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Despite significant COVID-19 led market disruptions the GHG
intensity of the Canadian oil sands declined again in 2020.
Altogether it has dropped 20 percent between 2009 and 2020. This is
an important signal, as preliminary finding from an advancing IHS
Markit report indicate ongoing GHG intensity reductions are poised
to overtake a slowing oil sands growth profile and absolute
emission could begin to decline within the next half decade.
The 2020 results confirm the long-term trend of declining GHG
intensity of the Canadian oil sands. Since 2009 (the earliest IHS
Markit models capture) the industry has seen the average GHG
intensity decline by just over 1.5 kgCO2e/bbl per year. In total
this equates to a drop of about 17 kgCO2e/bbl or 20% from 2009 to
2020.
GHG intensity is the ratio of absolute GHG emissions divided by
production—so it fluctuates based not only emissions, but also
productivity. Over the past decade it was a combination of both
factors that has led to the steady decline. Oil sands mining
operations have scored the greater improvements.
Since 2009, only once has the average GHG intensity increased.
Surprisingly this was not in 2020, but back in 2012. The fact that
GHG intensity continued to decline in 2020 is particularly
noteworthy. This occurred despite the industry undergoing the
single largest production contraction in its history because of the
COVID 19 demand shock. From January 2020 to May, production
plummeted by nearly 800,000 b/d or about 20% before beginning to
recover. This instability would drive down facility utilization
which in turn would put upward pressure on GHG intensity (think
about using similar levels of energy but with fewer units being
produced).
In 2020, however the average GHG intensity of the oil sands
still declined. To a large degree, this was the result of changes
in production between different types of extraction. In 2020, the
share of the comparatively more GHG intensive legacy integrated
mining operations which market synthetic crude oil temporarily
declined relative to the comparatively lower GHG intensive thermal
in-situ operations (specifically steam-assisted gravity drainage
projects or SAGD).
In 2020, IHS Markit estimated the average GHG intensity of
marketable oil sands produced average 69 kgCO2e/bbl. However,
within any upstream oil and gas plays there can be considerable
variability in GHG intensity. In 2020, the variation in the
Canadian oil sands emissions was the greatest it's been in many
years as the ramping down of some operations did have the expected
result of causing temporary spikes in GHG intensity. However, the
volumes impacted were relatively limited which muted the impact on
the overall average. In total in 2020 the Canadian oil sands
included output that ranged from 41 kgCO2e/bbl to 175
kgCO2e/bbl.
Increasingly the Canadian oil sands industry has begun to focus
on absolute GHG emissions. A consortium of major oil sands
producers that represent over 95% of industry output have announced
an ambition to get to Net-Zero by 2050. This is unique in that the
private operators that constitute nearly the entire basin have come
together to announce a shared ambition. Known as the Oil Sands
Pathways to Net Zero, their interim target includes lowering
absolute GHG emissions by 22 MMtCO2e by 2030 relative to 2018.
Meanwhile the Government of Canada announced its intention to cap
upstream oil and gas GHG emissions which would include the Canadian
oil sands. These efforts indicate greater levels of reduction
should be anticipated in the future.
The ramp-up of existing underutilized through the early 2020s
has put upward pressure on absolute GHG emissions. However, an
upcoming IHS Markit report indicates that ongoing GHG intensity
reductions are poised to overtake a slowing growth profile and
contribute to absolute emission reductions within the next half
decade. Moreover, new initiatives like the Oil Sands Pathways to
Net Zero are looking at ways to accelerate the deployment of carbon
capture and storage that could result is larger, more material
reductions towards the late 2020s.
This IHS Markit blog will be followed by an upcoming IHS Markit
Special Report on the trajectory of GHG emission intensity and the
absolute emissions of the Canadian oil sands. IHS Markit analysis
does not consider the implications of recently announced federal
cap on oil and gas emissions.
Please note IHS Markit oil sands GHG emissions estimates are
derived from a purpose-built oil sands model inclusive of all
thermal and mining operations in the oil sands. GHG intensity
metrics are presented with GHG emissions system boundaries
consistent with the life-cycle stage of upstream production. This
definition includes emissions associated with production of fuels
used in oil sands operations and export or import of electricity
from the power grid.
Posted 31 January 2022 by Kevin Birn, Vice President GHG Estimation & Coordination and Chief Analyst Canadian Oil Markets, S&P Global Commodity Insights
This article was published by S&P Global Commodity Insights and not by S&P Global Ratings, which is a separately managed division of S&P Global.
