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Canadian oil sands down in corporate reserves

High-profile resource sales combined with oil reserve ‘de-bookings‘ last year mean that oil sands assets now account for 4.7 billion barrels, or 10 per cent, of the corporate liquids reserve bookings for larger global companies.

IAN WILLMS/NYT

Asset sales and sharp oil reserve writedowns mean that Canada's oil sands occupy a much smaller share of what global companies count in their cache of recoverable crude.

A report from Calgary investment bank Peters & Co. Ltd. says recent high-profile resource sales combined with oil reserve "de-bookings" last year mean that oil sands assets now account for 4.7 billion barrels, or 10 per cent, of the corporate liquids reserve bookings for larger global companies.

That compares with the 2015 reserve reports for those same companies, which showed the oil sands accounted for 13.5 billion barrels, or 25 per cent, of total reserves.

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The report's examination of reserves – by which companies estimate how much economically producible oil they have – looked at BP PLC, CNOOC Ltd., ConocoPhillips Co., Devon Energy Corp., Exxon Mobil Corp., Marathon Oil Corp., Royal Dutch Shell PLC, Statoil ASA and Total SA.

While the survey adds to the narrative that higher-cost oil sands assets are falling out of international favour as crude prices remain low, the report noted that the de-bookings in 2016 could be temporary. Companies have said they might recognize the reserves again if somewhat higher commodity prices hold, or they can further cut costs.

The report also said the reserve writedowns don't reflect any change in the size of the underlying resource. Several of the de-bookings emphasize the difference between Canadian reserve reporting standards and U.S. Securities and Exchange Commission rules – the latter under which oil reserves are evaluated using trends from the past 12 months rather than future price forecasts. Up until the end of 2015, major oil companies were using the oil sands to beef up their oil reserves reports.

But the Peters & Co. report said that combined with the asset sales over the past two years, the reserve writedowns are "a reflection of the changing shift in perception of the oil sands from this group of companies" – and mergers and acquisition activity is likely to continue.

In February, ConocoPhillips cut more than a billion barrels of oil sands reserves from its books because of low global crude prices. The same month, Exxon Mobil wrote down the entire 3.5 billion barrels of bitumen at Imperial Oil Ltd.'s Kearl oil sands project.

A month later, ConocoPhillips sold its oil sands holdings and other Canadian assets to Cenovus Energy Inc. for $17.7-billion. That followed other deals where Canadian firms scooped up oil sands assets from global players, including Canadian Natural Resources Ltd.'s $8.5-billion (U.S.) purchase of Shell and Marathon properties.

The Peters & Co. report said the international exit could result in opportunities to buy assets at a discount.

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Video: Carbon price not behind Shell’s oil sands sale: McKenna (The Canadian Press)
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