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Despite goals to reduce its emissions of greenhouse gases, Canadian Natural Resources Ltd. is planning to drill 244 conventional oil and gas wells in 2022.Dan Riedlhuber/Reuters

Canadian Natural Resources Ltd. CNQ-N will bump up its capital spending and production this year, as oil prices rise on hopes that the global economy will continue its recovery despite surging cases of the Omicron COVID-19 variant.

Despite goals to reduce its emissions of greenhouse gases, the Calgary-based company is planning to drill 244 conventional oil and gas wells in 2022, and 102 in its thermal oil sands operations.

CNRL said in its budget released on Tuesday that it will spend about $4.3-billion on capital expenses in 2022, up from around $3.5-billion in 2021. That includes $700-million for projects aimed at increasing production by about 63,000 barrels of oil a day by 2025.

Meeting emission reduction targets crucial to earn support of banks and investors, CNRL president says

In 2022, about $315-million of the $700-million will go to what CNRL calls a “reliability enhancement project” at its Horizon oil sands operation. The project is intended to extend the turnaround cycle, – a planned shutdown for maintenance, renovations or refits – from annual to once every two years.

CNRL president Tim McKay said in a call with investors on Tuesday that the idea is to remove some of the costs and risks associated with expensive turnarounds. To do so, he said, engineers over the past few years have “come up with some creative ideas” around efficiency and reliability.

“When you take things down, the equipment changes, you find things that break,” he said. “As well, at the same time when you bring it up, you also find issues with various components. So the best and most operationally efficient thing to do is keep the facilities running, keep them running smoothly and safely.

“I just look at it as a really huge opportunity, in terms of both on the capital side and on the operational side.”

Mr. McKay said CNRL’s greenhouse gas emissions intensity has decreased by 18 per cent from 2016 levels, and its absolute methane emissions by 28 per cent. He added that he sees opportunities to further reduce the company’s environmental footprint to reach the oil sands goal of net zero by 2050.

He pointed to CNRL’s use of carbon capture, utilization and storage projects, which capture carbon dioxide emissions to be stored deep underground or injected into mature oil wells to increase production.

Mr. McKay said the company is targeting 6-per-cent growth in conventional oil production over 2021 levels, and 18 per cent in its natural gas production. Overall, its production mix goal for 2022 is about 46 per cent light and synthetic crude oil, 28 per cent heavy crude oil and 26 per cent natural gas.

He said that while oil demand has been volatile over the past few years, he’s seeing it climb back “pretty close to pre-COVID numbers.”

“What that pricing could be in 2022 and beyond is always difficult to say, but the way we’ve structured our program means we can slow down activities if we feel that it’s the right thing to do,” he said.

Still, he added that CNRL’s maintenance and operating costs are low, meaning volatile global oil pricing doesn’t hit the company as hard as some of its peers.

Canadian Natural delayed release of its 2022 budget until this week so it could factor in the production and economic effects of its acquisition of Storm Resources Ltd., which closed on Dec. 17.

The oil giant bought Calgary-based Storm for $960-million, which expanded CNRL’s footprint in the Montney area of northeast British Columbia.

It also picked up Painted Pony Energy Ltd., another Montney producer, for $461-million in 2020.

As for whether CNRL is considering any deals in 2022, Mr. McKay said it currently has no gaps in its portfolio.

“Acquisitions need to make sense and add long-term value,” he added.

Canadian Natural was one of numerous oil companies that took advantage of the Canada Emergency Wage Subsidy, a federal pandemic-relief program that ran from March, 2020, until October, 2021.

Even so, the company increased its shareholder dividend by 13 per cent in 2020, and 38 per cent in 2021, and Mr. McKay said he expects that trend to continue into 2022.

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