ExxonMobil and its Canadian unit, Imperial Oil, have broken a logjam that has been holding back sales of Alberta oil sands assets, raising hopes of more deals to come.
They are paying C$751 million to ConocoPhillips for a 226,000-acre Clyden lease in northeastern Alberta – 72.5 percent to be controlled by ExxonMobil and 27.5 percent by Imperial – viewing the property as a strong fit with their nearby Corner lease. ExxonMobil’s position opens the door to taking on another partner.
ConocoPhillips said it will record a gain of US$450 million from the sale, which is expected to close this quarter, depending on approval from Canada’s Competition Bureau.
Imperial chairman Rich Kruger said the acquisition is consistent with his company’s strategy to position itself for long-term business growth, which targets a doubling of production to 600,000 barrels per day by 2020, then passing 1 million bpd by 2030.
“The Clyden lease is a high-quality addition to Imperial’s portfolio of oil sands in-situ opportunities” using steam-assisted gravity drainage technology to develop, he said.
For now Imperial is not ready to talk about development timing or scope for Clyden, although it is due to start a new thermal-recovery project called Aspen about 2019.
Much still to divestConocoPhillips disclosed in late 2011 it was seeking buyers for 50 percent of a large portion of its oil sands holdings and now says the selling mission will continue in 2014.
Still on the block are 50 percent of the Foster Creek/Christina Lake SAGD operation (operated by Cenovus Energy), 50 percent of its operated Surmont SAGD (with France’s Total as partner) and 100 percent of its undeveloped lands at the Thornbury, Saleski, Crow Lake and McMillan Lake leases.
ConocoPhillips has 1.1 million net acres of land in the Athabasca oil sands region, with estimated bitumen deposits of 16 billion barrels and currently produces 100,000 bpd in Alberta, with seven major projects that are progressing “on schedule.”
ConocoPhillips vice-president Don Wallette said the ExxonMobil/Imperial transaction is a “significant step toward rebalancing our oil sands portfolio by divesting an asset that wasn’t in the company’s long-range plans.”
It is now evaluating a number of other offers it received “from buyers around the world” for 25 percent of Surmont and 50 percent of the other holdings.
If more deals are negotiated they will disperse a cloud over the oil sands sector which has been contending with many negatives in the past year because of development costs, competition from cheaper sources of crude and global market uncertainty, combined with a loss of interest from foreign state-owned enterprises which the Canadian government has banned from making acquisitions of controlling interests in the resource.
That negative mood saw Royal Dutch Shell, Koch Industries and Marathon Oil shelve planned asset sales after failing to attract hoped-for bids.
Foreign interests interestedIn an attempt to persuade the Canadian government to rethink its ownership policy, a delegation from the Indian government’s Planning Commission and the Ministry of Petroleum and Natural Gas held talks this month with federal and Alberta government officials.
The team is concerned about Canada’s policies as they relate to the acquisition of upstream oil sands, shale gas and LNG assets.
Last year, a team from India’s ONGC, Indian Oil Corp. and Oil India submitted a non-binding offer of about C$5 billion to acquire six of ConocoPhillips oil sands properties, including Clyden.
The Indian interest in gaining a foothold in Canada is reinforced by a Planning Commission recommendation last year, which urged the government to look to Canada and the United States to broaden its oil and gas stakes beyond the Middle East.