The pursuit of greener outcomes

Energy Visions 2018

Using innovation and collaboration to improve environmental performance

The world’s at an inflection point when it comes to carbon. Governments are looking to take stronger action to decarbonize economies by regulating greenhouse gas (GHG) emissions with the goal to limit the rise of global temperatures by “well below” 2°C, as agreed to under the Paris Agreement.

Environmental performance capabilities keep improving while regulatory standards keep getting stricter. But it’s not always clear if industry is leading or following regulatory institutions on this front. Although climate remains a challenge, the oil and gas sector is in a unique position where technology advancements can improve operational efficiencies as well as environmental results. So as environmental regulations tighten, the need to invest and develop new technologies increases, especially to ensure competitiveness.

“Technology is essential to reducing risks. In a world that gets serious about reducing environmental footprints, especially global warming, conventional fossil fuels will need to be a lot more competitive.”

—David Victor, Professor, School of Global Policy & Strategy; Co-Chair, Initiative on Energy and Climate, Brookings Institute

“The faster new technologies develop to challenge fossil fuels, the faster the oil and gas sector will be forced to adapt. But the industry relies on technology to improve efficiencies and its carbon footprint. So technology is seen as potentially disruptive in the long term and constructive in the short term.”

—Adam Crutchfield, Partner, National Energy and Alberta Consulting Leader, PwC Canada

Turning policy uncertainty into opportunity

In North America, the issue of climate change remains heavily partisan, and the withdrawal of the United States from the historic multilateral climate deal will make global progress to reduce emissions meaningfully more difficult. (Explore this trend more deeply.)

It goes without saying that policy uncertainty is one of the most disruptive forces for major oil and gas companies, especially as it relates to carbon. In response to the current operating environment, many Canadian companies are looking to take control and address what they can, positioning themselves as best as possible for the impacts of a politically expedited lower-carbon future. Given the rising attention to environmentally focused policies internationally, particularly in places like Europe and China, this may better align them with the global direction and investor focus on carbon.

In the near term, companies agree they need to show they can be profitable in a world of rising carbon prices and flat oil prices. Along with cost discipline, technology will be key to creating competitive advantage and building stakeholder confidence in an evolving operating environment.

Thriving in the low-carbon transition

Increasing carbon restrictions and environmental regulations at the provincial and federal level may be having an unintended consequence: putting Canadian producers at a competitive disadvantage. For example, the Government of Alberta continues to strengthen its emissions reduction strategies, most recently with rules to tax large industrial emitters to reduce emissions by 19% by 2030. Also, as planned, the provincial carbon tax increased by 50% on January 1, 2018. This is in contrast to the US government’s energy agenda of deregulation, cutting corporate tax rates and attempting to reduce environmental requirements and speed up permitting processes.

What’s more, elections can have major implications on the trajectory of environmental policies. Upcoming provincial elections in Ontario and Alberta and at the federal level have the potential to shift the current path of carbon policies. Uncertainty from a policy point of view is also exacerbated by economic uncertainty brought on by ongoing North American Free Trade Agreement (NAFTA) renegotiations and protectionist US trade policies.

The severe pendulum swing on these issues prolongs policy uncertainty for industry, making it increasingly difficult to operate, let alone commit to major investments in new projects. As a result, producers will likely focus attention on improving their operating environment, using technology and innovation to help reduce costs and address environmental concerns. It’s important to build capabilities to anticipate and respond to disruption—both expected and unforeseen—to not only survive, but to thrive in an uncertain environment.

The impact of collaboration

Canadian energy producers are grappling with a challenge: growing oil and natural gas supply without significantly increasing emissions while mitigating the broader environmental impacts. But companies are rising to the challenge by using technology and innovation. In doing so, a clear takeaway has been the importance of collaboration. Innovative ideas are coming from many sources outside their own walls, including service companies, universities, research establishments, entrepreneurs and governments.

An example of collaboration in industry is the Canadian Oil Sands Innovation Alliance (COSIA), a coalition of producers that focuses on accelerating the pace of improvement in environmental performance in Canada’s oil sands through collaborative action and innovation. In January 2018, the organization announced funding to support the Northern Alberta Institute of Technology’s clean water technology program—a potential solution for water treatment. Since 2012, COSIA has spent over CA$1.3 billion on 936 projects, 347 of which have been implemented.

Another example is the Clean Resource Innovation Network, which unites industry with academia, research institutes, financiers, governments and others to accelerate new technologies that address environmental improvements in the oil and gas sector. It invests in advanced technology solutions like water technology, methane abatement and digital oil and gas.

Producers aren’t the only ones committing to innovation and digital transformation. Energy services are also incorporating technology into their business, drawing inspiration from other industries and collaborating with startup incubators and universities among others. According to the Daily Oil Bulletin’s 2018 Oil & Gas Service & Supply Outlook Survey, 63% of respondents said investing in new technologies has become more important during this low oil-price period than before.

Key developments driving environmental performance

Canada is emerging as a world leader in environmental mitigation technologies for unconventional resource extraction practices. Collaboration has helped foster key developments in shoring up the Canadian oil and gas sector’s green profile:

Direct contact steam generation technology

According to COSIA, this revolutionary project may eliminate GHG emissions and the need for water treatment in steam-assisted gravity drainage (SAGD) plants. The process would replace the conventional boiler technology and instead use sequestration to pump carbon underground, where it then would aid in bitumen extraction.

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CO2 conversion

Key developments have been made in the use of algae at oil sands projects to convert CO2 into biomass and biofuel products. COSIA has been sponsoring the Algal Carbon Conversion Project and believes the project has potential to reduce emissions.

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Gas turbine once-through steam generators (GT-OTSGs) technique

Currently being piloted, this technique uses integrated natural-gas power turbines and large boilers to produce steam and electricity at the same time. The electricity is used to power facilities while steam is used to produce bitumen. The process reduces the operator’s reliance on Alberta’s power grid.

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Marine spills prevention technology

Collaborating with producers to drive clean technology solutions, a cleantech fund has created one of the smallest and lightest marine oil spill containment systems in the world.

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Canada is growing its leadership position in environmental mitigation technologies, so as regulations tighten, the need to collaborate and innovate increases to ensure global competitiveness.

Contact us

Reynold Tetzlaff

Calgary Managing Partner, PwC Canada

Tel: +1 403 509 7520

Adam Crutchfield

Partner, National Energy and Alberta Consulting Leader, PwC Canada

Tel: +1 403 509 7397

Jason Bergeron

Partner, Technology Advisory, Digital Energy Lead, PwC Canada

Tel: +1 403 509 7470

Clinton Roberts

Partner, Alberta Deals Leader, PwC Canada

Tel: +1 403 509 7307

Shawn Reain

National Tax Leader Energy, Utilities, Mining and Industrial Manufacturing, PwC Canada

Tel: +1 403 509 6373

Brendan Hobal

Partner, PwC Canada

Tel: +1 780 441 6836

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