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Canada oil producers grapple with Trudeau’s demand for faster emissions cuts

Source: Reuters

WINNIPEG, Manitoba, Oct 22 (Reuters) – Canada’s oil producers face new pressure from Prime Minister Justin Trudeau to reduce emissions in just three years, a sudden acceleration of their plans that at least one major company said looks unrealistic.

Suncor Energy (SU.TO), the second-largest Canadian crude producer, says it remains focused on cutting emissions by 2030, not 2025 as the Canadian government will require.

“Honestly, 2025 is going to be tough,” Martha Hall Findlay, Suncor’s Chief Sustainability Officer, told Reuters. “That’s not a number we’ve used, it’s a number the feds have used.”

Trudeau’s advanced timetable for cuts to the oil sector’s total emissions by 2025, announced last month, comes as the oil sector has focused on longer-term targets, and on reducing emissions on a per-barrel basis.

“That is light speed for an oil sands company. That’s tomorrow,” said Kevin Birn, chief analyst of Canadian oil markets at consultancy IHS Markit, of Trudeau’s demand. “They’re a very hard ship to turn because they have so much emissions.”

Previously, Ottawa had a target of cutting national emissions by at least 40% by 2030, but it did not single out the oil sector. Canada’s crude industry generates some of the highest emissions per barrel worldwide.

Suncor is the only big producer that has laid out a plan – in May – to cut total emissions by 2030, depending heavily on carbon capture, greener power sources and energy efficiency.

But Trudeau’s 2025 demand came as a surprise.

“We had obviously been having conversations with the feds long before the budget came out last spring, long before the (election) campaign,” Hall Findlay said. “None of those discussions have mentioned 2025. At Suncor, we’re laser-focused on 2030.”

Canadian Natural Resources Ltd (CNQ.TO) and Cenovus Energy (CVE.TO), have been planning for months to unveil their emissions targets by year-end.

Cenovus intends to cut emissions on an absolute and per-barrel basis, said spokesman Reg Curren, but he would not say if cuts would occur by 2025.

Canadian Natural is working on “mid-term” targets connected to the Pathways carbon capture project with its peers, said spokesperson Julie Woo. She would not say if they would address Trudeau’s 2025 requirement.

Governments and business would need to spend C$60 billion annually to cut Canada’s emissions by 75% in the next 30 years, RBC Economics said.

Canadian producers are expected to report big quarterly profits in coming weeks as oil and gas prices have soared. The companies have prioritized repaying debt and returning cash to investors, but Trudeau wants producers to spend some profits on curbing emissions.

He plans to unveil his new cabinet on Tuesday, just ahead of the United Nations’ Climate Change Conference in Glasgow, Scotland.

Ottawa wants to ensure there are ambitious emission reductions from the oil and gas sector, making a meaningful contribution to Canada’s climate goals, said Joanna Sivasankaran, spokesperson for the Canadian environment department.

Trudeau’s 2025 goal is “ambitious for sure” and it would be more realistic to expect the sector to cut emissions sharply by a decade later, said Steve MacDonald, CEO of Emissions Reduction Alberta, an arms-length corporation funded by the provincial government.

‘EASIER THAN ANYONE THINKS’

Some small conventional oil producers are already showing deep emissions cuts are possible, however, using methods that big producers Canadian Natural and Cenovus could widely apply. Both companies produce crude in the oil sands and by conventional methods.

Yangarra Resources (YGR.TO), which produces 10,000 barrels of oil equivalent per day, says it will cut total emissions by 47%, or 50,000 tonnes of carbon dioxide equivalent, by the end of 2022. Its plans involve powering 80 pumpjacks with electricity from the Alberta grid, instead of burning natural gas, and replacing older instruments that emit high amounts of methane.

“Cutting carbon in the oil patch is going to be a whole lot easier than anyone thinks,” said Yangarra CEO Jim Evaskevich. “All of the changes we are implementing make incredible economic sense.”

The moves are likely to generate substantial credits next year that Yangarra can sell to bigger emitters, although the monetary value has not yet been determined, Evaskevich said.

Cenovus, which generates 18% of its production from conventional operations, has cut its methane emissions by nearly half from 2015 levels, a spokesperson said. Canadian Natural has cut methane emissions by 28% since 2016, Woo said.

“They’re big, large operations, and they can’t pivot quite as quickly,” MacDonald said. “But that doesn’t mean they aren’t moving forward in the same areas.”

Emissions reductions are difficult for oil sands operations because of the energy they require, while conventional methane emissions are easier to tackle, said Keith Stewart, senior energy strategist at Greenpeace Canada.

Oil sands producers are counting on expanded carbon capture and sequestration facilities to cut emissions. But the economics requiregovernment funding, said Greg McNab, a partner at the Baker McKenzie law firm. Using renewable power to run oil sands facilities may be the quickest way to curb emissions, he said.

