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Canada’s Imperial Oil vows disclosure after parent Exxon shares new pollution data

Canada’s Imperial Oil says it will update its carbon pollution disclosure “in the coming months,” after parent company Exxon Mobil pulled back the curtain for the first time on emissions from the use of its own products.

Exxon bowed to investor pressure and released information this week showing the carbon pollution that is generated when its products are used, such as when the gasoline sold at company-affiliated gas stations is combusted inside people’s car engines.

This measurement of pollution, known by its technical term “Scope 3,” accounts for between 70 and 80% of life cycle emissions for most oil companies, according to the Pembina Institute.

Exxon’s Scope 3 emissions, the company admitted in its 2021 Energy and Carbon Summary, were equivalent to 730 megatonnes (Mt) of carbon dioxide in 2019. That puts Exxon, one of the largest oil and gas companies in the world, roughly on par with Canada’s entire emissions output of 729 Mt in 2018.

Financial experts have suggested for years that firms move towards disclosing these emissions. Canada’s federally appointed expert panel on sustainable finance, for example, recommended in June 2019 that corporations should begin preparing to “disclose, if appropriate, Scope 3 greenhouse gas emissions” and related risks. Two years before that, the Switzerland-based Financial Stability Board said the same thing.

“We need oil companies to phase out their fossil fuel production in line with what the climate science demands, and reporting Scope 3 emissions instead of ignoring them is a small step towards that,” said Oil Change International research analyst Bronwen Tucker.

Environmental groups, however, say the Canadian oil and gas sector is lagging when it comes to publicly disclosing this measurement of carbon pollution, at least to the fullest extent possible.

The Canadian Association of Petroleum Producers, the main industry group, did not respond to multiple requests for comment. The Canadian Fuels Association declined comment, while the Petroleum Services Association of Canada said it was not in a position to respond before publication.

In response to questions about whether the company would be making Scope 3 emissions data available to the Canadian public following its parent company’s move, Imperial Oil spokesperson Lisa Schmidt said: “We will provide an update on our emissions disclosure within our sustainability report in the coming months.”

Suncor, a large Canadian energy company, does disclose Scope 3 emissions, according to the Transition Pathway Initiative, which bills itself as a “corporate climate action benchmark” that assesses how companies are preparing for the low-carbon economy.

But Tucker argued that the Scope 3 data in the company’s Climate Risk and Resilience Report for 2020 represented an incomplete picture as it focused on its own refineries. A request for comment to Suncor was not returned before publication.

Imperial and other companies do publish what’s known as “Scope 1” and “Scope 2” emissions data, which refer to the carbon pollution from an energy company’s own operations, like crude oil production, as well as those emissions associated with the electricity that the company consumes.

In Canada, much of the attention on rising emissions from the oilpatch have been focused on these kinds of measurements. Greenhouse gas emissions from oil and gas production climbed 23% over the last roughly two decades, for example, largely due to increased production.

Oilpatch firms have also invested in technology that can decrease these kinds of emissions as well as their emissions intensity.

Cenovus Energy, another large Canadian company, said it currently reports Scope 1 and Scope 2 emissions in its Environmental, Social and Governance Report for 2019. Cenovus recently merged with oilpatch firm Husky Energy in a $6-billion deal.

“ESG (environmental, social and governance) leadership will remain core to the combined company,” said spokesperson Sonja Franklin.

“This includes ambitious ESG targets, robust management systems and transparent performance reporting. We will also maintain our ambition of achieving net-zero emissions by 2050.”

 


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Suncor’s Q4 takes a hit

Newfoundland project in question

Suncor, Canada’s leading integrated energy company, has announced it will record a $425 million non-cash after-tax impairment charge in the fourth quarter of 2020 on its share of the Atlantic offshore White Rose asset and West White Rose Project.

White RoseThe West White Rose Project was cast originally as a partnership between Husky Energy, Nalcor and Suncor. However, the recent acquisition of Husky Energy by Cenovus, a $21 Billion Calgary-based oil and natural gas company, has placed a shadow on the future of the West White Rose Project where plans are to access 200 million barrels (gross) of crude oil and extend the life of the offshore White Rose field by approximately 14 years. Discussions are ongoing with the operator and various levels of government to determine the future of the project.

Suncor’s 2021 guidance remains unchanged as the White Rose field will remain online producing as expected. 

The White Rose asset joint venture owners are Cenovus (operator, 72.5%) and Suncor (27.5%). The West White Rose Project joint-venture owners are Cenovus (operator, 69%), Suncor (26%) and Newfoundland and Labrador provincially owned energy corporation Nalcor (5%).

 


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Insights from the Star Women Leadership Panel

The Star Women Leadership Panel set the tone at the 2020 Star Women in Convenience Awards on November 4, 2020. They spoke candidly with CSNC editor, Michelle Warren, sharing their experiences in a changing industry, strategies for building strong teams and the importance of mentorship for career and business growth.

