MOU could hold key to $8.25-billion oil sands expansion, Canadian Natural president says

Canadian Natural Resources Ltd.’s CNQ-T paused $8.25-billion expansion of its Jackpine oil sands project in northern Alberta may be back on the table pending policy agreements with the provincial and federal governments, the company’s president said.

Calgary-based CNRL deferred the project in March. At the time, company president Scott Stauth attributed the decision to the lack of final ”government regulatory policies around carbon pricing and methane, which creates uncertainty and economic burden for our long-term growth.”

But a recent memorandum of understanding between Alberta, Ottawa and five oil companies – including CNRL – has changed the outlook for the project, along with several others being eyed by the company.

The MOU “presents a great opportunity for all oil sands players, including Canadian Natural, and certainly a very significant opportunity for Alberta and all of Canada,” Mr. Stauth told analysts on a Thursday morning earnings call.

The July 2 deal pushed forward a massive carbon capture project in the province’s north. It also set a Nov. 15 deadline for the governments to come to definitive agreements with oil companies on policies that aim to boost crude production.

Alberta, Ottawa and top oil producers agree to advance the Pathways carbon capture project

Mr. Stauth said in an interview should there be a successful agreement, CRNL will take another look at Jackpine, the expansion of its Jackfish and Horizon operations and a new greenfield project called Pike 2.

However, he said, the agreements must provide oil companies with the assurance that all of the objectives outlined in the MOU will be met.

Those goals include expanding global market access for Canadian oil, reducing emissions, streamlining regulatory frameworks and developing fiscal policy “to enable sustained and substantial oil sands development and production growth.”

“All of it has to come together,” Mr. Stauth said. “There isn’t one particular piece of it that needs to happen in terms of priority or the other. They’re all important.”

Mr. Stauth stressed that projects will remain on hold until an agreement is reached, and even then will only proceed if they will generate strong returns.

“Our shareholder returns will not be sacrificed,” he told analysts, adding that CNRL would not weigh long-term developments over medium-term ones if they press too hard on capital.

The chief executives at Suncor Energy Inc. and Cenovus Energy Inc. have also said that the MOU will not change their approach to capital spending.

The Jackpine project would increase CNRL’s bitumen production by 150,000 barrels a day, and the expansions of Jackfish and Horizon would boost barrels by roughly 30,000 and 90,000 barrels a day respectively. Pike 2, a new facility slated for Lac La Biche County, Alta., is designed to deliver 70,000 barrels a day.

On Tuesday, CNRL reported the highest quarterly oil sands mining production in its history, which averaged roughly 625,000 barrels a day April through June. It also increased its production guidance for the second time this year.

Its quarterly net earnings were $4.5-billion, compared with $1.3-billion in the first three months of the year.