The president of one of Canada’s biggest oil producers says meeting greenhouse gas emission reduction targets is crucial to earn the support of banks and investors, and ensure the long-term success of the sector.
In the past few months, myriad investors have taken a step back from Alberta’s oil sands, citing environmental concerns, including the world’s largest asset manager, BlackRock Inc., Norway’s sovereign wealth fund and Deutsche Bank AG. French energy giant Total SA also wrote off $9.3-billion worth of oil sands assets this year.
Tim McKay, head of Canadian Natural Resources Ltd., told The Globe and Mail on Thursday he believes divestment is because of the “stigma” attached to Alberta’s oil sands, which he doesn’t think reflects the current reality of emissions reductions.
Canadian Natural wants to reduce its greenhouse gas emissions by 25 per cent by 2025, and cut water use at its in situ operations by half. Its ultimate goal is net-zero greenhouse gas emissions in its oil sands operations, though it doesn’t have a timeline in mind.
Other oil companies also talk big when it comes to reducing their carbon footprints.
Calgary-based Cenovus Energy Inc. and Suncor Energy Inc., for example, are both targeting per-barrel emissions reduction of 30 per cent by 2030, while Husky Energy Inc. is aiming for a 25-per-cent reduction by 2025. Cenovus is also aiming for net-zero emissions by 2050, mirroring the federal government’s timeline.
Investors are increasingly factoring environmental, social and governance or ESG considerations into their decisions, which makes emissions reductions all the more important – even as Alberta Premier Jason Kenney repeatedly rails against what he sees as an unfair rating of the oil sands compared with Russia, Iran, Saudi Arabia and other producers with questionable human-rights records.
“If you look at it from a long-term sustainability perspective, to have investors investing in our company and to be able to have banks support us, we have to show that progress [on emissions reduction],” Mr. McKay said.
“So we’re very motivated to show that progress and actually meet or exceed those targets.”
Federal Natural Resources Minister Seamus O’Regan has also acknowledged the need to lower emissions if Canada wants to remain competitive.
“It’s not something we would have thought of as a market-driven competitive advantage, but if you look at countries increasingly like Norway and Ecuador, they will say, ‘We need to lower our emissions per barrel.’ That’s something they have to do domestically and internationally, and it’s something that investors are looking for,” he told The Globe in a recent interview.
“Net-zero is no longer just the right thing to do for the planet and an environmental imperative. It has become a strategic competitive advantage.”
Canadian Natural has already reduced its overall emissions intensity by 30 per cent since 2012, which Mr. McKay told a Thursday morning investor call was the equivalent of taking about two million cars off the road.
“In our oil sands operation, we can develop technology using Canadian ingenuity. We can even do better,” the president said.
The company posted a smaller-than-expected quarterly loss on Thursday, as improved natural gas prices and cost cuts helped cushion the blow from the COVID-19 pandemic on its operations.
The Calgary-based company said North American natural gas operating costs averaged $1.11 per thousand cubic feet in the quarter, a decrease of 3 per cent from a year earlier, as it took steps to control expenses. Overall expenses fell 13.3 per cent to $3.48-billion.
Canadian Natural, which cut roughly 14 per cent of its production in May, also signalled support for the Alberta government’s mandatory output limits, which were designed to help the sector deal with crushing differentials between U.S. and Canadian prices and a lack of market access owing to pipeline space.
Despite the slip in May, Canadian National reported a 13.6-per-cent jump in second-quarter output after restoring most of the curtailed volumes in June.
Mr. McKay told investors he expects total capital spending in 2021 to hover around the $3-billion mark, but said it will depend on oil prices and demand as the world economy continues to face uncertainty because of the pandemic.
With a report from Reuters
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