Shell agrees $7.25 bln Canadian oil sands sale

Royal Dutch Shell Plc will sell nearly all its production assets in Canada's oil sands in a US$7.25 billion (RM32.3 billion) deal that cuts debt and reduces involvement in one of the most environmentally damaging forms of fossil-fuel extraction.

Canadian Natural Resources will also take all of Shell's Peace River Complex assets in the area and a number of undeveloped leases in Alberta. These transactions are expected to bring $8.5 billion to the company.

Under the second deal, Shell and Canadian Natural will jointly acquire and own equally Marathon Oil Canada Corporation, which holds a 20% stake in AOSP, from an affiliate of Marathon Oil Corporation ( MRO ) for a total $2.5 billion or $1.25 billion each, to be settled in cash.

The transactions are expected to close mid-2017, subject to regulatory approvals.

"The proceeds will accelerate free cash flow and reduce gearing and make a meaningful contribution to Shell's USD30.00 billion divestment programme", he added.

In early trading, Shell's B shares in London were 1.4%, or 31p lower at 2,194.5p as the oil sector fell in reaction to weaker crude prices following a bigger-than-expected build in U.S. stockpiles.

"These assets are an excellent fit for Canadian Natural, a highly experienced oil sands developer", said Shell Canada president Michael Crothers in a release.

The moves provide further evidence oil majors are increasingly engaging with warnings from advocates of the carbon bubble hypothesis, which argues fossil fuel projects with relatively high capital costs could become stranded assets as clean technologies emerge and economies continue to decarbonise. Shell's share position in Canadian Natural will be "managed for value realisation over time".

Lastly, the 50% stake that Shell will own in the Marathon Oil Corp subsidiary after the transaction, when Canadian Natural will own the other half, can be swapped by Shell for a 20% stake in the Scotford upgrader and Quest CCS project.

The sale does not include its 10-per cent stake in the Athabasca mining project, Shell said. It will also remove 2 billion barrels of proven oil reserves from its books.

The disinvestment plan came after the London and Hague-based company sold assets worth $20 billion between 2014-1015.

  • Joanne Flowers