Canada's Oil Producers Target Late 2027 for Pathways Carbon Capture Decision

Canada's biggest oil producers are targeting late 2027 for a final investment decision on their proposed 6-million-tonne carbon capture and storage project, a key piece of the country's plan to grow oil production and keep emissions in check, the president of the Pathways Alliance industry group told Reuters.

Kendall Dilling, who heads the industry group that represents Canadian Natural Resources, Imperial Oil, Suncor Energy, Cenovus Energy and ConocoPhillips Canada, said in an interview this week that he believes oil sands companies will reach definitive agreements with the Government of Alberta and the federal Government of Canada on the fiscal terms by mid-November, paving the way for a potential decision to go ahead with the multi-billion-dollar Pathways project.

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"It depends, obviously, on regulatory approvals and a few things, but I think late 2027 into early 2028 is kind of that window," Kendall Dilling, president of the Pathways Alliance, said.

The Pathways project, a proposed CO2 transportation pipeline and storage hub that could reduce greenhouse gas emissions from Canadian oil sands production, is a key piece of a non-binding agreement signed earlier this year by the province of Alberta and the government of Canada, which have agreed to work together to grow the country's oil production.

Prime Minister Mark Carney is trying to help the oil and gas sector as part of an effort to make Canada's economy more resilient against U.S. President Donald Trump's tariffs, although the Canadian leader says he is still committed to tackling climate change. He has endorsed Alberta's vision of a new 1 million barrel-per-day export pipeline to the Pacific Coast, but has said his support is contingent on the Pathways project going ahead.

Oil sands companies, which first proposed the project in 2021 but have been balking at its construction cost, signed a deal in July with both governments. It lays out conditions for the advancement of Pathways, including agreements around carbon pricing, financial support and permitting. But many of the proposed policy changes have not yet been drafted into final legislation.

Scaled-Down Project

Environmentalists have excoriated the Pathways Alliance for scaling down the project, which had earlier targeted 22 million tonnes of emissions reduction by 2030. But Dilling said what industry and government have agreed to - 6 million tonnes by the mid-2030s, with an additional 10 million tonnes by 2045 - is a more appropriate, balanced middle ground.

"The (prior proposal) was an incredibly aggressive scale and timeline that would have been, I think, very difficult to manage and to contain costs," he said.

Earlier this year, some oil and gas executives were publicly critical of linking the approval of a new oil pipeline to the Pathways project. Cenovus CEO Jon McKenzie said in June that Pathways could cost up to C$30 billion, making Canadian producers, which are also subject to a federal carbon tax, uncompetitive.

While competitiveness is a concern, Dilling said, it's not true that industry has soured on the carbon capture project.

"Today, global focus on the climate issue has tempered, for sure, but I think as the industry, we take a long-term view here," he said. "So that if 10 years from now, the emissions-per-barrel discussion is really globally important again, we're not on our heels. We've been out on our front foot."