Canadian companies tap bond market at the heaviest pace

Jeddah - Yasmine El Tohamy - WINNIPEG: Canadian oil sands companies have shelved nearly C$2 billion 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$1.8 billion ($1.32 billion) 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 $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 kilograms per barrel of oil equivalent, more than triple that of the US, 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 percent from 2005 to 2018, as oil output doubled.

Suncor, which made most of the cuts, shelved a C$300 million wind power project and a C$1.4-billion cogeneration plan, which would replace coke-fired boilers with natural gas units at its base operations, reducing carbon emissions and other pollutants.

Alberta, heart of most of Canada’s production, reduced environmental monitoring requirements temporarily, saying it was necessary to comply with health orders regarding the pandemic. The suspended types of monitoring included certain water quality tests and some monitoring of soil and wildlife.

Alberta’s move is worrisome, said Jamie Bonham, director of corporate engagement at NEI Investments, a firm focused on responsible investing, which holds stakes in the sector to advocate for green improvements.

“The province is simultaneously opening up the economy — you can go to a barber, get a massage or sit in a restaurant — but you can’t take an environmental reading at a wellsite?” Bonham said.

The pause is only for “short-term relief,” said Kavi Bal, spokesman for the province’s energy minister. He noted that a major commercial carbon capture project began operations this month.

The federal government has used pandemic aid to launch two new green initiatives — cleaning up abandoned wells and loans to help companies reduce methane emissions.

Such steps, however, are too little and too late to draw back many investors, banks and insurers that shunned the industry in recent years, according to a Reuters survey.