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Canada Growth Fund Invests in Strathcona's Oil Sands Carbon Capture Initiatives

Strathcona Resources Ltd plans to develop up to US$1.5 billion (C$2 billion) carbon capture projects at its oil sands assets with the public investment vehicle Canada Growth Fund (CGF), the Canadian oil sands producer said in a statement.

Strathcona announced a strategic partnership with CGF, which will help fund the development of carbon capture and sequestration (CCS) infrastructure on Strathcona’s steam-assisted gravity drainage (SAGD) oil sands facilities across Saskatchewan and Alberta.  

The key reason for seeking such partnership and CCS projects is to mitigate the company’s current and future carbon tax obligations, Strathcona said, noting that carbon taxes account for a “significant part” of its current operating costs, and could further rise, based on current Canadian legislation.

“Strathcona expects to be able to eliminate a substantial majority of this future carbon tax liability through the development of CCS, and the unique structure of its arrangement with CGF is expected to allow Strathcona to achieve these reductions without a meaningful upfront capital outlay post-investment tax credits,” the company said. 

The Canadian public fund is set to invest up to US$733 million (C$1 billion) in CCS infrastructure on Strathcona’s assets, with an initial commitment of US$367 million (C$500 million). 

Strathcona will construct, operate, and own the CCS infrastructure, with 50% of the initial capital costs funded by CGF and 50% by Strathcona. 

“Substantially all of Strathcona’s share of capital costs is expected to be recouped through the federal CCS investment tax credit and other grants,” the company said. 

Strathcona said that its oil sands operations at Lloydminster and Cold Lake lie directly atop suitable carbon dioxide (CO2) storage reservoirs, allowing for local injection, unlike many other oil sands assets in Canada, where CO2 must be first captured and transported to a suitable injection site before sequestration. 

Strathcona currently produces around 90,000 barrels per day (bpd) of heavy oil and bitumen from its SAGD assets, with associated emissions of approximately three million tons of CO2 per annum. The projects with CGF backing are expected to capture up to two million tons of CO2 per annum, based on preliminary capital cost expectations, the company said.  

By Michael Kern for Oilprice.com

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