Shell cuts debt with asset sale
LONDON: Royal Dutch Shell Plc will sell almost all of its production assets in Canada’s oil sands in a $7.25 billion deal that cuts debt and reduces involvement in one of the most environmentally damaging forms of fossil-fuel extraction.
“All of the company’s oil-sands interests apart from a 10% stake in the Athabasca mining project will be sold to Canadian Natural Resources Ltd,’’ Shell said yesterday.
The transactions are expected to close in mid-2017, subject to regulatory approvals.
The Hague-based company will continue as operator of the Scotford upgrader, which converts heavy oil to lighter liquids for easier transport, and the Quest carbon capture and storage project.
The Anglo-Dutch producer is almost two-thirds of the way through a $30 billion divestment programme to reduce debt, which soared following its biggestever acquisition of BG Group Plc last year.
The company this week ended an almost two-decade old US refining partnership with Saudi Arabian Oil Co and earlier this year sold a collection of oil fields in the North Sea.
“This announcement is a significant step in re-shaping Shell’s portfolio,” chief executive Ben van Beurden said in a statement. “The proceeds will accelerate free cash flow and reduce gearing and make a meaningful contribution to Shell’s $30 billion divestment programme.”
The deal also marks another step toward van Beurden’s goal of preparing Shell for a world of lower oil prices and tighter restrictions on carbon emissions.
Oil sands — reserves of heavy crude found primarily in northern Alberta — lured investors in the past decade as the surge in crude prices above $100 made the difficult extraction process economic. They’ve since fallen out of favor amid a twoyear price slump.
Shell also yesterday amended its pay policy to better reflect incentives to control emissions.
Cutting greenhouse gases, including both carbon dioxide and methane, from its refineries, chemical plants and burning of natural gas at its fields, will make up 10% of executives’ bonuses.
This 10% weighting was split between energy intensity, controlling oil spills and water use last year, according to the company’s annual report.
Shell took a $2 billion charge in 2015 as it shelved the Carmon Creek oil-sands development and van Beurden said last month that the company wouldn’t take on any new oil-sands projects.
Exxon Mobil Corp slashed reserves in February after removing the $16 billion Kearl project from its books. A day earlier, ConocoPhillips Co said that erasing oilsands barrels had reduced its reserves to a 15-year low.
Oil-sands deposits are among the costliest petroleum projects because the raw bitumen extracted must be processed and converted to a synthetic crude before being transported to refineries, mainly in the US. This process also emits more carbon dioxide than production of conventional crude.