CALGARY – While many companies that service the oil and gas industry are struggling with record-low demand for their expertise, Scott Nelson and his team have become steadily busier in recent weeks.
Oilfield services companies face a 2016 where there’s little left to cut
As prices started receding in November 2014, oil service companies were the first to feel the chill, rolling back salaries and reducing headcount as they responded to producers’ demands to slash costs.
Nelson, president and CEO of clean-technology firm Titanium Corp., says interest in his company’s services has spiked since the Paris agreement on climate change and Alberta’s new carbon tax legislation.
“If you’ve been making a long list of things you may or may not do (to reduce emissions), you’d better look at them really hard right now because it’s going to cost you money if you don’t,” Nelson said.
Nelson, and a number of his clean-tech peers have been fielding an increasing number of calls from oil and gas executives since Alberta Premier Rachel Notley announced in late November new economy-wide taxes on carbon emissions, total emissions caps for oilsands operations and a requirement that energy companies reduce their methane emissions by 45 per cent.
Shortly after the announcement, the Canadian Association of Petroleum Producers president and CEO Tim McMillan said the requirement to cut methane emissions on its own would add “hundreds of millions of dollars” in additional costs for the industry.
To meet the new requirements, energy companies are turning to the clean technology sector, poised to be one of the few growth businesses in Alberta in 2016.
“I’ve seen a significant paradigm shift over the last couple of months working in the oil and gas sector and speaking to leaders who, five years ago, saw this as a compliance exercise,” Ernst and Young energy market leader for climate change Meghan Harris-Ngae said.
Now, she said, oil and gas companies in Alberta see clean-tech investments as a way to save rather than spend money, which “creates an opportunity for the clean-tech sector” and should also lead to an overall reduction in greenhouse gas emissions in the province.
Canada’s beaten and bedraggled oil and gas assets ‘now on sale’LNG hope and OPEC’s tightrope: What’s in store for Canada’s oil patch in 2016Canada’s oilpatch adjusts to the ‘new normal’ after a year of pain
On a national level, clean tech revenues have been growing at a rate four times faster than the Canadian economy, according to a report from Analytica Advisors, and the small but growing industry’s revenues totalled $12 billion at the end of 2014.
Much of the sector’s growth has been focused in Ontario, Quebec and British Columbia, each of which the Pembina Institute scored well on a July policy report card. The study by the environmental policy research institute called for additional support for the sector, including a national approach to carbon pricing and later-stage funding.
Harris-Ngae said the new policies in Alberta, which include a $20-per-tonne carbon tax in 2017 that increases to $30 per tonne in 2018, create an “impetus now for some of the smaller players in the clean tech sector to get a lot more traction” in the province by assisting oil and gas companies in reducing their emissions.
To be successful in Alberta, which has been hit hard by the prolonged oil price rout, Harris-Ngae said clean tech companies will need to demonstrate they can help oil and gas companies reduce their emissions as much as possible, and do so at the lowest possible cost.
“Our read on the industry is that they’ve been severely pressured by oil prices, but they’ve also been waiting to see what this climate plan would have in it,” Nelson said.
His company proposes to build facilities — either operated by Titanium or as a joint-venture — at oilsands mining operations that process a mine’s wastewater and remove the solvents and chemicals from that water. In doing so, Titanium prevents methanogenesis, a process which causes methane emissions in tailings ponds.
At the same time, Titanium and a potential partner would sell those solvents, chemicals and minerals on the market and actually make money, rather than simply adding costs.
Nelson estimates that Titanium’s process can prevent three to five megatonnes of methane emissions from tailings ponds and also eliminate volatile organic compound emissions. “We can make reductions in their emissions that are worth $30 per tonne and eat into that extra cost,” he said.
The oil and gas industry in Alberta produced 30.4 megatonnes of methane in 2013, the last year for which provincial government information was available. Those megatonnes account for 70 per cent of total methane emissions in the province and also account for 25 per cent of all emissions from the upstream oil and gas industry, according to the province.
Methane is also about roughly 30 times more intense as a greenhouse gas than carbon dioxide and, as such, forms one of the central parts of the government’s emissions-reduction plan.
It’s also the aspect of the plan clean-tech companies are targeting most aggressively.
“There are lots of quick, easy hits that Alberta and Canada can achieve,” said Questor Technology Inc. president and CEO Audrey Mascarenhas of reducing emissions from oil and gas operations. “If I can do it for under $2 a tonne, or it would cost me $20 a tonne in a tax, then that will generate a change in behaviour, I believe.”
Mascarenhas, who has been with Calgary-based Questor since 1999, says that selling her company’s products — which capture flared gasses and turn wasted heat into electricity — has become easier over time as energy companies have increased their focus on reducing emissions.
In recent years, oil and gas companies have tried to reduce emissions as a way to build social license in and around the cities and towns where they operate.
While Mascarenhas expects those community-relations efforts to continue, she said the new legislation in Alberta will provide a new and purely financial incentive to cut emissions.
Speaking specifically about methane emissions and her company’s technology, she said, “We have an opportunity to reduce GHG emissions by 8.5 megatonnes per year at a cost of less that $1.12 per tonne.”
“In this low (oil and gas) price environment, you’re not looking for sexy, expensive solutions. You need practical solutions that have a track record that show you can have an impact,” Mascarenhas said.