Significant update on Pathways Alliance project coming soon: MEG Energy CEO

By Amanda Stephenson, The Canadian Press on November 7, 2023.

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CALGARY – The CEO of one of the oilsands companies behind the Pathways Alliance says the group expects to provide a significant update on its proposed $16.5-billion carbon capture and storage project within the next couple of months.

Derek Evans, chief executive of MEG Energy, made the comments on a conference call with analysts discussing the company’s third-quarter financial results.

MEG is one of six oilsands companies that have formed the Pathways consortium with the goal of reducing greenhouse gas emissions from oilsands production to net-zero by 2050.

The companies have proposed jointly investing in the construction of what would be one of the largest carbon capture projects in the world. The project would take the form of a massive pipeline built to transport carbon from 20 separate carbon capture facilities at oilsands sites in northern Alberta to an underground hub near Cold Lake for safe storage.

The proposed project would sequester up to 10 to 12 million tonnes of harmful carbon emissions annually from the oilsands, an industry which currently accounts for about 12 per cent of Canada’s overall emissions.

While the Pathways Alliance has not yet made a final investment decision to go ahead with the project, the group has previously stated its intent to apply for regulatory approval this fall with the goal of putting in its first purchase orders for pipe in early 2024.

“I think we owe the market an update in that regard,” Evans said Tuesday.

“And I think something will be coming in that regard, I hope, over the next month or two.”

Pathways is still waiting for the federal government to finish hammering out the details of its pledged investment tax credit for carbon capture and storage.

It has also been waiting for Ottawa to release a promised framework providing certainty about the future price of carbon, a move which would remove some of the investment risk from the project.

In addition, Pathways recently started formal consultations with 24 Indigenous and Métis groups whose traditional territories are located in close proximity to the proposed project.

“I worry sometimes that because we haven’t hit milestones, or we’re not moving as fast as people think we should be moving, that they think there’s nothing going on with this project,” Evans said.

“I can assure you there is a massive amount of work that is going on in terms of Indigenous consultation, pipeline sizing, looking for appropriate mills … So lots and lots of work going on, as well as the important work with both the federal and the provincial government trying to arrive at the appropriate fiscal terms that will make this project economic.”

If the larger pipeline project is a go, Evans said, MEG itself would likely spend $50-$75 million between 2026 and 2029 building its first carbon capture facility at its Christina Lake oilsands site.

That facility would capture somewhere between 0.63 and 0.73 million tonnes per year of carbon emissions, he added.

MEG reported third-quarter earnings on Monday after the close of markets. The company said it earned $249 million in the third quarter, up from $156 million a year earlier.

The Calgary-based energy company said its earnings per diluted share were 86 cents, up from 51 cents during the same quarter last year.

Revenues were $1.4 billion, down from $1.6 billion a year earlier.

Evans said increased bitumen production and strong bitumen realizations resulted in over $400 million in free cash flow, allowing the company to advance its debt reduction.

The company said it paid down US$68 million in debt, or approximately $92 million in Canadian dollars, during the third quarter.

Bitumen production rose to 103,726 barrels per day, up from 101,983 a year earlier.