Federal tax credit not enough to get carbon capture projects built: Cenovus CEO

The investment tax credit unveiled by the federal government earlier this month isn't enough to convince Canada's major oilsands producers to begin construction on a proposed massive carbon capture and storage transportation line, the chief executive of Cenovus Energy Inc. said Wednesday.
On a conference call with analysts, Alex Pourbaix said industry will need “more help” from both the federal government and the government of Alberta in order to go ahead with large-scale carbon capture and storage projects like the one proposed by the Oil Sands Pathways to Net Zero consortium.
That group — of which Cenovus is a member, along with Canadian Natural Resources Ltd., ConocoPhillips, Imperial Oil Ltd., MEG Energy Corp., and Suncor Energy Inc. — has proposed to work together on a project that would capture CO2 from oilsands facilities and transport it to a storage facility near Cold Lake, Alta, delivering about 10 million tonnes of emissions reductions per year from oilsands production.
But while Pourbaix said the recently unveiled federal tax credit for companies investing in carbon capture projects is a good start, companies need to be certain there will be additional government money over the long-term to help with building and operating the expensive technology.
“These are multibillion-dollar projects. And we have to have certainty that they are investable, and that we can manage those investments over the entire commodity price cycle,” Pourbaix said.
“I suspect, over the long term, much as we've seen in other jurisdictions, we're going to require a real collaboration.”
Proponents say a large-scale rollout of carbon capture and storage technology will be necessary if Canada is to meet its climate goals. According to environmental think tank the Pembina Institute, capturing and storing CO2 from oilsands facilities, refineries and gas plants could reduce Canada's emissions by 15 million tonnes by 2030.
There are only a handful of carbon capture projects up and running in Canada right now, but the federal government is trying to kick-start oil producers to take action through a tax credit incentive announced in the most recent federal budget.
Starting this year, companies will be able to claim a tax credit of up to 60 per cent for direct air capture projects and 50 per cent for all other eligible carbon capture projects. A 37.5 per cent tax credit is available for investment in equipment for carbon transportation, storage and use.
But Pourbaix said in some parts of the world, governments have provided up to 60 or 70 per cent of the capital costs of new carbon capture projects, in addition to providing operating support. He said the Pathways alliance will need more detail about what kind of additional support to expect before it can make a final investment decision.
Pourbaix made the comments the same day Cenovus announced a first-quarter profit of $1.6 billion, or 81 cent per share, compared with a profit of $220 million or 10 cents per share in the first quarter of 2021. Revenue totalled $16.2 billion, up from $9.3 billion in the same quarter last year.
Cenovus also announced the tripling of its quarterly dividend, to 42 cents per share a year, up from 14 cents per share a year.
Canadian oilsands producers have been posting huge profits and record cash flows against the backdrop of the war in Ukraine, post-pandemic economic recovery, and soaring global energy demand.
But Pourbaix pointed out that oil prices are cyclical, and the industry has only very recently emerged from years of depressed prices. He said when it comes to the construction of the proposed carbon capture and storage transportation line, current oil prices shouldn't be banked on.
“Oil prices right now are obviously very attractive, but we know probably before that project is ever in service, we'll probably test the bottom end of those prices again,” he said. “So we really have to look at this over the long term.”
Cenovus' total upstream production for the quarter was 798,600 barrels of oil equivalent per day, up from 769,300 a year earlier, while downstream throughput was 501,800 barrels per day, compared with 469,100 in the first quarter of 2021.
In its guidance, the company raised its expected capital spending for 2022 by $300 million to a range of $2.9 billion to $3.3 billion due to increased costs at its Superior Refinery rebuild.
This report by The Canadian Press was first published April 27, 2022
CTVNews.ca Top Stories
Canadians want revenge on Bernardo, but that's not how prison works: ex-official
One of the architects of the law that governs Canada's prison system says it's understandable people want revenge on killer and serial rapist Paul Bernardo, but that's not what the prison system is designed for.

Prince Harry back in court for second day of grilling over U.K. tabloid claims
Prince Harry was back in the witness box at the High Court in London on Wednesday for a second day of grilling over his allegations that British tabloids targeted him with phone-hacking and other unlawful behaviour.
Want to know more about the wildfires spreading across Canada? Send us your questions
Wildfires currently burning across parts of Canada are some of the most severe ever witnessed, and experts say the 'unprecedented' fire season will become the new normal. CTVNews.ca wants to hear from Canadians with questions about wildfires, including their health impacts and how to stay safe.
Bank of Canada to announce interest rate decision this morning
The Bank of Canada is set to announce its interest rate decision this morning as speculation about another rate hike heats up.
opinion | Are First Home Savings Accounts open yet?
Personal finance contributor Christopher Liew explains how First Home Savings Accounts work, who’s eligible for the program, and outlines the contribution rules.
Canadian forest fire centre responds to unprecedented wildfire season
With 415 active wildfires across the country as of Tuesday afternoon, and 238 were considered out of control, it has meant long hours for people working at the Canadian Interagency Forest Fire Centre trying to figure out where firefighters and equipment are needed most at any given time.
'An ounce of prevention is worth a pound of cure': Experts say a national fire service could help battle wildfires
During a record-setting wildfire season, experts say prevention of more disasters is important, citing a Canada-wide fire service could help mitigate blazes.
Pope Francis to undergo intestinal surgery under general anesthesia
Pope Francis was admitted to the hospital for intestinal surgery Wednesday, the latest malady to befall the 86-year-old pontiff who had part of his colon removed two years ago.
Tim Hortons to launch credit card through mobile rewards app
Tim Hortons is launching a credit card that can be used through its mobile app, the latest move into an increasingly competitive rewards space.