November 2024, Calgary – The Canadian oil sands sector hardly broke a sweat in terms of raising Greenhouse gas (GHG) emissions in 2023 as it increased by less than 1%. This came despite the oil production surging significantly, S&P Global Commodity Insights has reported recently. According to the report, though this industry gained through its reduction of GHG intensity, more upgrades are required for this industry to meet the proposed Canadian government’s targets on 2030.
Emissions Growth Slows Amid Production Surge
The analysis reveals a dramatic reversal in emissions trends for the oil sands of Canada. From 2020 through 2023, annual emissions growth averaged merely 1%. That contrasts sharply with the 5% per annum increases from the previous decade. The reduction in emissions growth comes despite an 9 percent increase in oil sands production since 2019, adding about 250,000 barrels per day to overall production levels.
For his part, Kevin Birn, Vice President of Canadian Oil Markets and Head of the Center for Emissions Excellence at S&P Global, attributed this decoupling to years of innovation in emissions reduction. “The fact that the rate of production additions is outpacing emissions growth indicates that the production that is coming forward is of a much lower intensity than the overall average,” Birn said.
Birn’s observation is typical of the trend that has been ongoing in the oil sands sector which has progressively reduced GHG intensity, that is, the emissions per barrel of oil produced, without a decline in output. As of 2023, average GHG intensity in oil sands production had fallen to 58 kg of CO2 equivalent per barrel (kgCO2e/b); near a 28 percent decline from levels seen in 2009, when it was around 81 kgCO2e/b. This decline is attributable to ongoing investment in efficiency, carbon-capture and operating practices targeted at lowering emissions per barrel.
Critical Data Points
Absolute GHG emissions from Canadian oil sands were about 3% higher in 2023 than in 2019, or approximately 3 million more metric tons of CO2.
Production increased by 9% (some 250,000 barrels per day) over the same period.
Annual emissions of over 3 million metric tons have been accrued between 2010 and 2019, and production increased at an average of 200,000 barrels per day.
GHG intensity per barrel has dropped to 58 kgCO2e/b from an average in 2009, representing a 28% decline.
Challenges on the Road to 2030
Despite the progress, the oil sands sector still has some big hurdles to overcome, such as Canada’s planned federal emissions cap for oil and gas in 2030. Birn underlined that the sector would probably be overwhelmed by postulated increases in production that could outpace any gains made in the reduction of GHG intensity.
Anticipated production additions are expected to outstrip intensity reductions in the near term, ” Birn said. That means greater decarbonization efforts from the sector will likely be needed to meet the proposed federal oil and gas emissions limit by 2030″.
Accelerating CCS capacity is one of the major challenges. Many players in the industry, including oil sands companies, have committed to CCS as a means of reducing emissions. However, the commercially available storage infrastructure will be quite difficult to quickly come online in the near term. Birn said: “Bringing enough carbon and storage capacity online in only a few short years will be a challenge. But the slower rate of emissions additions may make the proposed 2030 emissions limit a bit more attainable.”.
Future Prospects for Canada’s Oil Sands
S&P Global analysis suggests that the peaking of absolute growth in emissions could potentially mean that the oil sands peak may occur earlier and at a lower level than anticipated. More will, however, depend upon the ability of the industry to continue its decoupling of emissions and to achieve significant decarbonization goals.
So far, sectoral progress comes through with such a strong commitment to emissions reductions as well as innovative technologies. As GHG intensity has declined by about 60 percent over the last ten years, it is evidence that the industry can make its progress even when production is growing. However, continued investment and ramping up of decarbonization strategies will be necessary for Canada to meet its climate targets-including scaling up CCS and progressing low-carbon production practices.
A Broader Implication for Climate Goals in Canada
Canada’s broader climate goals depend partly on how effectively its oil and gas industry reduces emissions. The oil sands are among the biggest emitters of GHG under Canadian jurisdiction, thereby becoming a centrepiece for determining the ability of Canada to meet its international commitments aimed at fighting climate change. Meeting the 2030 targets by the federal government will demand a combination of regulatory support and industry investment. However, perhaps more so, commitment to innovation in carbon management will prove critical.
The oil sands sector in Canada will likely remain under intense scrutiny in the coming years as it strives to balance the growing boom in production with its commitment to environmentally responsible progress. As international climate forums such as COP29 draw near, the performance of Canada in managing emissions produced from oil sands will become a crucial measure for how the country is doing in general on climate. High stakes indeed, but with persistence, the oil sands might reduce their environmental footprint to lead towards a cleaner, brighter, and more sustainable energy future for the energy sector in Canada.