A new agreement that will see Japan Petroleum Exploration Company (JAPEX) invest in decarbonization opportunities in Alberta made history while also being rooted in the past, in the eyes of Gary Mar. 

JAPEX is seeking to develop projects in carbon capture and storage (CCS), hydrogen and bioenergy. It’s part of the company’s JAPEX2050 strategy toward carbon neutrality. 

“This new endeavour is a great opportunity that demonstrates the world is changing but the relationships endure,” says Mar, the province’s former trade envoy to Asia and the current CEO of the Canada West Foundation.  

“Alberta’s very first international office was opened in Tokyo in 1981. And we have built a tremendous soft infrastructure that includes partnerships between a dozen Alberta and Japanese universities.” 

For JAPEX, the agreement represents something of a homecoming for the company that first started work in the Alberta oil sands in 1978 and operated one of the first in situ (or drilled) oil projects for nearly two decades before selling its stake in 2018. 

“We are now aiming to come back to Alberta and contribute to its decarbonization,” JAPEX president of overseas business Tomomi Yamada said in a statement.  

Mar says the memorandum of understanding signed this March between JAPEX and the crown corporation Invest Alberta stems from a strong relationship built over decades.  

“You can’t be considered a reliable partner for a new venture if you haven’t been a reliable partner for decades in the past,” says Mar.  

“Economies change and world’s needs change but strong relationships are important factor in whom you do business with.” 

Alberta’s established CCS infrastructure has already attracted new investment, including Air Products’ $1.6-billion net zero hydrogen complex and Dow Chemicals’ $8.8-billion net zero petrochemical complex.  

Mar sees JAPEX’s deal with Invest Alberta opening a whole new market of potential carbon neutral investors in the Pacific Rim. 

“When other countries who are partners in the Trans-Pacific Partnership (TPP) see JAPEX invest in this decarbonization opportunities and net zero projects in Alberta, it will send a very clear signal to others in the TPP about the potential,” Mar says.  

“This deal may come from the decades-long relationship between Alberta and Japan but can also serve as a signpost for decades to come.” 

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Emerging energy resources are taking on greater importance in Canada’s oil and gas heartland.  

Producers will spend $730 million this year developing hydrogen, geothermal, lithium and helium resources, according to the Alberta Energy Regulator (AER).  

That’s a nearly 250 per cent increase from 2020, and it’s expected to continue rising.  

“We have advantages in all four categories,” says AER principal economist Afshin Honarvar. “They are important.”  

The AER first included emerging resources in its annual outlook in 2022, listing capital expenditures for hydrogen, geothermal and helium alongside oil, gas and oil sands. This year the AER added lithium to the outlook as well.  

Annual spending on emerging resources in Alberta is projected to reach $840 million in 2032, or a total of about $9 billion between 2020 and 2032. 

“It makes sense for us as the regulator to use our expertise in economics as well as the data that we have to track the progress in these areas,” Honarvar says.  

“That is interesting for people to know. Provincially, nationally and globally this is something they are interested in, and they would like to see how we are progressing.” 

The AER’s spending projection is based on public project announcements and estimated capacity additions, the regulator said.  

The temporary pause on renewable electricity generation projects reviews and approvals that applies to the Alberta Utilities Commission does not apply to regulatory approvals from the AER, a spokesperson told CEC. 

Hydrogen 

Hydrogen is the most advanced of Alberta’s emerging resources. The province is already Canada’s largest hydrogen producer, generating about 2.5 million tonnes of the country’s three million tonnes per year of the resource, mainly used for industrial processes.  

Alberta is also already producing so-called “blue hydrogen” from natural gas, where emissions are removed through carbon capture and storage (CCS) technology. Since 2015, the Quest project near Edmonton has safely captured and stored more than 7 million tonnes of CO2 emissions while producing clean hydrogen for the Scotford oil sands facility. 

Among new hydrogen projects underway in Alberta is a $1.6 billion net zero complex owned by Air Products. It will provide supply to the province’s first commercial-scale hydrogen refueling station, as well as Imperial Oil’s new renewable diesel facility.  

Honarvar says Alberta’s advantage as a hydrogen producer for future fuels comes from its vast resources of natural gas, and the energy industry’s experience. 

“We have the right skill set; we have the right infrastructure. We have the human resources, with the knowledge that can be transferable in this area very easily,” he says.  

“Geothermal is no different.”  

Geothermal 

Geothermal energy, or heat originating from below the earth’s surface, can be produced using water or other fluids and used for heating or generating clean electricity.  

