Canadian crude just got a lot more Canadian as another global giant bails on the oilsands
The future of the Canadian oilsands is looking a lot more Canadian.
The deal marks another step toward CEO Ben Van Beurden’s goal of preparing Shell for a world of lower oil prices and tighter restrictions on carbon emissions. Read on
Calgary-based Canadian Natural Resources Ltd. said Thursday it will spend $12.7 billion, its biggest purchase ever, to buy Alberta oil fields and facilities that process the sticky bitumen from oilsands from Royal Dutch Shell Plc and Marathon Oil Corp.
“At the time you see some of the majors pivoting to other assets, you see Canadian companies that are doubling down on the oilsands,” Kevin Birn, a director at IHS Energy in Calgary, said by phone Thursday.
The deals come as West Texas Intermediate, the benchmark U.S. crude, falls below US$50 a barrel. It’s also less than a month after two major U.S. producers had to remove billions of barrels of Canadian oil from their stated reserves because they had become uneconomical as prices fell. As some producers shift capital away from Northern Alberta toward lower-cost, quicker-return resources such as U.S. shale, Canadian companies without the same global reach are staying put and filling the void.
“This transformational acquisition strengthens our robustness and sustainability,” Steve Laut, president of Canadian Natural, said in a conference call. “By any measure, these are world-class assets.”
Canadian Natural shares rose as much as 8.8 per cent and were 6.6 per cent higher at $42.05 at 11:26 a.m. Toronto time.
Shell’s sale came as the Anglo-Dutch producer seeks to divest US$30 billion of assets to cut its debt, which surged after the acquisition of BG Group Plc last year. It helps the company in its strategy to pivot toward gas production from oil, boosting reserves of the cleaner-burning fuel to 60 per cent from half.
Shell is getting rid of almost all its production assets in the oilsands, while holding onto the Scotford upgrader, which converts heavy oil to lighter synthetic crude.
Marathon agreed to buy 70,000 acres in the Permian basin, a shale play in Texas, for $1.1 billion cash at the same time it exited the oilsands. The company said Thursday that Canadian oilsands accounted for about a third of its expenses and only 12 per cent of production.
Shell and Marathon follow Statoil ASA in selling oilsands assets. Statoil’s sale was seen refocusing the company on its core assets and allowing it to stay clear of criticisms over the climate impact of oilsands. On the day Justin Trudeau was being feted at the CERAWeek by IHS Markit conference in Houston for his greening of the oilsands, one the world’s biggest energy companies was pulling back.
Some international oil companies are shunning oilsands as they focus resources on natural gas and shale oil, which have “shorter-term horizons,” Birn said. oilsands projects can take years to get to production, compared with months for shale.
Meanwhile, Exxon Mobil Corp. slashed its reserves by the most in its modern history on Feb. 22, largely due to having to remove all of the oil associated with the $16 billion Kearl project in Canada. ConocoPhillips said its reserves fell to a 15-year low after removing oilsands barrels.
Canadian Natural is acquiring the new oilsands operations at about 60 per cent what it would cost to build new similar operations, something that would require an oil price of about $90 a barrel, Amir Arif, analyst at Cormark Securities Inc., said by phone. “The acquisition prices are generally more favorable.”