Plus, the women talk about the projects their most proud of and share insights into what helps keep them motivated during the pandemic.

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The panel features:

Hélène Drolet: Vice-president, operations, Western Canada Division, Circle K

Leslie Gordon: Category portfolio manager convenience retail, Suncor Energy/Petro-Canada

Robbie Mulder: District manager, Little Short Stop Stores

Olga Pigeon: Director of marketing and strategy, BG Fuels

Laurie Smith: Marketing and communications lead, Canada, 7-Eleven Canada Inc.


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ExxonMobil Canada cuts staff

Cost-cutting and layoffs continue in Canada’s oil and gas sector. Last week, ExxonMobil Corp announced plans to reduce its Canadian workforce by 300 positions. Citing the COVID-19 driven price slump, ExxonMobil reported they will reduce positions at Imperial Oil, ExxonMobil Canada and at its ExxonMobil Business Centre Canada.

According to the company, the workforce reductions are the result of insight gained through reorganizations and work-process changes made over the past several years. The impact of COVID-19 on the demand for ExxonMobil’s products has increased the urgency of the efficiency work, they said. The company’s U.S. head office already announced massive cuts of more than US$10 billion earlier this year in a move to help reverse the negative trend.

Imperial Oil confirmed its plans to furlough 200 of its 6,000 workers in a move to cut costs in the face of a market downturn. This move mirrors Suncor’s announcement that it plans to shrink its cohort by 15% over the next year and a half.


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Suncor to move division head office

Market volatility behind the location change 

Suncor Energy has announced it will move its Petro-Canada head office from two sites in Ontario to Calgary next year.

The move will impact 700 workers and is part of efforts by the company to remain competitive by integrating the downstream business with the rest of Suncor to be more efficient. The downstream operations represent Petro-Canada’s refineries through to retail and wholesale sales, including the Petro-Canada and Petro-Pass brands.

According to Sneh Seetal, Suncor’s director of communications, not all positions will move, as some workers still needed to remain close to customers or businesses, and some employees may choose not to move.

This announcement follows earlier news that Suncor would eliminate 10% to 15% of its workforce (1,930 jobs) over the next 18 months as a result of cost-cutting to deal with low oil prices and market volatility. Altogether, Suncor has a staff cohort of 12,889 employees at the end of 2019.


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Suncor announces staff reductions

Pandemic and markets force 0il company’s hand

UnknownCalgary-based Suncor Energy Inc. told employees last week that it will reduce its workforce by 10% to 15% over the next 18 months. It is expected that this reduction could involve as many as 2,000 positions across the country and will impact both salaried and contract positions.

According to Suncor CEO Mark Little, workers would see an initial 5% staff reduction over the next six months. Currently, Suncor employs 12,889 persons at its facilities that include exploration and petroleum extraction, refining, and retail distribution. 

The company reports that behind the reduction is a series of initiatives at cost-cutting, cash flow, and competitive market position. Internally the plan was called Suncor 4.0. Expectations were that the program would result in a smaller, more market-tuned workforce. Speaking to media, Suncor stated that the unprecedented drop in oil prices, the impact of the global pandemic and economic slowdown, as well as market volatility, had them accelerate the plan.

The company says much of the workforce reduction could come through early retirements or voluntary severance packages. Workers could also be redeployed in other areas of the business.

Suncor is the third major oil co., behind Shell and Marathon, to announce staff reductions this September. Already this year, the Canadian Association of Petroleum Producers reports 28,000 direct job losses in oil & gas with another 107,000 indirect positions lost.


File photo: Jeff McIntosh Canadian Press

Suncor CEO signals caution about restarting oil output as economy recovers

The CEO of Suncor Energy Inc. says the company won’t quickly ramp up oil production despite recent higher crude prices as the North American economy begins to reopen following the easing of lockdowns from the COVID-19 pandemic.

Mark Little says he won’t “bet the financial health” of the company on the nascent recovery, listing a host of risks including the possibility of a second wave of virus outbreaks.

On a conference call to discuss second-quarter results, Little reiterated his contention that the energy sector recovery will be led by consumers of its refined products, with higher demand for fuel translating into more demand for oil.

Little says Suncor’s refinery utilization rate of 76% in the three months ended June 30 (allowing crude throughput of 350,400 barrels per day), was well ahead of industry averages, and credited that to its ability to assess customer needs through its wholesale and retail networks, including its Petro-Canada service stations.

Suncor’s total production was 655,500 barrels of oil equivalent per day during the second quarter, 18.5% less than the 803,900 boe/d in the prior year quarter, as it took measures including shutting down one of the two production trains at its 194,000-bpd Fort Hills oilsands mine in northern Alberta.

Little said putting the second train back in service depends on oil prices, the ongoing Alberta oil output curtailment program which has prevented full production at Fort Hills and Suncor’s ability to control costs.

“During the second half of 2020 we see continued strengthening of downstream (refining) demand in gasoline and diesel to more seasonal levels by the end of the year,” said Little.

