North American oil and gas producer Strathcona Resources has partnered with Canada Growth Fund, an $15 billion arm's-length public investment vehicle, for the development of a carbon capture and sequestration (CCS) infrastructure on Strathcona's steam-assisted gravity drainage (SAGD) oil sands facilities across Saskatchewan and Alberta.
As per the agreement, CGF will invest up to $1 billion towards CCS infrastructure on Strathcona's assets, with an initial commitment of $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.
All of Strathcona's share of capital costs is expected to be recovered through the federal CCS investment tax credit and other grants.
Strathcona will retain full ownership of the CCS infrastructure and associated carbon credits and will repay CGF's investment over time from the actual cash flows generated by the CCS infrastructure based on actual captured volumes and costs. While the repayment of CGF's investment will not be subject to any fixed payments or minimum volume commitments, it will be driven by the actual performance of each CCS project.
Strathcona has agreed to dedicate an area to the CO2 volumes from its SAGD facilities and will guarantee a fixed price of carbon to the partnership. Each CCS project's fixed price per ton will be set at the time of the final investment decision (FID).
Strathcona's oil sands facilities in the Lloydminster and Cold Lake regions are located directly on top of suitable CO2 storage reservoirs to allow local injection. In contrast, the majority of Canada's oil sands facilities in the Athabasca region of Northern Alberta must be captured and transported to a suitable injection site before sequestration. The Government of Saskatchewan has granted Strathcona subsurface CO2 sequestration rights.
Based on preliminary capital cost expectations, up to $2 billion of combined capital, which will be deployed through the partnership, is expected to capture up to two million tons of CO2 per annum.
The agreement will allow Strathcona to initiate its final stage of front-end engineering design (FEED) work, with a targeted FID date for its first commercial project in mid-2025. Strathcona is working with the Alberta government on a similar approval for dedicated carbon sequestration pore space beneath its Cold Lake assets.