Geothermal is relatively untapped in Alberta, but AER data shows development is accelerating.   

“We forecast an average growth rate of 13 per cent in our outlook. The base is small, but the pace of growth is fast,” Honarvar says.  

“Geothermal is about repurposing existing oil and gas wells. We have produced from oil and gas wells for many years. We are very familiar with that technology, and we have the knowledge of how to utilize that kind of resource.” 

Lithium 

Alberta’s long-established oil and gas sector also provides advantages for lithium production, Honarvar says. In Alberta, lithium – an ultra-light metal used in consumer electronics as well as electric vehicles and battery storage systems – is found in so-called brine.  

“Brine is basically the water that gets produced with oil and gas.  We have been dealing with brine for many, many years, but in the past we were not using it, we were injecting it back into the ground,” he says.  

“Now the plan is to extract the lithium that is available in those brines. The price of lithium has increased a lot over the past few years and that has created that window of opportunity for Alberta because some of those marginal resources now they are becoming a gold mine.” 

Helium 

Helium, which has many uses including medical MRI imaging and as a rocket propulsion fuel, is in short supply around the world.   

The price of helium has increased by more than 160 per cent since 2017 as demand has grown and is expected to continue rising. Canada has the world’s fifth largest helium resources, and because it can be produced along with natural gas, Alberta could become a significant supplier.  

“In the past helium was mainly maybe a waste because it was not really captured or processed. Now if we find a good concentration of helium, the plan is to extract and process that helium,” Honarvar says.  

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The early stages of construction are now underway on a new $1.6 billion net zero hydrogen complex near Edmonton, Alberta. 

One of its first customers is expected to be Imperial Oil, using the hydrogen to supply a proposed renewable diesel facility that could reduce Canadian transportation emissions by the equivalent of taking 650,000 cars off the road per year.  

“We are on the threshold of a material reduction of western Canada’s greenhouse gas emissions while sparking new economic development in the Edmonton region,” says Rachel Smith, general manager of Air Products Canada, owner of the hydrogen facility. 

“Hydrogen has been produced in Alberta for decades. But net zero clean hydrogen is a game-changer.” 

Net zero technology 

The complex will use advances in technology to achieve net zero emissions.   

To produce hydrogen, it will employ a system known as auto-thermal reforming (ATR) rather than the more traditionally used steam methane reforming (SMR) technology.  

An SMR facility equipped with carbon capture technology is recognized to enable cost-effective capture of up to 60 per cent of carbon emissions.  

Air Products says that ATR, which uses a different reaction for the chemical synthesis of hydrogen, is expected to enable 95 per cent capture of the carbon that would otherwise be emitted. 

The captured and compressed CO2 will be sent by pipeline to a permanent underground storage site approximately 40 kilometres away. 

To avoid the indirect emissions associated with using electrical power from the provincial grid, the complex will use a hydrogen-fueled electrical power cogeneration unit. It will be large enough to power the facility and enable excess power to be exported to the grid.  

The avoided emissions from the exported power are expected to offset the remaining five per cent of emissions from the ATR hydrogen facility, allowing the project to achieve net-zero. 

The complex has received a combined $475 million in funding from the federal government’s Strategic Innovation Fund, the Alberta Petrochemicals Incentive Program, and Emissions Reduction Alberta.  

It is expected to be in service in 2024.  

Renewable diesel 

Also expected to be up and running in 2024 is Imperial’s proposed renewable diesel complex at its Strathcona Refinery. The deal with Air Products, announced in September 2022, is “an important milestone,” says spokeswoman Keri Scobie. 

The facility is expected to produce more than one billion litres per year of renewable diesel.  

This could reduce emissions from Canada’s transportation sector by about three million tonnes per year (from a total of 159 million tonnes per year in 2020).  

About half of the low-carbon hydrogen produced by the Air Products facility will supply the Strathcona complex.  

Smith says the facility will also produce zero-emission liquid hydrogen fuel for the transportation market, all derived from Alberta’s natural gas resource. 

Hydrogen complex construction began in fall 2022. Imperial expects to reach a final investment decision for its renewable diesel complex in the coming months.  

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Canadian companies are pulling ahead in the race to reduce emissions from rail transportation.

As momentum builds for hydrogen as a low or zero-emission energy source, Calgary-based CP Rail and Burnaby, B.C.-based Ballard Power Systems are developing the first long-distance hydrogen locomotives in North America.

