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Trouble for oil sands
Pressured by activists, institutional investors, big money players flee oil sands
Gary Park for Petroleum News
Alberta is getting a full view of where the oil sands industry is heading ... at least, through European eyes.
Bankers, insurers, investors and some of the world’s largest operators are diving for cover as they abandon their roles in the financing, extraction, processing and refining of bitumen from the oil sands and covering the risks of pipelines out of the region.
The lengthening list of Europeans quitting one of the world’s largest resources of energy now includes Germany’s Deutsche Bank, insurance powerhouse Zurich, France’s leading upstream player Total and Swiss insurance company Zurich.
All have come under mounting pressure from environmental campaigners, their own governments and some Indigenous groups, combined with their belief that world oil demand will peak in 2030.
Total Total announced it is writing off C$9.3 billion worth of oil sands assets and cancelling its membership in the Canadian Association of Petroleum Producers, CAPP.
The company said it now views oil reserves with high production costs that are to be produced beyond 2040 to be “stranded” given its own carbon-reduction goals.
The write-downs include C$7.3 billion tied to its 24.6% ownership of the Fort Hills oil sands mines operated by Suncor Energy and its 50% stake in the Surmont thermal recovery project operated by ConocoPhillips.
In addition, Total will write off C$2 billion in other oil sands properties, along with its US$1.07 billion holding in Australia’s LNG assets.
Total said it is also quitting CAPP because of a “misalignment” between the public positions stated by the Canadian industry’s leading lobby organization and those expressed three months ago in Total’s own climate change strategy.
CAPP Chief Executive Officer Tim McMillan said there was a contradiction between Total’s asset write-downs and its increased “focus in Africa, Brazil and the Middle East,” border-line democracies where the company has increased investment and focus in recent years.
Alberta Energy Minister Sonya Savage said the oil sands will continue to offer investment in a “stable and ethical democracy. At the same time Total is dismissing the leadership of Canadian producers who are doing their part to reduce greenhouse gas emissions while it continues to invest in countries such as Myanmar, Nigeria and Russia.”
“This highly-hypocritical decision comes at a time when international companies should be increasing their investment in Alberta, rather than abandoning a source of stable, reliable, supply of energy,” she said,
The ban will block financing and capital market transactions in oil sands exploration, production, transport or processing that will cover pipelines, upgraders and refineries.
Banks backing out The latest flurry of pull-outs comes on the heels of Norway’s US$1 trillion sovereign wealth fund decision to dump its stakes in oil sands majors Suncor, Canadian Natural Resources, Cenovus Energy and Imperial Oil over “unacceptable greenhouse gas emissions,” although it made no mention of Chinese-controlled Husky Energy.
Two years ago, Europe’s largest bank, HSBC Holdings, said it would no longer offer financial services for new oil sands projects or pipelines, a move that led Suncor to end all business with HSBC, including its conventional operations in Europe.
Total’s move came two days after Frankfurt-based Deutsche Bank said it would join a list of European lenders and insurance companies that have opted out of backing new oil sands projects.
The German bank said its new fossil fuels policy will also prevent it from investing in projects that use hydraulic fracturing in countries with scarce water supplies and all new oil and gas projects in the Arctic region.
TMX insurance Insurance giant Zurich has decided not to renew coverage for the Trans Mountain pipeline expansion but refused to divulge its reasons.
TMX, which has another 10 insurers, mostly in the United States, said it has the insurance it needs for its existing operations and the expansion.
Trans Mountain’s annual liability insurance contract, dated a year ago, listed Zurich as the lead insurer for the first C$8 million of potential payouts.
British Columbia’s president of Indian chiefs Stewart Phillip said he hopes other companies will follow Zurich’s lead and end their “complicity in violations of Indigenous rights ... because the pipeline expansion does not have the consent of all impacted First Nations along the route.”
Jackie Forrest, executive director of ARC Energy Research Institute, said that although the oil sands impact on carbon emissions is often misjudged in comparison to other crude oil sources there is little question that Canada must commit to a net zero carbon target.
She said a benchmark for European banks is a peer-reviewed study by Stanford University in 2018 that rated Canada as the fourth most carbon-intensive of 50 countries, trailing only Cameroon, Venezuela and Algeria.
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