TORONTO: Canadian oil sands companies have shelved nearly C$2bil (US$1.47bil) in green initiatives in a cost-cutting drive to weather the coronavirus pandemic, a reversal in some of their commitments to reduce emissions and clean up their dirty-oil image.
International oil firms left Canada in droves in recent years due to the high costs to turn a profit in the sector. Some investors and banks, meanwhile, halted financing in part to pressure the world’s fourth-largest crude producer to reduce the environmental impact of oil-sands production.
This year, top producers Suncor Energy, Canadian Natural Resources and Cenovus Energy have cut a combined C$1.8bil (US$1.32bil) in planned spending on green initiatives as losses mount due to economic lockdowns that have hammered oil demand.
“This has strengthened our view on the matter, that our decision that we took (to block oil sands) was correct, ” said Jeanett Bergan, KLP’s head of responsible investments.
KLP, Norway’s largest pension fund, exited oil sands investments last year, while the country’s US$1 trillion wealth fund in May blacklisted Suncor and other large producers for producing excessive greenhouse gas emissions.
The Canadian industry has the highest upstream emissions intensity among major world oil and gas producers, at 39 kg per barrel of oil equivalent, more than triple that of the United States, consultancy Rystad Energy said in May.
The picture in Canada contrasts with Europe, where the biggest oil and gas companies have diverted a larger share of their cash to green energy, even through the outbreak.
The oil sands industry is more carbon-intensive than other forms of crude production, and faces more intense pressure from investors to limit emissions.
Canadian oil producers will have a harder time convincing investors and environmentalists of their role in a future lower carbon economy if their commitment to green initiatives is wavering.
Canada’s oil firms have invested in recent years to reduce their emissions intensity. But Western Canada’s overall emissions increased 14% from 2005 to 2018, as oil output doubled.
Suncor, which made most of the cuts, shelved a C$300mil wind power project and a C$1.4bil co-generation plan, which would replace coke-fired boilers with natural gas units at its base operations, reducing carbon emissions and other pollutants.
Suncor vice-president of sustainability Jon Mitchell said it and other green investments hinge on the financial health of the company’s core business extracting crude.
“The deferral and delay in some of those projects does not diminish their importance, ” he said.
Cenovus, which is targeting net zero emissions by 2050, cut its technology budget by 78%, or C$137.5mil, saying in a filing it was only advancing select initiatives that had both cost and environmental benefits. — Reuters