The $33.2-million project drew attention at this year’s COP26 climate summit in Glasgow, Scotland, says Scott MacDonald, CEO of Emissions Reduction Alberta (ERA).

“It really resonated with countries around the world,” he says.

“They all get it in terms of transportation. They’re all exploring the opportunities around hydrogen and this opportunity around locomotives everybody nodded their heads and said ‘oh wow that’s amazing’. It’s very, very exciting.”

Ballard helped build the world’s first commercial hydrogen fuel cell powered short-distance rail line, which started operating in China’s Guangdong Province in December 2019. It brings “a new zero-emission transit experience” to local residents, the company says.

In Canada, Ballard and CP are developing hydrogen fuel cell powered locomotives for long-haul, heavy loads. It’s a program that CP first announced in December 2020 and expanded in November 2021 after receiving $15 million in funding from ERA.

Global interest in hydrogen-powered locomotives is growing. Just this week, Texas-based BNSF Railway and partners Caterpillar and Chevron announced they will work together to “confirm the feasibility and performance of hydrogen fuel for use as a viable alternative to traditional fuels” in long-haul rail.

Also this week, Australian freight operator Aurizon and mining company Anglo American announced they will team up on a feasibility study that could lead to the development of a hydrogen fuelled heavy haul locomotive prototype.

In Canada, CP is going to build three. The work will “refine the process” of converting diesel-electric powertrains to hydrogen-electric powertrains for three categories of locomotive, which collectively represent most locomotives in use throughout North America, the company says.

Projects like this are important as the world becomes more serious about hydrogen as an energy source because they create demand that previously did not exist.

“There wasn’t demand because there wasn’t supply, and there wasn’t supply because there wasn’t demand,” says Alanna Hnatiw, mayor of Sturgeon County in central Alberta. She’s also chair of the Edmonton Region Hydrogen Hub, which launched in April 2021 with partners including ERA.

While there are major projects underway in Alberta for new hydrogen production, MacDonald says the demand piece is a critical part of the puzzle if it is truly to become part of the Canadian economy.

“What’s so exciting about the CP project is that it’s creating the demand,” he says.

“Transportation is Canada’s second largest source of GHG emissions, so the ability to transform the energy source for that sector will create the demand that will drive the supply side and create the customers that Alberta needs for the products that we can produce.”

The CP project is being expanded significantly with the additional funding from ERA. In addition to increasing the number of hydrogen locomotive conversions from one to three, CP will add hydrogen fuelling facilities at rail yards in Calgary and Edmonton.

In Edmonton, a small-scale hydrogen plant will use natural gas, built to accommodate potentially capturing greenhouse gas emissions in the future. In Calgary, the hydrogen will be produced from water, using renewable power from solar panels to produce zero greenhouse gas emissions.

“It creates the opportunity for Alberta to become a centre of excellence in this whole conversion technology,” MacDonald says.

“Locomotives are used around the world and if we can be involved in the conversion to prove out this technology there’s a huge economic opportunity in terms of the conversion but also creating a demand for the product that we can produce going forward.”

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Canada’s oil and gas industry is recognized as having a level of cooperation on cleantech research and development that is unprecedented globally. Today that cooperation is resulting in a flood of new cleantech development projects.  

Here are a few emerging partnerships in cleantech initiatives to watch:  

Turquoise Hydrogen 

If you’re starting to get lost in all the colours of hydrogen – grey, blue, green – there are multiple pathways for hydrogen production. Each pathway is differentiated by the colour spectrum from black to yellow; however, most have not been commercialized.  

Hydrogen can be generated from biomass (yellow), water (green, pink), and fossil fuels (black, brown, grey, blue, turquoise). The colour designation relates to the cleanliness of the power source used in generation, the associated emissions, and whether or not they are captured. 

Source: International Renewable Energy Agency

Baker Hughes has announced an investment in Vancouver-based Ekona Power Inc. to advance development of a unique low-cost methane pyrolysis technology platform to produce cleaner turquoise hydrogen.  

Compared to traditional steam methane reforming processes used to produce industrial scale hydrogen, Ekona’s process can produce hydrogen at costs on par with current systems while reducing emissions by more than 90 per cent.  

The technology will be applicable to many markets including upgraders, refineries, chemical plants, and natural gas transmission and distribution companies looking to reduce their GHG emissions footprint.  

Decarbonizing existing assets 

TC Energy and Irving Oil announced they will work together to lower emissions by decarbonizing existing oil and gas operations and deploying new technologies. 

