Cenovus is an integrated oil and gas company headquartered in Canada, and a diamond sponsor of the 24th World Petroleum Congress, taking place in Calgary between 17 and 21 September. Former COO Jon McKenzie took over as president and CEO in April this year. Here he talks to Carbon Economist about the future of the energy sector.
The theme of this year’s Congress is ‘transition’. Can you talk about what Cenovus is doing on this front, in terms of scope one and scope two emissions?
McKenzie: We have a target to reduce our absolute scope one and two emissions across our operations by 35% by year-end 2035, on a net equity basis, as we build toward our long-term ambition for net-zero emissions by 2050. And this year we announced a methane milestone to reduce absolute methane emissions in upstream operations by 80% by year-end 2028, from a 2019 baseline. This will help us make additional meaningful reductions in the near term as we also apply and advance technologies to enable future decarbonisation of our operations. We expect to spend about $1b in our five-year business plan on GHG emissions reduction opportunities. This includes CCS we are progressing at our Minnedosa ethanol plant, Elmworth gas plant, Lloydminster upgrader and Christina Lake oil sands asset. On the methane front, we are prioritising a significant inventory of abatement projects across our upstream operations, as well as using technology that helps us identify leaks faster so we can prioritise and address the largest ones first. Our innovation team is also continually looking at new technologies that could potentially be applied to our operations to reduce emissions.
How important are individual and collective reduction targets for oil and gas producers as they approach the transition?
McKenzie: We believe targets are extremely important. All credible analysis indicates oil and natural gas will continue to be a part of the energy mix for decades to come. That means our industry must play a major role in reducing emissions. By setting our own target, as well as working with our oil sands peers in the Pathways Alliance, we can demonstrate the actions we are taking. It is also important for the public and our investors to be able to chart the progress we are making. Targets are another way to be transparent about efforts to decarbonise industry’s operations.
Do you see firms working together in new ways when tackling the challenges of the transition?
McKenzie: The Pathways Alliance is an example. We co-founded Pathways with five of our largest oil sands peers with the goal of achieving net-zero emissions from our oil sands production by 2050. Together we represent 95% of Canada’s oil sands production. We are fierce competitors, yet we realised that to tackle this huge challenge, and find solutions faster, we needed to work together. We have hundreds of employees from all six companies working together across multiple teams. And the direction to ensure this work progresses with urgency comes from the top, with executives from each of our companies meeting several times a week.
How is the current renewed global focus on energy security changing the strategic thinking of firms involved in energy supply?
McKenzie: The recent turmoil has made clear the critical role oil and gas plays in helping ensure an affordable, abundant and reliable supply of energy. And the renewed focus on energy security has, I think, highlighted for many the importance of where energy comes from. Cenovus continues to believe our industry is a valuable source of energy and that, if we decarbonise the Canadian barrel of oil, it should be the preferred global barrel. Studies by independent researchers and analysts show the Canadian energy sector is ranked best in the world when it comes to ESG—human rights, strong governance, transparent disclosure and sustainable land and water use. Our area of challenge has been emissions, and we are working to address these.
In relation to producers in other parts of the world, how well placed are Canadian firms to address the global transition to a low-carbon economy?
McKenzie: Canada is perfectly positioned. We have abundant reserves to deliver a reliable supply of energy the world needs—and is going to continue needing. The majority of that oil resource is in the oil sands, where costs to sustain production are very low. At the same time, Cenovus and our largest oil sands peers are committed to reducing our emissions and working together—and with governments—on an ambitious plan to help meet the national 2050 net-zero goal.
How important are technologies such as CCS and hydrogen in the oil and gas industry of the future?
McKenzie: All technologies are going to be needed to get us where we need to go to achieve our targets and net-zero ambition. CCS is one where we see great opportunities, and the ability for Alberta and Canada to be a global leader. The Pathways Alliance foundational project is a carbon capture, transportation and sequestration network that would be among the largest in the world once operating. Much of the preliminary work is underway, including the upfront evaluation, regulatory, legal and engineering work needed for megaprojects like this. We are also working closely with governments to ensure a financial and regulatory model that supports decarbonisation efforts to achieve net-zero emissions by 2050.
And, of course, Cenovus has a number of its own carbon-capture projects underway, in addition to two already operating. We have been capturing CO₂ from our Lloydminster ethanol plant since 2012 and using it for enhanced oil recovery. And a pilot project at our Pikes Peak South thermal project is helping us test technology developed by Vancouver-based clean tech company Svante.
Is the policy regime in Canada providing adequate incentives for producers to reduce their emissions and invest in new technologies, or can more be done?
McKenzie: It is imperative the right policies are in place to ensure the competitiveness of our industry, and it is something we continue to work on with our provincial and federal governments. Without the right policy and incentive mix, capital is going to flee to other jurisdictions.
Are there any technologies not yet commercialised (other than CCS and hydrogen) that could be a game changer for producers?
McKenzie: As I mentioned, our innovation team is always looking at new and emerging technologies and their potential for our business. One area we are taking a close look at is using small modular nuclear reactors (SMRs). A lot of our oil is produced via a process called steam-assisted gravity drainage, and we use natural gas to create the steam. That is the major source of emissions from those assets. If we could replace that energy source with something like SMRs, which have almost zero emissions, we could decarbonise those barrels. However, our discussions in this area are at a very early stage and a lot more work needs to be done.
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