Strathcona Resources and Canada Growth Fund Partner on up to $2 Billion Carbon Capture Initiative

Strathcona Resources Ltd. has joined forces with Canada Growth Fund (CGF), a $15 billion government investment entity, in a strategic partnership. This strategic partnership targets the development of Carbon Capture and Sequestration (CCS) infrastructure specifically for Strathcona's Steam-Assisted Gravity Drainage (SAGD) facilities in Saskatchewan and Alberta.

Under the agreement, CGF (Carbon Green Fund) will invest up to $1 billion into CCS (Carbon Capture and Storage) infrastructure for Strathcona's assets, starting with an initial commitment of $500 million. Strathcona will assume full ownership, operational responsibility, and construction oversight for the CCS infrastructure. The capital costs will be split evenly between both partners, with CGF and Strathcona contributing 50% each. Strathcona anticipates recovering most of its share of capital costs through federal CCS investment tax credits and other grants.

Strathcona retains complete ownership of the CCS infrastructure and the resulting carbon credits. Repayment of the Canada Growth Fund's (CGF) investment will be performance-based, tied directly to the CCS project's operational efficiency.  Cash flow generated by the infrastructure, factoring in captured carbon volumes and operational expenses, will determine the repayment schedule. This repayment structure does not include fixed payments or minimum volume commitments, instead being contingent upon the performance of each CCS project.

As part of the arrangement, Strathcona has committed to dedicating CO2 volumes from its SAGD facilities to the partnership and guaranteeing a fixed carbon price. This fixed price per tonne of carbon will be determined at the time of the final investment decision for each CCS project, serving as a hedge against Strathcona's annual carbon tax obligations.

The agreement between Strathcona and CGF has been facilitated by the unique characteristics of Strathcona's oil sands properties. All of Strathcona’s facilities in the Lloydminster and Cold Lake regions are situated directly above suitable CO2 storage reservoirs, enabling on-site injection for local sequestration. This contrasts with most oil sands operations in Northern Alberta's Athabasca region, where CO2 must typically be transported to distant injection sites for storage. In 2024, the Government of Saskatchewan granted Strathcona exclusive subsurface CO2 sequestration rights, establishing Strathcona as Canada's sole oil sands producer authorized to capture and store CO2.

Currently, Strathcona's SAGD assets produce approximately 90,000 barrels per day of heavy oil and bitumen, resulting in annual emissions of roughly three million tonnes of CO2. Through the partnership, up to $2 billion in combined capital investment is anticipated, aimed at capturing as much as two million tonnes of CO2 annually, based on initial cost estimates.

For Strathcona, investing in CCS presents a compelling economic strategy aimed at mitigating both current and future carbon tax liabilities. Presently, carbon taxes represent a significant component of Strathcona’s operational expenses, amounting to approximately $65 million annually under existing regulations. This financial burden could potentially escalate over time based on current legislative trends.

Through the implementation of CCS initiatives, Strathcona anticipates significantly reducing the bulk of its future carbon tax obligations. The structured partnership with CGF is designed to enable these reductions without necessitating a substantial upfront capital investment, particularly after factoring in investment tax credits. This approach allows Strathcona to strategically manage its carbon liabilities while minimizing initial financial outlays.