Reporting by Rod Nickel in Winnipeg; Editing by David Gregorio

Our Standards: The Thomson Reuters Trust Principles.

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Could electric vehicles be the answer to energy flexibility?

Rolf Bienert, Managing and Technical Director, OpenADR Alliance

Last year, what was the Department for Business, Energy & Industrial Strategy and Ofgem published its Electric Vehicle Smart Charging Action plans to unlock the power of electric vehicle (EV) charging. Owners would have the opportunity to charge their vehicles while powering their homes with excess electricity stored in their car.

Known as vehicle to grid (V2G) or vehicle to everything (V2X), it is the communication between a vehicle and another entity. This could be the transfer of electricity stored in an EV to the home, the grid, or to other destinations. V2X requires bi-directional energy flow from the charger to the vehicle and bi- or unidirectional flow from the charger to the destination, depending on how it is being used.

While there are V2X pilots already out there, it’s considered an emerging technology. The Government is backing it with its V2X Innovation Programme with the aim of addressing barriers to enabling energy flexibility from EV charging. Phase 1 will support development of V2X bi-directional charging prototype hardware, software or business models, while phase 2 will support small scale V2X demonstrations.

The programme is part of the Flexibility Innovation Programme which looks to enable large-scale widespread electricity system flexibility through smart, flexible, secure, and accessible technologies – and will fund innovation across a range of key smart energy applications.

As part of the initiative, the Government will also fund Demand Side Response (DSR) projects activated through both the Innovation Programme and its Interoperable Demand Side Response Programme (IDSR) designed to support innovation and design of IDSR systems. DSR and energy flexibility is becoming increasingly important as demand for energy grows.

The EV potential

EVs offer a potential energy resource, especially at peak times when the electricity grid is under pressure. Designed to power cars weighing two tonnes or more, EV batteries are large, especially when compared to other potential energy resources.

While a typical solar system for the home is around 10kWh, electric car batteries range from 30kWh or more. A Jaguar i-Pace is 85kWh while the Tesla model S has a 100kWh battery, which offers a much larger resource. This means that a fully powered EV could support an average home for several days.

But to make this a reality the technology needs to be in place first to ensure there is a stable, reliable and secure supply of power. Most EV charging systems are already connected via apps and control platforms with pre-set systems, so easy to access and easy to use. But, owners will need to factor in possible additional hardware costs, including invertors for charging and discharging the power.

The vehicle owner must also have control over what they want to do. For example, how much of the charge from the car battery they want to make available to the grid and how much they want to leave in the vehicle.

The concept of bi-directional charging means that vehicles need to be designed with bi-directional power flow in mind and Electric Vehicle Supply Equipment will have to be upgraded as Electric Vehicle Power Exchange Equipment (EVPE).

Critical success factors

Open standards will be also critical to the success of this opportunity, and to ensure the charging infrastructure for V2X and V2G use cases is fit for purpose.

There are also lifecycle implications for the battery that need to be addressed as bi-directional charging can lead to degradation and shortening of battery life. Typically EVs are sold with an eight-year battery life, but this depends on the model, so drivers might be reluctant to add extra wear and tear, or pay for new batteries before time.

There is also the question of power quality. With more and more high-powered invertors pushing power into the grid, it could lead to questions about power quality that is not up to standard, and that may require periodic grid code adjustments.

But before this becomes reality, it has to be something that EV owners want. The industry is looking to educate users about the benefits and opportunities of V2X, but is it enough? We need a unified message, from automotive companies and OEMs, to government, and a concerted effort to promote new smart energy initiatives.

While plans are not yet agreed with regards to a ban on the sale on new petrol and diesel vehicles, figures from the IEA show that by 2035, one in four vehicles on the road will be electric. So, it’s time to raise awareness the opportunities of these programs.

With trials already happening in the UK, US, and other markets, I’m optimistic that it could become a disruptor market for this technology.

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Navigating the commercial vehicle sustainability conundrum

By David Wilson, Business Development Advisor, NEOL Copper Technologies Ltd.

As road transport companies implement their environmental, social, and governance (ESG) strategies to ensure they are contributing positively to the planet and society while also being run ethically and transparently, they are faced with a conundrum.

With increasing regulatory and social scrutiny on carbon emissions, the transportation industry which is the second largest (20%) contributor to carbon emissions worldwide, faces growing pressure to meet the near-term net-zero targets, requiring an immediate move to being more sustainable.

The industry has recently undergone significant changes that have impacted the cost of running a successful business. Factors such as high fuel costs, increased labour expenses, and maintenance costs, as well as excessive costs to renew the fleet, have all contributed to this. Additionally, businesses now need to consider how to incorporate the future of electric and autonomous vehicles.

