Energy companies wrote down nearly 8 billion barrels of reserves
Canadian assets comprise largest portion of total declines among 68 firms: study
A group of U.S.-listed oil companies wrote down their proved reserves in the Canadian oilsands by nearly eight billion barrels in 2016, as energy firms continue to defer investments in major heavy oil projects.
The U.S. Energy Information Administration, a data-gathering agency, tracked 68 oil companies listed on U.S. stock exchanges and found that their total proved reserves declined for the second consecutive year, according to a study released Monday.
The debooking of Canadian oilsands assets accounted for the largest portion of declining reserves over the year, at nearly eight billion barrels. The next highest was Latin America, which saw a roughly one-billion barrel decline.
The declining reserves come as weak commodity prices force companies to revisit the economic viability of their priciest barrels, raising questions over the competitiveness of major, long-term oilsands projects. Big international companies have in recent years shifted capital investment away from Canada’s oilsands in favour of shorter-cycle returns, particularly in U.S. shale basins.
Exxon-Mobil Corp. recently reported a massive 3.5-billion barrel writedown of proved reserves at its Kearl oilsands development, operated by Calgary-based subsidiary Imperial Oil Ltd.
Conoco-Phillips Co. cut its oilsands reserves in half in 2016, down to 1.2 billion barrels, following a tumble in oil prices. In mid-July CNOOC Ltd., China’s largest offshore oil producer, warned that it would post a more than $1-billion loss after taking charges on its oilsands assets.
The EIA’s study included several Calgary-based oilsands companies with secondary listings on U.S. stock exchanges, including Cenovus Energy Inc. and Suncor Energy Inc. The Canadian companies accounted for only a small portion of proved reserve declines, according to the EIA.
Proved reserves are an industry categorization based on whether companies can produce barrels economically at a given price. How those proved reserves are calculated changes across different jurisdictions and even individual companies.
Following major writedowns in the oilsands, some industry analysts observed that the reserve reductions are largely due to the accounting practices of U.S.-listed companies that report to the U.S Securities and Exchange Commission, which looks at commodity prices in hindsight rather than based on future projections.
Canada’s proved oil reserves are among the largest in the world at roughly 170 billion barrels, behind Venezuela and Saudi Arabia.