The partnership’s initial focus will consider a series of upgrades at Irving Oil’s refinery in Saint John, New Brunswick, with the goal of significantly reducing emissions through the production and use of low-carbon power generation.  

Other opportunities such as the production and distribution of low emission hydrogen and establishing a world class carbon capture and sequestration network will aid in decarbonizing local industries and position Atlantic Canada for development and job opportunities well into the energy transition.  

TC Energy and Irving Oil have a history of working together, including the development and operation of the Grandview Cogeneration plant, reducing the carbon intensity of the top-tier Saint John refinery resulting in up to 750,000 tonnes of avoided GHG emissions – the equivalent of taking over 160,000 vehicles off the road.  

Solar farm to power refinery 

Shell Canada has announced plans to build a 58-megawatt solar farm adjacent to the company’s Scotford refinery and chemicals park near Edmonton. 

Shell subsidiary Silicon Ranch will build and operate the solar farm which is expected to produce enough renewable electricity to provide 20 per cent of the refinery’s energy needs for at least the next 25 years. 

While most solar farms are typically built in the southernmost portion of the province, this project will mark the first large-scale solar installation in Alberta’s industrial heartland and be designed with panels that can capture sunlight reflected off snow.  

Silicon Ranch and Shell will construct a solar farm to help power the Scotford refinery. Photo courtesy Shell Canada

Emissions reduction and economic recovery 

Canadian companies Suncor Energy and ATCO Ltd. are collaborating on a potential hydrogen project near Edmonton that would produce more than 300,000 tonnes per year of clean hydrogen using advanced technology to capture more than 90 per cent of the emissions generated in the production process. 

Suncor and ATCO have established projects throughout the province that support thousands of jobs and hundreds of communities. This encourages investment along the hydrogen value chain; from production, to carbon capture and storage, and end-uses such as hydrogen fuel cell trucking.  

Eighty-five per cent of the produced clean hydrogen would be used to supply existing energy demand, with 65 per cent of the output used in refining processes and cogeneration of steam electricity at the Suncor Edmonton Refinery, reducing refinery emissions by 60 per cent.  

In addition to supply clean hydrogen to Suncor and the Alberta gas grid, the project would make hydrogen volumes available for other industrial, municipal, and commercial transport users. 

The hydrogen production facility would be located at ATCO’s Heartland Energy Center and could be operational as early as 2028, reducing carbon dioxide emissions in Alberta by more than two million tonnes per year.  

Polaris Carbon Capture and Storage 

Indigenous leaders have reached a deal to work with Shell Canada on the company’s proposed Polaris carbon capture and storage project northeast of Edmonton. First Nations partners are working to raise funds for a potential agreement to acquire an equity position in the storage hub.  

Polaris will be the second CCS project at Scotford. The first, Quest, started operating in 2015 and has so far safely sequestered more than six million tonnes of CO2. 

The project will create 2,000 jobs and have the capacity to capture and store up to 750,000 tonnes of carbon per year from the Shell-owned Scotford refinery and chemicals plant, the equivalent of removing over 160,000 vehicles from the road each year. If approved, operations would start in the mid-2020s.  

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Demand for natural gas from Western Canada could more than double in the coming decades as governments around the world roll out hydrogen strategies to meet greenhouse gas emission reduction targets, according to a report by BMO Capital Markets.

Canada – and specifically the region near Edmonton known as Alberta’s Industrial Heartland – has a particularly compelling set of features that offer promise to become a hydrogen leader, says Alanna Hnatiw, mayor of Sturgeon County.

“We believe that the hydrogen economy will emerge very quickly in this region because of the experience that we’ve had over a number of decades in creation of hydrogen as well as the abundant low-cost natural gas feedstocks that we have, and of course the carbon capture utilization and storage technologies that we’re well known for,” says Hnatiw, chair of the Edmonton Region Hydrogen Hub.

Why hydrogen?

Hydrogen is expected to make a big dent in global CO2 emissions, if production and use is expanded dramatically.

Hydrogen for end use produces no emissions – only electrical power, water and heat. Emissions from the production of hydrogen are categorized by colour: “grey” if produced from fossil fuels with no carbon capture and storage (CCS), “blue” if produced from natural gas with CCS, and “green” if produced using renewable energy.

The world now consumes about 73 million tonnes (MT) of pure hydrogen per year, according to the International Energy Agency. But that’s primarily used for industrial activities like oil refining and fertilizer production, and it’s mostly “grey.”