The future of electric vehicles

ESG strategies such as investing in fuel-efficient, low-emission technologies and adopting alternative sustainable fuel sources are essential to reduce carbon emissions, air pollution, and preserve natural resources, while protecting the industry’s long-term viability.

In order to make the industry more sustainable electric trucks will need to play a significant role. The migration to electric trucks is also an option for the fleet manager but there is presently a narrow choice of vehicles, an associated high procurement or lease cost, and a lack of public charging infrastructure.

Most commercial vehicle OEMs (original equipment manufacturers) now offer a range of electric trucks that are specifically designed for zero-emission deliveries. However, the use of heavy-duty electric trucks for long-range transport is not feasible yet, mainly because the batteries and charging power are insufficient. The large-scale adoption of electric trucks is going to take time, and it may not be until 2035 – emphasizing that the electrification of the trucking industry is around 10 years behind passenger cars in terms of electrification.

Transitioning away from fossil fuel is a complex challenge for fleet managers. It will take time for a complete shift of the 600,000+ heavy good vehicles currently navigating the UK roads to electric power. To address the issue promptly and enhance the fuel efficiency and sustainability of the current fleet, proactive measures are imperative to optimise their performance and curtail emissions immediately.

Addressing the sustainability conundrum

The vast majority of today’s commercial vehicles on the road today are powered by internal combustion engines (ICE) that run on diesel fuel. Since the first introduction of European exhaust emission standards in 1993, more stringent guidelines have been released every four to five years to reduce and eliminate harmful pollutants such as carbon dioxide, nitrogen oxide, hydrocarbons, and particulate matter from new vehicles sold in the EU.

 To meet the latest Euro VI (2015) emission standard, trucks are now typically equipped with diesel particulate filters (DPF) to capture particulate matter and lubricant ash, and selective catalytic reduction (SCR) technology to convert harmful nitrogen oxides to nitrogen and water, and exhaust gas recirculation (EGR) technology to lower the combustion temperature, reduce nitrogen oxides, and improve engine efficiency.

Euro VI engines are advanced and highly sophisticated systems that offer dependable and efficient performance. Together with the correct low-SAPS (sulphated ash, phosphorous, and sulphur) and low viscosity e.g. SAE 5W-30 engine lubricant, the fleet manager will benefit from reduced fuel consumption and warranted protection of the engine and exhaust aftertreatment devices (ATD).

As engine hardware has advanced, so has the lubricant technology. However, even with the latest low-viscosity oils, levels of fuel saving at 1-1.5% (compared to higher-viscosity oils) have not reached its full potential. Moreover, the continued use of metal-containing detergents and ZDDP (zinc dithiophosphate) antiwear components risk negatively impacting the performance and efficiency of the DPF, as well as the precious metal catalysts & sensors in the SCR units. This can lead to unplanned service and replacement of one or more of the ATDs, causing costly downtime for fleet managers.

 Euro 7 emissions regulations will be implemented in a few years, and it will require ATDs to perform as new for 200,000 km or 10 years. Therefore, the lubricant industry is facing a new challenge of lowering the levels   in engine lubricants even further.

Reducing unexpected downtime with technical lubricants

The fleet manager has access to high-quality diesel engines and lubricant technology, but they are concerned about unplanned mechanical issues due to the wear and tear of components from extended use. Additionally, the blockage of DPFs (which creates backpressure and increases fuel consumption) and the possible failure of sensors may lead to faults being registered on the truck’s OBD (on-board diagnostics) computer systems, still causing great concern for managers as they strive for maximum productivity and profitability.

Whilst the use of fossil fuels will remain crucial to power heavy-duty diesel engines, we must wait for further advancements in electrification. However, we can improve the lubricants currently being used to make commercial vehicles more efficient, with lower emissions and greater fuel economy. By doing this, we can reduce unwanted unplanned downtime for repairs or component replacements.

It is easy to see the clear link between reducing wear to increase the longevity of your machine assets. Additionally, by reducing friction, we can improve fuel savings which helps to increase efficiency, all essential steps towards acting more sustainably and making changes for a better future.

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Streamlining the road to net-zero through carbon reporting

By Paul Rekhi, Head of Carbon Services at Advantage Utilities

Understanding the evolution of our carbon footprint is key to comprehending the urgency and significance of emission reduction today. According to the Global Carbon Project, between 2011 and 2020, carbon dioxide emissions averaged at 38.8 billion tons per year, but our land and ocean sinks which convert this CO2 have only been able to support 21.7 billion tons yearly. This deficit in emissions is what has caused the atmospheric CO2 growth rate which in turn has led to global warming and climate change. These are defining issues for businesses, hence the need to report and then reduce carbon emissions is more important than ever. I recently hosted a webinar where I discussed this very point, advising businesses on how to implement a credible plan to achieve net-zero as well as lower energy costs. 

