Advantage Oil & Gas Ltd. and Allardyce Bower Consulting Ltd. ("ABC") are pleased to announce they have jointly developed breakthrough carbon capture and storage technology capable of commercial profitability at a carbon price below CDN$50/tonne. The first deployment of the technology will occur at Advantage's Glacier Gas Plant near Grande Prairie, Alberta and is expected to enter service by March 2022.
The Modular Carbon Capture and Storage ("MCCS") technology can be retrofitted to most point-source industrial emissions, including sectors that are difficult to decarbonize like power generation, blue hydrogen, LNG, oil and gas processing, and production of cement and steel. In partnership with ABC, Advantage has established Entropy Inc. ("Entropy"), which will own the technology with the intent of deploying it widely in the global effort to decarbonize.
Entropy's MCCS designs include several key innovations from a research and development program that has been underway for several years, including collaboration with an accredited Canadian university. Entropy is seeking numerous patents on new technologies required to reduce the cost of capturing post-combustion carbon dioxide and storing it permanently, including innovative process enhancements and refinements that were developed over a decade of operational experience with a pre-combustion carbon capture and storage at the Glacier Gas Plant. The modular technology is extremely versatile, applicable to projects as small as 8,000 tCO2e/year allowing decarbonization to occur in easily financed increments. There is no upper limit to the scalability for larger projects. MCCS recovers approximately 90% of carbon emissions.
Highlights of the first commercial project at the Glacier Gas Plant:
- Advantage intends to substantially achieve "net-zero" scope 1 and 2 emissions using the MCCS technology at the Glacier Gas Plant in two phases. Phase 1 has been fully approved by the Advantage Board of Directors and equipment procurement is underway.
- Total cost of Phase 1 is expected to be $27 million, with Advantage investing $7 million (included in Advantage's 2021 capital spending guidance). The remainder of the project will be funded by a third-party in the form of non-equity, non-dilutive sponsorship.
- Once onstream (scheduled for March 2022), Phase 1 is expected to capture, store and offset approximately 46,000 tonnes of carbon dioxide equivalent per year (tCO2e/year). Captured carbon will be permanently stored in a deep saline aquifer.
- Operating income from monetizing carbon offsets is expected to be up to $3 million per year following Phase 1, based on a carbon offset price forecast of $50/tonne. Internal rate of return for the project at this pricing is expected to be 12%, assuming no carbon price escalation.
- Energy input and operating costs are expected to be approximately $15/tonne.
- Phase 2 may be constructed by Entropy as early as 2023 at an expected cost of $49 million and is designed to capture an additional 136,000 tCO2e/year.
- Advantage will begin marketing a proportion of its production as "blue natural gas" (net zero supply) once the project is online.
In addition to the MCCS project at Glacier, Entropy is pleased to announce it has been contracted to design a third-party MCCS project in British Columbia, and has been engaged to evaluate several additional projects in multiple industrial sectors in Western Canada and the United States. Entropy intends to develop and deploy MCCS projects world-wide, employing a full suite of expertise including project assessment, engineering procurement and design, storage reservoir engineering, carbon utilization engineering, compliance-based carbon offset marketing, carbon finance and regulatory expertise. While exploring strategic options to expand the business, Entropy will be led by Michael Belenkie (Director, President and CEO) and Craig Blackwood (CFO) under a services agreement while retaining their existing roles at Advantage.
Using Entropy technology, industrial emitters will have the opportunity to reduce emissions in stages to achieve targeted outcomes, and the MCCS design is specifically suited to achieving these goals while moderating the required pace of investment and delivering returns via carbon revenue.
