For years, Canada’s resource and energy sectors have been gripped by a crisis of reinvention as they try to figure out a suitable and competitive future. With the arrival of the pandemic, this lack of true north was further cemented, accelerating discussions around the sectors’ long-term viability.

Having contributed for decades to the country’s growth and prosperity, Canada’s bitumen is at a crossroads; it needs to evolve beyond its current use. Alberta’s massive reserves have long been used for bitumen’s lowest-value application: combustion fuels. Dense and sticky, bitumen is more difficult to process and transport than lighter oils, making it more costly. Conversely, the chemistry, composition and viscosity of bitumen make it an ideal feedstock for high-value carbon fibre materials that are strong, light and durable. These materials are key inputs for more sustainable vehicles, industrial equipment, buildings and infrastructure. Research on further uses for bitumen is still emerging, but its potential to be converted directly into other applications is very real as we look to support supply chains that are sustainable and poised for growth in the advanced materials space.

For several years now, Alberta Innovates has been driving the Bitumen Beyond Combustion (BBC) program to achieve two priorities: fund programs that lower greenhouse gas (GHG) emissions associated with oil-sands production and increase the investment value of the province’s bitumen industry. This work has yielded some promising market segments: asphalt binder, activated carbon and carbon fibre have the potential to generate a total of $84 billion annually, more than three times the $27-billion annual value of bitumen for combustion fuel – and much more sustainable for the planet.

Interestingly, BP’s Energy Outlook 2020 projects oil production of 24 million barrels per day in its net-zero 2050 scenario. It allocates 1.5 million barrels of oil per day, or the equivalent of 87 million tonnes, to asphalt in 2050. Even by conservative measures, with zero market increase after 2030, global asphalt demand would be 220 million tonnes per year by 2050. This means there could be a global asphalt shortage of up to 133 million tonnes per year in the 2050 net-zero scenario. Because Alberta bitumen contains up to 50% asphalt binder, more than any other crude oils, it would take only 7.6 million barrels of bitumen per day to satisfy the global asphalt market. With 50% of Alberta’s bitumen used for asphalt, that would still leave 50% of the distillate for use in other downstream applications. Light and medium crudes cannot satisfy the asphalt demand in the net-zero 2050 scenario. There is already strong innovation taking place that allows bitumen to be used to make asphalt more sustainably. As an example, BASF has recently launched a liquid asphalt modifier that’s designed to reduce energy, resource consumption and the need for chemical cleaning agents by paving trucks. It lowers emissions of volatile organic compounds during paving operations and enables fewer roller passes for compaction, thereby increasing efficiency and reducing the total cost of ownership.

Unlike conventional and shale oil used to make asphalt, 80% of emissions in bitumen production are from natural gas combustion, making carbon capture and storage (CCS) viable. CCS has the potential to reduce GHG emissions by 60 megatonnes (MT) annually in existing oil-sands production facilities, once CCS costs come down (one Alberta CCS project has stored more than 5 MT of CO2 to date). Also, technologies are being developed to increase the amount of asphalt that can be recycled. And as solidification technology advances, it will become possible to transport bitumen in pellets rather than in a molten state, which would lower delivery costs and emissions.

Canada has tremendous potential to deliver a global blueprint for marrying vast resource and energy sectors with sustainable low-emission targets and zero-waste ambitions. It’s time for Canada to shed its identity crisis and embrace its leadership position as a resource-rich country with much to offer the world. This can all be done sustainably, just like the further development of bitumen beyond combustion.

The road ahead is clear for Canada – we just need to start paving it.

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Alberta Innovates – a Crown agency – says the biggest opportunity lies in the production of carbon fibre, a high-strength material that can be used in wind turbines, automotive applications and the aerospace industry. The agency has launched a $15-million “Grand Challenge” in which 20 laboratories around the world are participating in research to commercialize the production of carbon fibre from the heavy asphaltenes contained in bitumen, in the so-called bottom of the barrel.

“We are finding new ways to use bitumen not as transportation fuel but as value-added non-combustion materials that are worth more than transportation fuel but with a low GHG emissions – products like carbon fibre,” said John Zhou, vice-president of clean resources at Alberta Innovates.

Zhou participated Wednesday in a virtual roundtable hosted by Corporate Knights and the German embassy in Canada, part of a series on rebuilding a cleaner, more sustainable economy as we recover from the COVID-19 pandemic.