In Alberta, 40 per cent of hydrogen production is already “blue,” generated with natural gas at facilities that capture CO2 emissions that are then safely stored in underground reservoirs.

A major opportunity

The combined potential of Canada’s domestic hydrogen markets and export opportunities to the U.S., Asia and Europe could reach $100 billion per year, according to Transition Accelerator, a Canadian non-profit focused on net-zero solutions.

To put that in context, the value of Canada’s oil and gas sales was $125 billion in 2019, according to the Canadian Association of Petroleum Producers.

Put another way, Wood Mackenzie forecasts that low-carbon hydrogen demand will increase to 211 million tonnes by 2050, from practically zero today.

Canada’s domestic hydrogen demand could rise by 14 MT to 25 MT per year, compared to current production of about three MT per year, BMO Capital Markets estimates. Including export markets, potential could exceed 30 MT to 60 MT per year.

The expansion could have big benefits for Canadian natural gas production, BMO analysts said.

Western Canada now produces about 16 billion cubic feet per day (bcf/d) of natural gas, most of which is exported to the U.S. Growth in hydrogen demand both domestically and for export could result in demand for an additional 5 to 20 bcf/d of natural gas production.

Adding to the opportunity, Canada is already recognized as a competitive player in clean hydrogen production, with the second-lowest costs in Asia-Pacific Economic Cooperation (APEC) forum countries.

The price to produce emissions-free hydrogen in Canada using natural gas and CCS is second only to natural gas and CCS in Russia, according to a 2018 report by the Asia Pacific Energy Research Centre.

Production Cost of CO2 Free Hydrogen in APEC Region

Megaprojects coming out of the gate

Canada’s entry into the emerging global hydrogen economy has a big kickstart.

One of the world’s largest hydrogen producers – Pennsylvania-based Air Products – gave the green light this June to a greenhouse gas-reducing megaproject near Edmonton designed to help transform the way hydrogen is used.

The $1.3 billion complex, to be developed jointly with the governments of Canada, Alberta and Edmonton, will include Western Canada’s first-ever facilities to produce liquid hydrogen fuel for road transportation.

The project needs to meet milestones before construction can start, but Air Products Canada vice-president Rachel Smith says it is in an ideal location and the company is confident it will be up and running in 2024.

“We’re highly committed to this project. We’ve commenced the regulatory process; we’re well underway there, and we’re working through the next steps in the process to finalize agreements,” Smith says.

“It’s encouraging to see that the hydrogen economy has started to come to fruition.”

Air Products’ new project would significantly expand Alberta blue hydrogen production, capturing and storing 95 per cent of CO2 emissions and offsetting the remaining 5 per cent by using hydrogen-fueled electricity.

Further growth could come from another new blue hydrogen facility in the Edmonton region, proposed this May by Suncor Energy and ATCO. The plant, which would primarily feed Suncor’s Edmonton oil refinery, could be operational as early as 2028, “provided that it has the required regulatory and fiscal support,” Suncor said.

A hydrogen hub

Collaboration between stakeholders including government, industry and Indigenous communities will be required for Alberta to reach its potential as a clean hydrogen leader, says Sturgeon County mayor Hnatiw.

The Edmonton Region Hydrogen Hub was launched this April. It’s a partnership of municipal, provincial and federal governments along with First Nations, economic development groups, researchers and academics.

“The Hub is set out to innovate along the entire hydrogen value chain and build supply and demand at sufficient scale, because that has been the reason why hydrogen hasn’t caught on earlier,” Hnatiw says.

“There wasn’t demand because there wasn’t supply, [and] there wasn’t supply because there wasn’t demand. Having an orchestrated group to be able to develop a process will help us kind of end that chicken and egg scenario.”

The Hub group is a part of the Alberta Zero-Emissions Truck Electrification Collaboration (AZETEC) project, which will develop and demonstrate a hydrogen fueling station for heavy-duty commercial fleet vehicles. The $15 million project led by the Alberta Motor Transport Association has $9.2 million in funding from the provincial and federal governments.

Hydrogen, and natural gas/CCS blue hydrogen in particular, is a major opportunity for Canada to produce the energy of the future, Hnatiw says.

“We still do have our work cut out ahead of us, but this is the one place across this country where we see alignment from the federal government to the provincial government to municipal governments and certainly a strong interest and very early onboarding with the First Nations,” she says.

“I think we’ve got some huge opportunities in front of us because our intent is to do this slightly different than we’ve ever done anything in the past.”

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