06:40 AM EDT, 07/11/2024 (MT Newswires) -- Strathcona Resources ( STHRF ) and Canada Growth Fund are partnering to build carbon capture and sequestration (CCS) infrastructure on Strathcona's steam-assisted gravity drainage oil sands facilities in Saskatchewan and Alberta.

Strathcona will capture and permanently store up to 2 million tonnes of carbon dioxide (CO2) per year, Canada Growth Fund said in a release.

Canada Growth Fund and Strathcona will each contribute up to $1 billion to the project. They will each fund 50% of the capital costs to build CCS infrastructure on Strathcona's oil sands facilities. Canada Growth Fund will initially commit $500 million, with an option to increase that to $1 billion.

Meanwhile, Strathcona will build, own and operate all CCS projects and receive all investment tax credits.

Canada Growth Fund will earn a targeted return over time with the annual cash flows generated by each CCS project based on actual captured volumes, operating costs and a fixed carbon price guaranteed by Strathcona.

"This partnership is a breakthrough in Canada's journey towards decarbonizing the oil and gas sector," said Patrick Charbonneau, president and CEO of CGF Investment Management. "Alongside CGF, Strathcona intends to advance Canada's first CCS projects in the heavy oil sector."

Strathcona's oil sands facilities in Lloydminster and Cold Lake are located near suitable CO2 storage reservoirs, allowing for CO2 to be injected directly on site.

Strathcona obtained subsurface CO2 injection rights from the government of Saskatchewan in 2024, making the company the first oil sands producer in Canada with approval to capture and permanently store CO2.

The parties are aiming to reach a final investment decision for its first commercial CCS project, expected to be in Saskatchewan, in mid-2025. Strathcona is in talks with the province of Alberta regarding approval for sequestration beneath its Cold Lake properties.