Economics of Dedicated Storage and Enhanced Oil Recovery

Alberta and Saskatchewan have vast CO₂ storage potential, as well as opportunities to use CO₂ for enhanced oil recovery (EOR). Capturing the CO₂ is often the most expensive step in the carbon capture, utilization and storage (CCUS) process – use the tool below to understand the  economic impacts of EOR compared to dedicated geologic storage.

This tool uses a hypothetical industrial capture facility operating in Alberta or Saskatchewan and capturing 1 million tonnes of CO₂ per year. It demonstrates how the interaction of government incentives and the end use of captured CO₂ impacts capture project economics. 

The federal and provincial governments have incentives to offset capital costs; however, the end use of CO₂ dictates a project’s eligibility for funding.

• In Alberta, CCUS projects will be able to receive a grant worth 12% of eligible capital costs through the Alberta Carbon Capture Incentive Program regardless of whether their CO₂ goes to dedicated geological storage or EOR. 
• Saskatchewan capture projects can receive funding through the Oil and Gas Processing Investment Incentive if a minimum of either 50% of captured CO₂ or 25,000 tonnes per year goes towards EOR.
• The federal CCUS Investment Tax Credit (ITC) provides up to 50% of capital costs for a point source capture project in approved jurisdictions (Alberta and Saskatchewan are both approved) if the captured CO₂ is used for an eligible use. If a project uses more than 5% of its CO₂ for ineligible uses, the ITCs are returned to the government proportionally. EOR is an ineligible use, and therefore for the purposes of this tool, it is assumed that a project is choosing to either put all captured CO₂ into dedicated geologic storage or permanently store CO₂ through the EOR process.  

When a project uses captured CO₂ for EOR, the capture facility will have an offtake agreement where the EOR operator purchases the CO₂. In this tool, we have assumed an offtake purchase agreement of $34/tonne. This is based on the inclusion of EOR in the United States incentive program which differentiates the funding between EOR and dedicated geologic storage projects by $25USD/tonne. However, it should be noted that offtake agreements vary based on several factors, including the distance between the capture project and the storage site, whether transportation of CO₂ is included, expected oil prices, the oil reservoir characteristics, the availability of CO₂, and the potential use of existing infrastructure. 

Another factor in the capture facility’s economics is the ability to generate carbon credits. The federal government passed the Greenhouse Gas Pollution Pricing act in 2018, which includes a carbon pollution price and schedule for an increase in value year over year for every tonne of CO₂ equivalent reduced. In 2025, the price is $95/tonne, but the tool allows you to adjust the value between $0 and $200 to see how the carbon credit price might affect your project’s economics.