He said that while technological challenges remain “very, very significant” to a commercializing bitumen-derived carbon fibre industry, progress is being made.

There are skeptics, however. Wolfgang Seeliger heads up Leichtbau BW, a German consortium of companies developing and deploying lightweight materials that reduce costs and greenhouse gas emissions in transportation and industrial processes. He said that carbon fibre production cannot compete with other lightweight materials on either cost or environmental footprint, noting that it takes more energy to produce auto parts from carbon fibre, for example, than is saved by the use of the lighter material.

Alberta Innovates estimates that diverting 30% of oil-sands production to industrial uses would reduce GHG emissions by 126 megatonnes (Mt) a year. That’s because the carbon from the thick, asphalt-like component of the bitumen would be locked in the industrial material, rather than combusted as transportation fuel or petroleum coke.

It also estimates the industry could earn $84 billion by 2030 from those industrial markets – including $44 billion from carbon fibres – while reaping $27 billion from the sale of the remaining crude.

However, the “bitumen beyond combustion” strategy would not lower emissions from oil-sands extraction and processing in Alberta. The sector currently produces more than three million barrels per day. It accounted for 77 Mt of GHG emissions in 2018, or 10.5% of the country’s total.

Canada has pledged to reduce GHGs by 30% from 2005 levels by 2030, and the federal Liberal government now says it will introduce an even-tougher 2030 goal along with its commitment to get to net-zero emissions by 2050.

Seeliger said carbon fibre will be relegated to a niche market for some time because carbon fibre is expensive and its introduction into markets like automotive, construction and aerospace will require complicated changes to certification standards. However, Zhou said the opportunities will expand dramatically if the province succeeds in driving down the cost and the environmental footprint of producing it. Alberta Innovates believes industry can reduce the cost of producing carbon fibre by more than 50% below that of current methods and reduce the carbon intensity of production by up to 90%. It estimates that a 50% cost reduction in carbon fibres would boost demand tenfold.

Suncor’s Carrie Fanai said Wednesday that Canada’s largest oil and gas producer is focused on the “need to transition to a greener economy.” Suncor has pledged to reduce the emissions intensity of its oil and petroleum products by 30% by 2030, while other companies, notably Cenovus Energy and Canadian Natural Resources Ltd., have set “aspirational” goals to have net-zero emissions at their oil-sands plants.

“For us at Suncor, that has meant not only focusing on improving the GHG intensity of our existing production but looking at new products, energy sources and related lines of business,” said Fanai, who is the company’s lead on bitumen value-chain optimization.

She noted that it is still early days in the journey to commercialization and that producers will have to work with chemical companies and manufacturers to ensure they maintain focus on potential customers.

Marcelo Lu, president of BASF Canada, said the opportunities for carbon fibre “are very large if we can crack the innovation to take the impurities out of the bitumen stream,” which is heavy in sulphur and metals. He said the massive bitumen resource represents a high concentration of low-cost feedstock for carbon fibre that could drive market developments in a way not seen before.

Alberta Innovates hopes to see a commercial-scale demonstration plant for producing carbon fibre from bitumen by the end of 2024.

If it succeeds in reducing the cost of production, the province could produce 326,000 tonnes per year of carbon fibres from the asphaltenes contained in one million barrels per day of bitumen, which would be worth an estimated $44 billion annually in today’s prices, the agency estimates. It says there is also potential to produce activated carbon and asphalt binder from the asphaltenes in another two million barrels per day of production.

The total value of the “non-combustion” products would be $84 billion. At the same time, industry would sell higher-quality crude, “de-asphalted” oil for $27 billion. Total value: $111 billion a year, compared to the $27 billion a year the sector expects to earn by selling three million barrels a day at $25 per barrel.

As part of its Build Back Better series last spring, Corporate Knights recommended that the federal government provide $1.4 billion in funding over five years to help the industry commercialize carbon-fibre production. Environmental groups have called for an end to subsidies for the fossil fuel industry, arguing that government efforts should be focused on the transition off oil.

Shawn McCarthy writes on sustainable finance and climate for Corporate Knights. He is also senior counsel for Sussex Strategy Group.

With the support of the Embassy of the Federal Republic of Germany in Canada.

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