Royal Dutch Shell has signed agreements to divest stakes in its in-situ and undeveloped oil sands assets in Canada and reduce its share in the Athabasca Oil Sands Project (AOSP) to 10% for $7.25bn.
Under the first deal, Shell agreed to divest its entire 60% stake in AOSP, its 100% interest in the Peace River Complex in-situ assets, including Carmon Creek, and a number of undeveloped oil sands leases in Alberta, Canada, to a subsidiary of Canadian Natural Resources for approximately $8.5bn.
AOSP comprises the Shell Albian Sands mining and extraction operations (Muskeg River and Jackpine mines) north of Fort McMurray, Alberta as well as the Scotford upgrader and Quest carbon capture and storage (CCS) project northeast of Edmonton, Alberta.
As part of the second agreement, Shell and Canadian Natural agreed to jointly acquire and equally own Marathon Oil Canada’s 20% interest in AOSP for $1.25bn in cash.
Upon completion of the deals, Canadian Natural will be the operator of the AOSP upstream mining assets, while Shell will continue to operate the Scotford upgrader and Quest CCS project.
Shell CEO Ben van Beurden said: “We are strengthening Shell’s world-class investment case by focusing on free cash flow and higher returns on capital, and prioritizing businesses where we have global scale and a competitive advantage such as Integrated Gas and deep water.
“The proceeds will accelerate free cash flow and reduce gearing and make a meaningful contribution to Shell’s $30bn divestment program.”
Shell said that the deals mark a significant step in re-shaping its portfolio in line with its long-term strategy.
Shell Canada president and country chair Michael Crothers said: “We are enhancing returns in our important Downstream business and leveraging our world-class manufacturing capabilities through the integration opportunities that come with continuing to operate the Scotford upgrader and Quest CCS project, located next to the Shell Scotford refinery and chemicals plants.”
Scheduled to be completed in mid-2017, the deals are subject to customary closing conditions and adjustments and regulatory approvals.
The Peace River Complex includes facilities at Peace River, Carmon Creek and Cliffdale. 2016 full year production from these assets was approximately 14,800 barrels per day.
Image: Royal Dutch Shell head office in Carel van Bylandtlaan, Netherlands. Photo: courtesy of P.L. van Till at nl.wikipedia.