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Investment uncertainty won’t scare Shell away, Canadian boss says

A Shell logo is seen reflected in a car's side mirror at a petrol station in west London.

© Toby Melville / Reuters

Royal Dutch Shell PLC has largely exited the oil sands but remains committed to the country through other operations, including shale development in Alberta and B.C. – where a $1-billion investment was made in 2016 and another $1-billion is coming this year – the multinational energy firm's Canadian president says.

Michael Crothers is taking pains to emphasize the Anglo-Dutch company is not leaving Canada, even if it now has largely cut out its work mining bitumen from the forests of Northern Alberta. In March, Shell announced it was selling the chief parts of its oil sands holdings to Canadian Natural Resources Ltd. in agreements that saw Shell net $7.25-billion (U.S.) along with taking a nearly 9-per-cent stake in CNRL, a domestic oil sands giant. The deal has played a role in cementing Shell's global move toward gas and away from crude, especially the more expensive varieties.

Even investment uncertainty in Canada – and whether a new B.C. Legislature will try to block Kinder Morgan Inc.'s planned expansion of its Trans Mountain pipeline, or whether liquefied natural-gas projects are encouraged on the West Coast – won't dampen Shell's plans, he insisted.

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"Uncertainty comes in and then uncertainty recedes," Mr. Crothers said at his downtown Calgary office. "But one of the things I want to emphasize is that Shell continues to invest in Canada and will continue to invest in Canada."

While the total money spent on its Canadian work will drop compared with 2016's $2-billion (Canadian) spend, Shell has now moved its Canadian upstream focus to 130,000 barrels, and growing, of oil equivalent a day, production from Montney natural-gas resources in B.C. and Duvernay shale containing high-value oil in Alberta.

"It's become so competitive," he said of shale plays, where better technology and lower labour costs mean break-even rates have plummeted across North America.

In a wide-ranging interview, Mr. Crothers said uncertainty in the political landscape – including the potential of an NDP-Green political partnership in B.C. – weighs on the Canadian energy sector, but he is still hopeful regarding the construction of new pipeline capacity and the building of Canada's liquefied natural-gas industry.

Among 19 proposed projects for the West Coast, the cost of building the Shell consortium's $40-billion LNG Canada project could even go down as a result of a drop in industrial activity in Western Canada – meaning better availability of workers and engineering firms, he noted. The consortium, of which Shell is a 50-per-cent owner, will receive bids from potential prime contractors at the end of this year and will make a final project decision some time thereafter.

Although the B.C. New Democrats have expressed general support for LNG projects, the province's Green Party has criticized both the push to expand the industry and has pledged to ban fracking. But Mr. Crothers said the LNG Canada project has widespread support from Indigenous and other communities.

"I'm hopeful that regardless of what government is in place in British Columbia, if our project comes to a decision to proceed, that they'll support us."

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Mr. Crothers also defended both provincial and national climate-change policies and carbon-pricing schemes, even in the face of ongoing criticism they will – along with the planned exit of the United States from the Paris accord on climate change – make the Canadian energy industry less competitive. He said the Climate Leadership Plan introduced by Alberta's NDP government in late 2015 has succeeded in helping to remake the province and country's environmental image.

"I think Canada really did reset itself," he said, noting Canada's higher costs because of climate-change policies are "manageable." He said he hasn't heard complaints from his industry cohorts about the fact that Shell sold off most of its oil sands assets just 18 months after joining a group of energy companies that backed an Alberta carbon tax and a hard cap on oil sands emissions.

He also said a report last month that Shell is trying to unload its $4.1-billion stake in CNRL was "pure speculation." He suggested nothing too imminent is in the works.

"Holding for value over time means that we don't have a firm timetable for liquidating that position," he said.

Environment Minister Catherine McKenna is defending carbon pricing in the wake of news Royal Dutch Shell is selling most of its Canadian oil sands holdings. The Canadian Press
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