Learn from peers on well cleanup, Alberta told
CNRL boss cites Saskatchewan’s approach
• Alberta should follow Saskatchewan’s example in its approach to distributing funds for cleaning up old oil and gas wells, the head of Canada’s largest oil and gas producing company said Thursday.
“I think what Saskatchewan did better than some of the other provinces is they worked with many of the stakeholders in their design (of a well cleanup program),” Canadian Natural Resources Ltd. president Tim Mckay said Thursday, following the company’s second- quarter earnings call.
CNRL has been one of the most active companies in the oil patch when it comes to plugging and remediating inactive and uneconomic oil and gas wells.
In the midst of the COVID-19 pandemic, the federal government announced $1 billion to fund such cleanup efforts in Alberta, British Columbia and Saskatchewan as a way to address an environmental problem and to put unemployed oilfield workers back to work.
The program in Alberta has been criticized because initially its criteria for who would be allocated funding was unclear and the system was swamped with applications, though the province has made adjustments over time. In Saskatchewan, which is distributing $ 400 million in funding to oilfield services companies to clean up wells, CNRL says the program is running smoothly.
“For Alberta, I think it would be good if it was a little more of a broad- based approach in terms of how they’re doing it,” said CNRL’S Mckay, adding Alberta would do well to make the program simpler and easier for applicants to understand the criteria for funding.
The scale of the problem in Saskatchewan is also significantly smaller than it is in Alberta, where over 91,000 inactive oil and gas wells dot the landscape and where there are also nearly 3,000 orphan oil and gas wells with no owner responsible for cleaning them up.
Last week, Alberta Energy Minister Sonya Savage announced a new regulation program to deal with environmental liabilities in the province that will require oil and gas companies to spend a targeted amount of money each year on oil and gas well clean up. Savage likened the program to beginning to pay down a large mortgage and the initial target would likely be set at four per cent of a company’s total environmental liabilities per year.
CNRL plugged 2,035 oil and gas wells last year and 1,293 wells in 2018 when it also submitted 1,012 reclamation certificates. CNRL spokesperson Julie Woo said the company is currently working on new targets for well remediation in each province for 2020.
Mckay said that environmental liabilities were one of the factors that CNRL considers when it’s pursuing potential acquisition targets.
As oil prices have collapsed as a result of commuters staying home during the coronavirus pandemic, many oil and gas companies are struggling, adding debt and have watched their valuations fall.
Asked whether or not CNRL sees opportunities for acquisitions in the current market, Mckay said, “We’re very good at that. It’s a lot about the timing and having a motivated buyer and a motivated seller.”
Last year, CNRL spent $3.1 billion to buy Oklahoma Citybased Devon Energy Corp.’s Canadian oilsands business. During the previous oil price collapse in 2017, CNRL spent $12.7 billion to buy Shell Canada Ltd.’s oilsands business.
Mckay said the company has “always looked at different opportunities over time” when asked whether the company is looking to make a deal.
The company’s shares rose three per cent, or 81 cents, to $ 25.83 on Thursday after it reported a $ 310 million net loss for the second quarter, which is a dramatic fall from the $ 2.83 billion in net income it earned during the same time a year earlier.
Stifel Firstenergy analyst Mike Dunn said in a research note that CNRL may not have to add to its net debt over the course of 2020, a position that “few if any oil producer peers” enjoy.