A new report released today finds that seven of the largest publicly-traded oil companies in the world are putting billions of dollars in jeopardy by investing in high-cost, high-risk oil extraction projects.
Many of the most risky ventures are right here in Canada and many of the companies named in the report figure significantly in Canadian pension plans and mutual funds.
Authored by the U.K.-based Carbon Tracker Initiative (CTI), the report details how large, household name oil companies like Shell, BP, ExxonMobil and Chevron are at risk of wasting a whopping $91-billion of investor cash over the next decade in some of the world's most expensive energy projects, like Canada's oil sands, as well as deep-sea oil drilling in hostile environments like the Arctic.
CTI provides a list of twenty projects from around the world that institutional and individual investors should be aware of. Of particular interest to Canadian investors will be the nine Canadian oil sands projects listed, of which six top the list as the most risky and expensive.
Some of these Canadian projects are the costliest oil ventures in the world and will require crude oil prices to rise as high as $150 a barrel if they are to be profitable.
The price for the benchmark oil Brent Crude has been flat now for more than four years and currently sits far shy of $150 per-barrel at $102/bbl.
A quick look at the portfolios of some of the largest mutual funds in Canada, finds major holdings in the companies behind these risky projects.
The nine risky Canadian oil extraction projects listed by CTI are:
- ConocoPhillips' Foster Creek oil sands mine
- Shell's Carmon Creek oil sands mine
- ConocoPhillips' and Total's Surmont oil sands mine
- Exxon's Aspen oil sands mine
- Exxon's Kearl oil sands mine
- ConocoPhillips' Christina Lake oil sands mine
- BP's Sunrise oil sands mine
- Chevron and ConocoPhillips' Amauligak Arctic Drilling Project
- Chevron and Shell's Athabasca oil sands mine
According to CTI these nine projects are much more expensive than more traditional oil extraction projects due to their unconventional nature.
"Unconventional" is a term used by the oil industry to describe projects that do not use the traditional oil well method. So projects like the Alberta oil sands are considered unconventional because they employ methods like steam extraction.
Unconventional oil projects are becoming more and more common as oil companies struggle to discover new conventional oil reserves like those you would typically see in regions like the Middle East.
CTI is urging institutional and individual investors, as major shareholders in these publicly traded companies, to start asking questions about the risks these projects pose to their investments.
"Investors are concerned about the levels of capital being sunk into future fields by the oil sector, but are not getting answers on the economics of the projects from the companies," said James Leaton, CTI's research Director. "CTI has responded to demand for detail to enable shareholders to challenge where money is spent."
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