As legacy oil and gas fields look for ways to combat economic challenges and become more sustainable, Razor Energy and FutEra Power Corp. have teamed up to build a geothermal/natural gas hybrid power plant in Northern Alberta.
The project, located in Swan Hills, will leverage large volumes of water Razor Energy produces as part of its ongoing conventional oil and gas operations and waterflood activities, allowing FutEra, a transition energy provider, to capture geothermal heat energy and generate renewable power.
Construction on the geothermal portion of the plant began in May 2021. By the end of its two planned construction phases, which includes a natural gas turbine, the facility could generate a total electricity output of 21 MW.
One of the major advantages of this project is that it already has the necessary infrastructure — wells, water re-injection systems and an operating, gathering and distribution system. These systems exist on-site, which could help create a net-negative carbon-emitting facility that can also sequester carbon.
“Understand that these fields are, if they’re good at geothermal, also good at taking carbon,” Lisa Mueller, CEO at FutEra, and vice-president of new ventures at Razor Energy, told SustainableBiz. “You get the ticket from the reservoir, you get the hot water, but you also have a reservoir that will take CO2.”
The connection to the grid will occur in Q2 2022, with commercial operations set to begin in the third quarter.
Expected to reduce GHG emissions at Razor Energy and validate geothermal energy production, the facility could set the table for other partnerships, as Alberta’s provincial government sets carbon capture guidelines.
Details of the geothermal deal
Mueller said a deal between the companies had been in the works since 2019. However, pandemic challenges and a lack of access to capital caused setbacks.
“You’ve got the sunk cost of capital in all the infrastructure, and you’ve got an existing framework to surface hot water every day, and I think that was the kicking-off point,” said Mueller, who been the senior business development manager of infrastructure at Shell Canada and president/CEO at Epoch Energy Development before joining FutEra.
Government funding from Alberta Innovates also plays a role in financing the construction for future phases.
Current financing has been provided by Arena Investors LP The New York-based institutional asset manager has funded about 40 privately negotiated transactions within the energy and resources sector over the past five years. At the beginning of this year, it reported $2.8 billion in assets under management.
The Alberta Investment Management Corporation (AIMCo) — Razor Energy’s principal lender — is a Crown corporation and institutional investor in Edmonton, which, in 2020, had $119 billion in assets under management. Unable to get financing from that investor, the companies turned to a smaller asset manager.
“We, unfortunately, found out that power infrastructure projects fall under their forestry (and) road infrastructure division, and they don’t look at anything (under) $50 million,” said Doug Bailey, president and CEO at Razor Energy.
With financing now in place, there’s also potential for expansion.
Bailey said the Swan Hills location has all the right elements for two or three follow-up projects. He added the companies are not limiting themselves to the Western Canadian sedimentary basin.
Instead, they will look at the scale of the project as something that could be replicated in larger Canadian cities and other locations.
More than just power generation
The next phase of construction will include 15 MW of natural gas power generation and the design and implementation of a carbon-capture utilization and sequestration (CCUS) solution. This will also allow for the optimization of geothermal energy production.
In January, as reported by Reuters, Fatih Birol, the head of the International Energy Agency (IEA), said his organization considered CCUS one of the three most critical decarbonization technologies.
The IEA also says for the world to reach net-zero emissions by 2050, carbon sequestration facilities need to be expanded from around 40 million tonnes per year to 7.6 billion tonnes.
With this aspect of the project planned, Mueller said the company is largely waiting on CCUS regulations from the Alberta provincial and federal governments to come down this spring. The firm is taking a wait-and-see approach to this operation phase, as carbon prices per tonne rise to $170 from $40 by 2050.
“As soon as they show us what can be done, we will do what can be done,” Mueller said. “We’ve got an approach that we think fits both the provincial and the federal regulatory oversight for carbon capture and sequestration.”
Razor Energy is a junior oil and gas development and production company headquartered in Calgary. It went public in January 2017 via an arrangement with an existing TSX Venture-listed company, Vector Resources Inc.
Aside from Swan Hills, the company has focused on light oil in the Beaverhill Lake and Kaybob areas. Its other active subsidiary is Blade Energy Services Corp.