“I am thinking in particular of the Fort Hill project… Total was very unhappy with the performance of this asset, [among others]Masson said, citing capital cost overruns and reduced oil production.
“So I think as an international major they look at the world and they say, ‘What are we going to do to try to align with climate change? ”
“The asset they had that didn’t give them a good performance was the one they were prepared to take a big hit on. “
“Stranded” Oil Reserves
On Wednesday, Total said it was quitting the Canadian oil lobby because of a “misalignment” between the company’s climate ambition statement and CAPP’s public positions, adding that it considers oil reserves at high production costs would be produced more than 20 years in the future to be stranded. ”
Although Masson said he didn’t think this would be a dominant theme in the future of Canada’s oil sands, Total was not the first example of an international company shying away from these assets.
In 2017, Royal Dutch Shell struck a $ 12.74 billion deal with Canadian Natural Resources, saying at the time the company had neither the scale nor the capacity to stay in the oil sands for the long term. .
“What’s going on, in my mind, in [both] of these cases, these two companies are international majors with large retail presences. Shell has service stations around the world, as does Total, ”said Masson.
“They don’t want boycotts, they don’t want to see anything that negatively affects their brand. “
Kevin Birn, Calgary-based analyst at IHS Markit, said the oil sands came in part from a world where oil was in short supply. Today, he says, the market has changed.
“Companies like Total, large and integrated, will shift their priorities from one resource to another, where they believe they have a competitive advantage,” said Birn.
“So you see a number of companies dislodging their portfolios from the oil sands, but you also see Canadian companies doubling up on those assets because they feel they have a competitive advantage.
With the Fort Hill project now having a lower value on Total’s books, Masson said he expected someone to try to strike a deal to purchase these assets soon.
“It’s easier for Total to say, okay, we’re going to take, I don’t know, 50 or 60 cents on the dollar for what we paid for these things now that they’ve been written up. present, ”he said.
“We may see these assets change hands, probably to a Canadian company. And all in all, it could be a good thing for Canada. ”
Earlier this week, IHS Markit released its latest forecast for oil sands production growth, continuing a decade-long trend of industry experts projecting a less optimistic outlook for the sector.