Penn West seeks CO2 from Saskatchewan power plant
CALGARY, Alberta, June 2 (Reuters) - Penn West Energy Trust (PWT_u.TO) has started talks aimed at securing carbon dioxide from a government-funded carbon-capture project to boost output at oil fields in southeastern Saskatchewan, its Chief Executive said on Monday.
Penn West, Canada's largest conventional oil and gas trust, has several small oil pools near SaskPower's Boundary Dam coal-fired power plant, site of a C$1.4 billion ($1.4 billion) carbon capture proposal, which CEO Bill Andrew said were well-suited for the CO2.
In February, the Western Canadian province's government moved ahead with plans to refit the power plant with CO2 equipment after Ottawa committed C$240 million.
"We've been talking with SaskPower and we've been talking with the government of Saskatchewan. They are not formal talks, but we've certainly had discussions with them," Andrew said in an interview after Penn West's annual meeting.
"We believe we've got a place to put the CO2."
The oil fields produce about 15,000 barrels a day.
The site is not far from EnCana Corp's (ECA.TO) Weyburn oil field, where the company bolsters oil output with carbon dioxide piped from a North Dakota coal gasification plant.
Andrew has long been a proponent of piping the gas linked to global warming from industrial emitters, like electricity, petrochemical and oil sands plants, to be injected into old oil fields. The gas increases pressure, lifting output.
He has been frustrated in the past by the slow pace of proposals in Alberta, although he said on Monday that progress is now being made there too.
In Saskatchewan, costs will likely have to be shared by his firm, governments and SaskPower, which is owned by the province, he said. The power utility has said it could cost about C$1 billion to refit the Boundary Dam plant and C$400 million to build pipelines.
"In the case of emitter, they've got a problem with CO2 so they've got to put some cash on the table to address that. In our case, on the (enhanced oil recovery) side, we want to pay to get some upside on the oil -- we don't expect it for nothing," Andrew said.
"The gap -- if there is any -- I think it's got to be maybe in the form of tax incentives. That's basically the way oil sands (development) worked."
Canadian governments are looking at carbon capture and storage projects as a way to meet emission reduction targets with minimal impact on economic growth.
Early this year, Alberta's government said it hoped the emerging technology will make up 70 percent of its emission reduction goal by 2050.
Andrew said his efforts in Canada's biggest oil-producing province are starting to gain traction.
"Alberta's moving a lot faster than it was. There's been a climate council announced. I'm on the council and we're very active looking for a solution with many players," he said.
The group includes representatives from industry, government and environmental groups.
One hurdle in Alberta is the surging cost amid the province's economic boom, which mirrors conditions in all sectors, he said. ($1=$1 Canadian) (Editing by Rob Wilson)
