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BP’s Oil Sands Exit May Not Be the Last as Big Oil Revises Image

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Credit: Mark Ralston/AFP/Getty Images

(Bloomberg) — BP Plc has become the latest international oil company to exit Canada’s high carbon-emitting oil sands — but it almost certainly won’t be the last.

The decision by the London-based energy company to sell its non-operating 50% interest in the Sunrise project to Cenovus Energy Inc. is just the latest in a recent string of divestments from Alberta’s oil sands, one of the largest crude reserves in the world.

Companies including Shell Plc, ConocoPhillips, Equinor ASA and Devon Energy Corp. have divested big stakes in the mines and well sites of Northern Alberta to local companies in recent years, increasingly concentrating control of the oil sands in the hands of Canadian producers such as Cenovus, Canadian Natural Resources Ltd. and Suncor Energy Inc. And more deals are seen as likely as local producers sit on cash hoards from $100-plus oil prices.

Chevron Corp.’s 20% stake in the Athabasca oil sands mine could be the next asset to be sold, said Matt Murphy, analyst at Tudor, Pickering, Holt & Co LLC. It’s not a “core asset” to the company and could become the next sale, probably to majority owner Canadian Natural, he said. While Athabasca generates “pretty good cash flow,” it’s not strategic, Michael Wirth, chief executive officer, said last year.

TotalEnergies SE is another big-name company in the region with assets that might make sense to offload. The Paris-based company has been divesting holdings in the oil sands for several years and pledged to no longer invest in the region. It recorded a $7 billion impairment of its Canadian oil sands portfolio in 2020 as part of a wider review but continues to hold a 50% stake with ConocoPhillips in the Surmont site as well as a minority stake in Suncor’s Fort Hills mine. Finding a local buyer for Surmont could be challenging because it’s a non-operating position, Murphy said.

Emails to Chevron, Total and Canadian Natural weren’t immediately returned.

The recent exodus from oil sands comes as Big Oil pledges to curtail and even zero out carbon emissions amid pressure from investors to tackle climate change. Crude from the oil sands must be dug from mines or forced from wells injected with steam, making them some of the highest carbon-emitting grades of oil in the world and something of a pariah for investors seeking greener alternatives. Norway’s sovereign wealth fund and large pension fund Caisse de Depot et Placement du Quebec have pledged to sell oil sands holdings.

Asian companies have appeared more resistant to leaving the region but that too may be changing. Last year, Japan Petroleum Exploration Co. sold its stake in the Hangingstone site to Trafigura-backed Greenfire Acquisitions Corp. China’s CNOOC Ltd., which bought Nexen in 2013, is said to be considering giving up operations in the UK, Canada and the US amid concern the assets could be blacklisted, Reuters reported in April, citing people it didn’t identify. CNOOC didn’t respond to an email for comment.

Canada’s largest oil sands companies are pushing back at environmental critics by pledging to invest billions to zero out carbon emissions from their operations by 2050, mostly by deploying carbon capture technology.

Such a strategy may be what Exxon Mobil Corp. is counting on to justify its majority stake in Canadian oil sands producer Imperial Oil Ltd., Murphy said. But even Exxon has been trimming some non-core assets. Exxon could, for example, sell its 29% stake in the Kearl mine to Imperial, thereby reducing its holdings, he said. An email to Exxon wasn’t immediately returned.

“It just makes sense for the assets to stay in the hands of the natural operators,” Murphy said.

Story Credit: (Bloomberg) -Robert Tuttle

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