Virgin Prizes Low-Carbon Oil Sands

Source: Photograph by Jimmy Jeong/Bloomberg

Mining operations at Syncrude Canada Ltd.'s oil sands North Mine in Fort McMurray, Alberta. Canada's oil sands, a mixture of sand, clay, water and a heavy oil called bitumen, contain the world's second largest proven concentration of crude oil reserves at about 170 billion barrels. Close

Mining operations at Syncrude Canada Ltd.'s oil sands North Mine in Fort McMurray,... Read More

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Source: Photograph by Jimmy Jeong/Bloomberg

Mining operations at Syncrude Canada Ltd.'s oil sands North Mine in Fort McMurray, Alberta. Canada's oil sands, a mixture of sand, clay, water and a heavy oil called bitumen, contain the world's second largest proven concentration of crude oil reserves at about 170 billion barrels.

Richard Branson's Virgin Group would like Canada's oil sands capital, Calgary, to emerge from the tar as a global center for low-carbon living.

It's a challenge. The process of mining Canada's rich oil sands releases enormous carbon emissions before refined gasoline ever reaches a car. That's why the Keystone XL pipeline, which would bring the oil to the U.S., has stirred passions in Washington, culminating in the choreographed arrests of more than 1,000 protesters at the White House this summer.​

Calgary's role as a home to energy finance and engineering draws Branson's attention. On Nov. 2, Virgin will announce in Canada's energy capital the results of its Earth Challenge, a $25 million prize for a lucky inventor who can demonstrate a commercial application that removes carbon dioxide from the air.

"Calgary is a good place to start low-carbon technology. It's an energy center. There's lots of financing and quality engineering," said Alan Knight, Branson's advisor on sustainable development. The inventiveness and rigor that made oil sands an unlikely success need to be applied "to sustainable, low-carbon and economically viable technology," he said.

Oil-sands producers, such as Suncor Energy Inc., Imperial Oil and Statoil ASA, are collectively spending billions of dollars to lower emissions of heat-trapping gases and other pollution from their operations.

Suncor, Canada's largest oil producer, operates a bitumen pit mine 700 kilometers north of Calgary. Trucks the size of three-story buildings carry loads of the tar-like substance to refineries around the clock. The process to separate bitumen from the sand and refine it into crude greatly increases the energy-intensity of production, and consequently emissions, compared with conventional drilling.

Carbon capture and storage would help, says Rick George, Suncor's chief executive officer. "Carbon capture and storage systems could have long-term applications for the oil sands sector." That's the expensive process, still under development, by which emissions are trapped and buried underground. It's proving costly to develop without government support or a global cost for emitting carbon. Test projects in the U.K. and Germany have floundered in recent months, the result of a lack of funding, government support and declining carbon prices. Even if carbon storage projects entered the Earth Challenge, the $25 million purse wouldn't compare to the capital outlays required for implementation.

The Earth Challenge is being judged by Branson, Al Gore and atmospheric scientist James Lovelock. Among their finalists is Carbon Engineering, a developer of a new technology that uses chemicals to extract carbon dioxide directly from the air. If successful, it could help to reduce the greenhouse gas emissions associated with the processes like digging up tar-infused sand and boiling it in 65-foot-tall (20-meter) drums. The company's CEO is David Keith, a Harvard professor of applied physics and chief executive of Carbon Engineering. He put the true challenge in context: "Nobody is going to take huge quantities of CO2 out of the air and put it into the ground at current prices. The real hard question is can you do it at an industrial scale and an interesting price point."

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