ExxonMobil Corporation will admit this week that it can no longer profitably develop up to 3.6 billion barrels of its Alberta tar sands/oil sands reserves unless oil prices rise, the Wall Street Journal reports.
The formal acknowledgement, forced on Exxon by the U.S. Securities and Exchange Commission, followed a quarterly report last fall in which Secretary of State Rex Tillerson’s former employer admitted that up to 4.6 billion barrels of its reserves might have to stay in the ground.
- The climate news you need. Subscribe now to our engaging new weekly digest.
- You’ll receive exclusive, never-before-seen-content, distilled and delivered to your inbox every weekend.
- The Weekender: Succinct, solutions-focused, and designed with the discerning reader in mind.
The move comes after Exxon burned through $20 billion to “put the oil sands at the centre of its growth plans” through its Kearl project, about 70 kilometres north of Fort McMurray, and “highlights how dramatically the prospects of the region have dimmed,” the Journal reports [sub req’d]. “Once considered a safe bet, Canada’s vast deposits are emerging as a prominent case of reserves being stranded by a combination of high costs, low prices, and tough new environmental rules.”
“For a lot of reasons the oil sands look like a prime candidate for eventual abandonment,” Baker Institute energy fellow Jim Krane told the WSJ. “One problem is that costs are persistently higher. The high carbon content only makes it worse.” The uniquely carbon-intensive process for extracting Alberta heavy oil and bitumen, the Journal acknowledges, has prompted the federal and provincial governments to introduce an (not necessarily foolproof) emissions cap and a carbon levy, on top of the already-high cost of tar sands/oil sands production.
The Journal points to continuing low oil prices as the central factor that has “altered investment priorities” for fossil producers, drawing emphasis away from expensive (and acutely environmentally sensitive) Arctic, ultra-deep, and tar sands/oil sands deposits. “Such projects can require billions of dollars in up-front investment and seven to 10 years, or even more, to bring returns. Now companies are turning to new sources of crude oil, such as shale, that don’t require the same massive investment of time and money to bring to production,” the paper states.
Citing ARC Financial, the WSJ says the price crash and ensuing shift in priorities have so far doomed at least a dozen and a half projects representing 2.5 million barrels of production per day. “Barring some geopolitical catastrophe that really changes the outlook,” said Amy Myers Jaffe, executive director for energy and sustainability at the University of California, Davis, “all these other projects are going to take the wind out of the oil sands.”
Exxon is still happily projecting that oil, gas, and coal will still supply 77% of global energy demand in 2040, against 4% for wind, solar, and biofuels. (h/t to The Energy Mix Subscriber Shelley Kath for pointing us to this story)
