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Canadian Natural Resources Ltd. is trying to change the world’s image of oil sands – saying major advances in technology have driven greenhouse gas emissions per barrel of crude below global averages – even as the sector continues to struggle with the lack of sufficient pipeline capacity.

CNRL said Thursday that it lost $776-million in the final quarter of 2018 as prices plunged due to supply glut in Alberta that was caused by growing crude production and the failure to build the pipeline capacity needed to get it to markets in the United States and overseas. Activists and politicians in neighbouring states and provinces have succeeded in delaying or completely blocking pipeline proposals over concerns that growing oil sands production is incompatible with efforts to avert the worst impacts of climate change.

However, the company noted that the prices have recovered dramatically as a result of the provincial government’s decision in December to order an across-the-board production cut of 350,000 barrels a day (b/d), which has since been reduced to 250,000 b/d. The price difference between Western Canada heavy crude and North America’s trend-setting West Texas Intermediate had widened to more than US$40 a barrel in the fourth quarter but should average around US$14.50 in the first quarter this year.

That price improvement came at the cost of production volumes. As a result of the curtailment, CNRL is producing 95,000 barrels a day less than it would otherwise, though it supports the policy, company president Tim McKay said Thursday.

Hemmed in by pipeline constraints, the industry has long battled the perception that Canadian crude is “dirty oil” that should be shunned even as many competitors around the world – including in the United States – operate with little or no climate-related regulations.

CNRL has cut its greenhouse gas emissions per barrel, known as emissions intensity, by 25 per cent between 2012 and 2017, and at its flagship Horizon mine, intensity has declined by 31 per cent, executive vice-chairman Steve Laut said Thursday. That environmental improvement was replicated across the industry, with average Canadian crude now below the global average for emissions intensity, Mr. Laut told analysts on a conference call.

“Essentially, the Canadian oil and gas sector has taken what was branded high-intensity oil in 2009 and made it what I would call the premium oil on the global stage," he said. ”If you view climate change from a global issue – and climate change is a global issue, not a national issue – then it makes sense that having more Canadian oil and gas on the global market will reduce greenhouse gas emissions."

Environmental analysts challenge the industry’s recent claims to world-beating environmental performance. While companies have made significant strides in reducing emissions from mines and steam-assisted extraction, the bitumen requires far more processing than other crude sources, and that upgrading and refining produce additional greenhouse gas emissions, said Benjamin Israel, senior analyst at the Calgary-based Pembina Institute.

He said the companies tend to tout new projects where they have succeeded in reducing emissions but that, over all, GHG intensity in the sector has not fallen, in part because more production comes from the steam-assisted projects where emissions tend to be higher than in the mines. As well new mines perform well initially but then emissions climb as they dig deeper into the formation and extract lower-quality ore.

At the same time, the oil sands in particular remain the fastest-growing source of GHGs in Canada, and planned construction of liquefied natural gas facilities on the British Columbia coast will add to the industry’s emissions, though proponents say the exported gas will displace high-carbon coal in Asian electricity sectors. Still the rising domestic emissions would make it far harder for Canada to meet its climate commitments under the 2015 Paris Agreement.

CNRL, which had earnings of $2.6-billion and adjusted cash flow of $9.1-billion last year, cut its capital budget in 2015 by $800-million to $3.7-billion while it assesses progress on pipelines. The recent delay of Enbridge Inc.’s Line 3 expansion into 2020 was a disappointment, Mr. McKay said. However, the company remains hopeful that the federal government will approve and restart construction on the Trans Mountain expansion by this summer, and the TransCanada Corp. will soon get the green light for its long-stalled Keystone XL project.

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