In this article, I will share those insights, discussing how ESG emerged as a key consideration for businesses today. I will then outline how businesses can go about measuring their carbon by using the carbon-ethics cycle which includes the steps they should take to streamline the road to net-zero via effective carbon reporting.

Paul Rekhi, Head of Carbon Services

The distinction between net-zero and carbon neutral

There is an important distinction to be made about what we mean by ‘net-zero’ and ‘carbon neutral’. Net-zero involves counting emissions, then organically removing these emissions from the business. What carbon neutrality involves is the same accounting principle of greenhouse gas (GHG) accounting but also taking accredited carbon offsets to help counteract GHGs released and reaching a zero-carbon footprint. However, to get to true net-zero you have to account for it – that means having oversight into your scope 1, 2 and 3 emissions. 

Scope 1 emissions are direct emissions such as company facilities and vehicles. Scope 2 emissions primarily involve indirect emissions stemming from purchased electricity, heating and cooling. Finally, Scope 3 emissions involve everything else your business does; this starts with upstream activities, everything that happens before your organisation – ‘from cradle to gate’, including bought goods, employee commuting and leased assets,  through to  downstream activities, everything that happens after – from gate to grave, such as processing of solid products, transportation and investments.

The importance of carbon reporting

As corporate guidance emerged and the damaging effects of excess carbon emissions were accepted, this led to large companies being required to report on their scope 1 and 2 emissions. If an organisation meets two or more of the following criteria; a turnover or gross income of £36 million or more; balance sheet assets of £18 million or more; or 250 employees or more; then they must stay compliant with UK government regulations such as theStreamlined Energy and Carbon Reporting (SECR) and Energy Savings Opportunity Scheme (ESOS). Of the 5.5 million UK businesses, only 7,000 fall into the category of having over 250 employees. 

But this is not just a checkbox exercise, it is a strategic move. Proper carbon reporting not only ensures compliance but also positions your organisation as a responsible and forward-thinking entity, which is why it has become widely accepted for organisations to establish an ESG department.

The carbon-ethics cycle

To enable businesses to track their carbon emissions, we created our carbon-ethics cycle, to enable organisations to measure, manage and reduce their emissions as efficiently as possible. 

Our starting point is to understand businesses – their sites, their objectives and their needs. From here, businesses should measure and certify their scope 1, 2 and 3 emissions which act as an organisation’s benchmark on how much carbon was associated with their business, within a given period – usually by financial year. Without first measuring emissions, you cannot manage emissions, making progress towards net-zero very difficult. 

Once we have that benchmark, consultation with each department of the business is crucial to effectively reducing emissions, looking at how energy is used (when and where) as well as how it is procured. From there, technology such as solar PV, heat pumps and voltage optimisation, can be used to make energy savings and increase sustainability. 

Reducing/offsetting emissions may also be necessary if reducing emissions is not possible. The final step is to report and re-certify their emissions, allowing comparisons to be made to benchmark data. And this is an ongoing process, so the cycle can begin again on the journey to net-zero. But what this cycle achieves is a streamlined process that enables the most progress to take place.

So where are we right now? With large companies required to report on their carbon, other companies are also taking it upon themselves to expand their own reporting. There are several types of clients that get in touch with us to measure their carbon and reduce their emissions. One of them are the large companies, but others include organisations with supply chain partners requesting carbon data, companies with competitors measuring carbon emissions, environmentally conscious companies as well as others.    

A structure to measuring carbon within your organisation

Businesses all start from the same position: having to change their processes and behaviour in order to measure carbon. Progress is only made by building upon this foundation, with Standard Operating Procedures (SOPs) offering the next step in ensuring compliance throughout the business. On top of that, policies are overlaid which runs and controls the business.

But there are also two ‘floors’ that are missing in this structure. The first of these is accounting, reporting and marketing. Without measuring and accounting what it is that you are doing as a business, the effects of your progress will be minimal, which is why marketing is also crucial to enhancing brand image and customer loyalty. The final step is planning and execution, fundamental to realising your organisation’s goals. This cannot be forgotten as this is where businesses must ensure they have all the experience, expertise, knowledge and skills in place to report for what they do.

To conclude, businesses implementing carbon reporting will find that progress towards net-zero is far easier. The need to reduce emissions is clear and the systematic measurement, management, and subsequent reduction of emissions is made a tangible possibility through the streamlined and efficient approach outlined in the carbon-ethics cycle. A collaborative and structured carbon reporting process allows businesses to meet reduction targets successfully, ultimately leading to the attainment of net-zero status.

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