech

nolo

gy

Dev

elop

ing

Fram

ewor

ks,

Reg

ulat

ion

s,P

ract

ices

InternationalCollaborationPartnerships

CapacityBuilding,

Transport’n

TechnologyRoadmap,

Compendium

Str

ateg

icP

lann

ing

,N

etw

orks

,In

tern

atio

nalI

niti

ativ

es

Government Announcement – HighlightsNew Regulatory Framework for Air Emissions

Outlines regulatory approach for both GHGs and CACs from industry

Sectors include:

GHG obligations – existing facility emission intensity based targets 6% annual Emissions Intensity (EI) reduction required for existing facilities for

Electricity from combustion Forest products / pulp and paper Iron and steel Cement, lime

Oil and gas Smelting and refining Selected mining (titanium, others) Chemicals (including fertilizer)

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6% annual Emissions Intensity (EI) reduction required for existing facilities for2007, 08 and 09

2% annual EI reduction required for subsequent years By 2010, 20% reduction in EI for combustion related GHG emissions Compliance mechanism – Technology Investment Fund 2 components – (1) deployment and infrastructure and (2) R&D Deployment and infrastructure contribution limit declines over 2010 to 2017 R&D limit of 5 MT per year Compliance units @ $15/tonne for 2010

CAC emissions reductions – absolute national caps on emissions by 2012/15 Compliance mechanisms Domestic trading for NOx and SO2 Will pursue discussions on Canada/US trading for both NOx and SO2

CCS TRM & Compendium

CO2 Capture and StorageTechnology Roadmap

http://www.nrcan.gc.ca/es/etb/cetc/combustion/co2trm/htmldocs/ccstrm

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Carbon Dioxide Capture andStorage: A Compendium ofCanada's Participation

Carbon DioxideCapture and Storage:

A Compendium ofCanada's Participation

http://www.nrcan.gc.ca/es/etb/cetc/combustion/co2trm/htmldocs/ccstrm_main_e.html

http://www.nrcan.gc.ca/es/etb/cetc/combustion/co2network/pdfs/ccs_canadian_compendium_e.pdf

Defining the Way ForwardCanada-Alberta Task Force on CCS

Much has been achieved, now what? Canada and Alberta announce joint task force

“Canada-Alberta Task Force on CCS”

Goals “To recommend the best ways for Canada to implement CCS on a large scale” Opportunities for widespread use Identify and assess current obstacles Outline actions, roles and responsibilities

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Outline actions, roles and responsibilities For federal and provincial governments, industry, stakeholders

“Blue Ribbon” members – from industry, academia Steve Snyder, President and CEO, TransAlta – Chair of Task Force David Keith, Director, U of Calgary’s Institute of Sustainable Energy, Environment and Economy Kathy Sendall, Senior VP, Petro Canada Ian Anderson, President, Kinder Morgan Canada Patricia Youzwa, President and CEO, SaskPower Ex officio

Deputy Minister, Natural Resources Canada Deputy Minister, Alberta Department of Energy

Timeline Report in November 2007

Enhanced Oil Recovery – Demonstration ProjectsDifferent Geology, Different CO2 Sources

Penn West $5.0M The Pembina field is the largest pool in the Canada with significant potential storage capacity Located in central Alberta, close to major coal fired power plants for future CO2 supply

Apache $3.1M The project is located in northern Alberta at the Zama Keg River oil pools Injecting acid gas into the pinnacle reef reservoir

Anadarko $1.7M The Anadarko proposal proposed capturing the CO currently being vented from their Hays gas plant

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The Anadarko proposal proposed capturing the CO2 currently being vented from their Hays gas plantfor injection into the Enchant Arcs reservoir

Will recover light oil that would otherwise be left in the ground, located near CO2 sources

Devon Canada Corporation $3.2M 2nd Tranche - Devon had proposed a CO2 based EOR project in central Alberta, at Swan Hills Unit #1

Beaverhill Lake First CO2 EOR miscible flood to follow a hyrocarbon miscible flood

Suncor $1M Proposed to conduct a CO2 Sequestration and Enhanced Coalbed Methane (ECBM) Production pilot

to be located in central Alberta Test the response of Alberta coal seams to injection to determine the parameters of CO2 storage and

potential enhanced methane production from coal

Emerging ProjectsCCS, Clean Coal

Many projects on the drawing boards, in progress

Clean Coal/Hydrocarbons Suncor Voyageur Upgrader – announced Nov 2001 Nexen/Opti Long Lake Plant – announced Feb 2003. North West Upgrading Plant – announced Feb 2005 Peace River Bluesky Project – announced Dec 2005

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Peace River Bluesky Project – announced Dec 2005 TransAlta/EPCOR Keephills 3 Plant – announced Mar 2006

CO2 Capture and Storage EPCOR : Front End Engineering Design Study for a utility-scale (400 MW) coal

gasification plant – announced 2006 SaskPower – Front End Engineering Design Study for a 300 MW oxyfuel plant –

announced 2006 Sherritt Dodds Roundhill Plant – announced Jan 2007 CanSolv Demo – announced Dec 2005 CO2 Solutions Demo – announced Oct 2006

Key Messages

National and international experts have identified CCS as a key solutionto reduce GHG emissions – critically important for Canada

In addition to power generation, broad range of point sourceapplications Oil sands, hydrogen production, polygeneration Supports EOR, ECBM commercial projects

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S&T and policy gaps and needs are being addressed

Extensive ongoing work to facilitate the development and deploymentof CCS technology – clean coal is a primary driver CCS Task Force to report in November 2007

CCS facilitates a regulatory approach to GHG reductions

Conclusion

Canada is well-endowed with many fossilresources – opportunities abound…

But, along with the opportunities, also come

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But, along with the opportunities, also comemany challenges to develop the resources in anenvironmentally and socially responsible way…

There are many proposals, projects underway…an interesting future lies ahead…