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Total’s Alberta oilsands writeoff is a wake-up call — not a cheap shot

CAPP and Jason Kenney’s government slammed Total’s decision as ‘hypocritical,’ but a look at the numbers shows why the French oil giant made the $9.3-billion decision
By Mitchell Beer, publisher of The Energy Mix and president of Ottawa-based Smarter Shift.

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 reaction from the oil lobby and its allies in the Alberta government was swift, fierce and entirely predictable.

“I think it’s somewhat virtue signaling that there is an orchestrated campaign globally against Canada and this is a visible action they can take to wage some of that pressure,” Canadian Association of Petroleum Producers president and CEO Tim McMillan told BNN Bloomberg.

Alberta Energy Minister and former pipeline executive Sonya Savage agreed. “At the same time Total is dismissing the leadership of Canadian producers who are doing their part with active strategies that have reduced emissions, they continue to invest in countries such as Myanmar, Nigeria and Russia,” she said. “This highly hypocritical decision comes at a time where international energy companies should, in fact, be increasing their investment in Alberta.”

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Indeed, it isn’t as though Total, France’s biggest company and one of the world’s seven fossil “supermajors,” is suddenly embracing a rapid transition off carbon. That surely wasn’t the tone in mid-July, when Total sealed the deal on a US$20 billion LNG project in Mozambique, Africa’s biggest project investment ever.

“The signing of this large-scale project financing, less than one year after Total assumed the role of operator of Mozambique LNG, represents a significant achievement and a major milestone for the project,” said CFO Jean-Pierre Sbraire. “It demonstrates the confidence placed by financial institutions in the long-term future of LNG in Mozambique.”

Friends of the Earth International declared the project “a windfall for the industry, a curse for the country.”

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.

Contrast the triumphant tone of Total’s Mozambique release with the bean counter dryness of its Alberta announcement.

“The weakness of investments in the hydrocarbon sector since 2015, accentuated by the health and economic crisis of 2020, will result by 2025 in insufficient worldwide production capacities and rebound in prices,” the company wrote. “Beyond 2030, given technological developments, particularly in the transportation sector, Total anticipates oil demand will have reached its peak.”

With those factors in mind, along with the company’s own 2050 carbon neutral pledge, “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.

Along the way, the Kenney government is utterly ignoring the 67,200 green economy jobs the province could tap into by 2030, including urgently-needed energy efficiency work that would deliver $2 billion in energy savings and carbon reductions. Instead of keeping faith with voters who largely supported the province’s solar and energy efficiency programs, the government shuttered its energy efficiency agency in June, returning Alberta to its previous status as the only North American jurisdiction without a functioning program. Its recently-announced economic diversification strategy is long on spin, generous with corporate tax cuts and short on detail.

In other parts of Canada, it has become fashionable to respond to Alberta’s desperate straits from one of two, increasingly polarized extremes: by holding ever tighter to an oil industry that is entering its sunset or gloating from a distance at a province that can’t seem to let go. Neither approach is particularly helpful for households and small businesses that are bearing the brunt of their leaders’ political and economic malpractice.

Kenney’s basic strategy — curse the fates and blame political opponents, real or imagined — might look like a winner. As a way to mobilize his political base and drive wedge-issue voters, it could work for some time to come. But it won’t deliver the jobs Albertans need, the strong economy they’ve come to expect or the greenhouse gas reductions their future (and everyone else’s) depends on. 

Alberta’s politicians have the option of taking an announcement like Total’s as a wake-up call, rather than a cheap shot. They’ll be failing their constituents until they start getting that judgement call right.

Doubling down on Alberta’s oil and gas sector is a risk Canadians can’t afford to take

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