First It Was Total, Now Exxon. The Verdict Is In. Athabasca Bitumen Is a "Stranded Asset."

When word got out on Wednesday that energy giant Exxon was writing down 20 per cent of its fossil fuel assets - Athabasca bitumen and natural gas - the writing was on the wall. It was the culmination of a quiet retreat by the world's biggest institutional investors, global insurance giants and foreign energy companies from the Tar Sands. High carbon, low value bitumen was in trouble and it took the federal  and Alberta governments to throw billions of public dollars into bad investments to keep it from collapsing entirely.

From The Narwhal:

The news broke in the last, ostensibly lazy week of July, and it sent a shockwave through the oilpatch: French fossil fuel giant Total was designating $9.3 billion in Alberta crude investments as stranded assets. 

Citing high production costs and forecasting declining demand for oil, Total said it was writing off its $7.3-billion stake in the Fort Hills bitumen mine, a massive development capable of processing 14,500 tonnes of oil sand per hour. 

Total also dropped its 50 per cent share in the Surmont bitumen recovery project, a joint effort with ConocoPhillips Canada that was busy doubling its output as recently as 2016. 

For good measure, Total dropped its membership in the Canadian Association of Petroleum Producers.

...The fallback assumption among Canada’s political class is that companies like Total, Deutsche Bank, and Zurich Insurance Group are just out to get Alberta, falling prey to the supposed foreign-funded radicals whose influence Premier Jason Kenney’s government is now apparently having trouble tracking down. 

“If you can picture the portfolio manager at the end of his long table in New York or London or Zurich or wherever, looking down at his juniors and saying ‘What are we doing about climate change? Well, we’re writing off investments in Canadian oil and gas,’ ” Natural Resource Minister Seamus O’Regan told The Globe and Mail last month. “And the box is checked.” 

But what if the rest of the world is reading the numbers while elected officials in Ottawa and Alberta cling desperately to their own spin? What if there’s no virtue signalling or hypocrisy in Total’s decision, just a hard-nosed business assessment? 

After all, Total is far from alone: in May, Fort Hills co-owners Suncor and Teck wrote down their own oilsands investments by $1.38 billion and $474 million, respectively, The Canadian Press reported. The facility was expected to operate for about half a century when it opened less than three years ago.

...“Total has reviewed its oil assets that can be qualified as ‘stranded’, meaning with reserves beyond 20 years and high production costs,” the release continued. “The only projects identified in this category are the Canadian oil sands projects Fort Hills and Surmont.” 

In other words: nothing political to see here, folks. Just listening to the evidence and following where it leads. 

But in Alberta, where everything fossil-related is hyper-political, that kind of analysis leaves both major parties in a serious bind. They’re caught between their own overheated support for an expanded oilsands industry and a global economic reality that is driving down the province’s fossil economy, triggering huge cuts in health and community services that depend on it, and now threatening to eviscerate rural municipalities’ tax base.

Since The Narwhal article went to print, Exxon has joined the Defector's Club. Exxon will be wiping 20 per cent of its fossil fuel reserves from the company's asset sheet. First to be written off, stranded, are Exxon's Athabasca bitumen holdings.

It's pretty obvious now that the reality of Tar Sands bitumen was foremost in Kinder Morgan's thinking when the Texas cowboys announced they were walking on the Trans Mountain pipeline. They must have thought they hit the jackpot when Bill Morneau flew down with the federal chequebook to grossly overpay them for what they knew was a pipeline to nowhere.

Will the Trudeau Liberals ignore these omens and keep pouring billions into the Trans Mountain expansion or will they realize that Canada has no end of better uses for that money?

Justin Trudeau has another scandal on his hands only this time it doesn't go to his integrity. This is a question of competence.