CO2 interest may help accelerate decision somewhat on Shand Power Station: minister

Whitecap Resources Inc. has recently approached the provincial government, saying it’s interested in additional carbon dioxide (CO2) for usage in its enhanced oil recovery efforts at the Weyburn Unit.

What does this mean for SaskPower? Dustin Duncan, Minister responsible for SaskPower, said on Oct. 3, “That says there is interest in seeing an expanded market for CO2. We had a really good discussion with (Whitecap CEO) Grant Fagerheim and his team. They came down to Regina to meet with us.

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“I would say they’re not the only company interested, which is actually a pretty positive sign,” Duncan said.

He was briefly attending the Saskatchewan Industrial and Mining Suppliers Association’s Oil and Gas Supply Chain Forum in Regina.

“We’ve had some early interest from other companies, what’s our timeframe in terms of making a decision on the Shand project. But obviously, Whitecap is, by far, the biggest player that’s looking at this. And I think they’re just trying to see whether or not their timing on making decisions for future CO2 contracts lines up with our decision-making timelines on the Shand Power Station.

“So we had a really good discussion. They’ve just recently sent us some information this week. We’ve asked for a little bit more firm numbers in terms of how much CO2 they’d actually be looking for. We’re going to put that as part of the decision-making process on whether or not to go forward with Shand,” Duncan said.

Asked if having a ready customer takes pressure off the decision-making process, Duncan replied, “It certainly takes some of the pressure off. Keep in mind, BD3 (Boundary Dam Unit 3), the price of natural gas was probably three to four times than what it is today. I think having a ready off-taker for the CO2 was probably less of a factor. It’s going to be more of a factor this time, just because the price of natural gas is so low. We need to help make that business case, to say that the byproduct, the CO2, we actually have a market for. We have somebody willing to take it.

“Now, we have to do a lot of work to see what the comparables are. As Whitecap knows, and they’ve told us, they’re currently getting supplies from Beulah, and some of the incentives in the United States, it looks like there’s going to be more, not less, CO2 coming onto the market over the coming years. What is their price point look like, compared to what they can buy from the States, compared to what we can produce it for and sell it to them. The price of CO2 is obviously going to be an important part of this. But knowing there is active interest, that’s going to help build the business case on whether or not we move ahead with Shand,” Duncan said.

He said other CO2 sources might come online which will be able to supply carbon dioxide into the Souris Valley Pipeline which supplies the Weyburn and Midale Units with CO2. Montana and Wyoming are possible sources.

“I think they’re just looking at their options to see what sources are going to be coming online in the States,” he said, adding this includes whether they have to sign long-term contracts in the U.S. that would prohibit them from buying additional CO2 from SaskPower.

“I think Grant was very upfront, in saying if they’re going to buy additional CO2, they’d like to buy it from Saskatchewan sources rather than the U.S. That will be a business decision that they need to make.”

Asked if this accelerates SaskPower’s decision-making process to go ahead with further CO2 capture, Duncan replied, “I think it helps. I think a couple of things are going to help to accelerate. I’m going to say not by years, by a number of years, but we might be closer to making a decision. In the past, if it was maybe a 2025-type of timeframe, maybe we’re making it earlier in the decade, but certainly not making it this year. Certainly by the end of this year is off the table at this point. But things like the new natural gas regulations, and the cost that’s going to put on SaskPower for the new Moose Jaw plant, having a company come forward, saying they’d like to buy additional CO2…

“At the end of the day, we need as much information as possible to make the business case of whether to go forward or not. And the more information we have, earlier in the process, rather than later, certainly helps,” he said.

If a new federal government comes in and decides to axe the carbon tax, does that make a difference? Duncan said there’s two parts to it – the consumer carbon tax and the output-based performance system on large emitters.

“Even with a change in government, there may still be a cost, an additional operation cost, because of the fuel source. It might be lower, though, compared to what is now proposed by the federal government on Moose Jaw,” he said, preferring it simply be exempted.

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