“Given the high level of global crude inventories and the return of production which was shut in during the second quarter, we expect (oil) pricing and crude spread volatility to remain through 2020, although obviously not as extreme as we saw in the second quarter.”

It reported a second-quarter net loss of $614 million or 40 cents per share, down from net earnings of $2.73 billion or $1.74 per share in the same period of 2019, but ahead of analyst expectations of a net loss of $1.28 billion, according to Refinitiv.


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Oilpatch optimism expected to rise as difficult second quarter finally ends

A rebound in oil prices as consumer demand for gasoline rises will buoy energy companies as they give quarterly results starting next week, but analysts say there are still too many uncertainties to expect any new spending in the sector.

The second-quarter reporting season for Canadian major oil and gas producers begins July 22 with results from Calgary-based Suncor Energy Inc.

The three months ended June 30 were marked by depressed oil prices blamed on a glut of oil from members of the OPEC-plus group, followed by a severe decline in fuel demand as pandemic lockdowns kicked in.

The price impact led to about $8.6 billion in announced capital budget cuts by producers of Canadian oil.

The average price of benchmark West Texas Intermediate crude fell to about US$27.85 per barrel in the period, less than half of the US$59.82 registered a year earlier _ a slide that included closing for the first time at a negative level on one day in April amid fears that North American crude storage was nearing its limit.

The price has been above US$40 per barrel for most of June.

“While three months ago we would have proclaimed Q2 results to likely be a complete writeoff in terms of relevance for investors, we no longer feel that way,” said analyst Michael Dunn of Stifel FirstEnergy in a report.

He predicted upside surprises in second quarter cash flow from operations for Suncor and Canadian Natural Resources Ltd. and higher-than-expected oilsands bitumen production from MEG Energy Corp. and Cenovus Energy Inc.

Investors will be keenly interested in progress in cutting costs and in forward guidance for the rest of 2020 and 2021, he said, adding concerns about financial liquidity have largely dissipated thanks to recent successful debt financings.

Canadian energy companies are taking heart from falling crude storage levels and ample export pipeline capacity to bring back oil output voluntarily shut down over the past few months, said Phil Skolnick, an analyst for Eight Capital.

He said the second quarter will be the worst this year for most energy companies.

“They’re going to be impacted by very low oil prices in March, and then that was offset partially by the increase in oil prices but, nonetheless, this (quarter) will basically be the bottom for earnings and cash flows for this year,” he said.

He says his sources indicate that about 500,000 barrels per day of Canadian oil production has been returned to service from the total of about 800,000 bpd taken out as prices reached their lows.

Optimism will be offset by fears of more economic disruption if there’s a major second wave of the pandemic, along with the growing risk of more pipeline headaches after recent U.S. court setbacks for projects including the Keystone XL, Line 5 and Dakota Access pipelines.

Companies with refining assets are expected to report very low utilization rates due to the economic slowdown but their profit margins will be bolstered by the low price of oil feedstock, Skolnick said.

He said demand is up in North America for gasoline and diesel but remains depressed for jet fuel.


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Suncor takes flight with AvGas venture

Screen Shot 2020-06-08 at 2.09.56 PMSuncor has teamed with Japanese partners to fund an innovative new project called LanzaJet that will develop sustainable aviation fuel (SAF) and other products.

Suncor Energy Inc., alongside Japan-based trading and investment company, Mitsui & Co., Ltd., will invest (US)$25 million to establish the LanzaJet demonstration plant at Soperton, Georgia.

The facility will be operated as an integrated bio-refinery by LanzaTech using sustainable ethanol sources to produce almost 38 million litres per year of SAF as well as renewable diesel. Hopes are the plant will start production in early 2022. The initial investment is coupled with participation from All Nippon Airways (ANA) and will complement an existing (US)$14 million grant from the US Department of Energy.

Suncor reports it has contracted to take a significant portion of the SAF and renewable diesel produced at the facility to provide its jet fuel and distillate customers. “These products are very complementary to our existing product mix and we see growth potential in both North American and international markets,” says Mark Little, President and CEO of Suncor. “Suncor is committed to both a low carbon future for our own business and to helping our customers, including in the space of commercial aviation, realize their vision of a sustainable future.”

Heading LanzaJet as CEO is Jimmy Samartzis, an aviation industry veteran who was pulled from his role as a Director with the Fermi National Accelerator Laboratory.

 

The LanzaJet process can use any source of sustainable ethanol for jet fuel production, including, but not limited to, ethanol made from recycled pollution, the core application of LanzaTech’s carbon recycling platform. Commercialization of this process, called Alcohol-to-Jet (AtJ) has been years in the making, starting with the partnership between LanzaTech and the US Energy Department’s Pacific Northwest National Laboratory (PNNL). PNNL developed a unique catalytic process to upgrade ethanol to alcohol-to-jet synthetic paraffinic kerosene (ATJ-SPK) which LanzaTech took from the laboratory to this pilot project.

Contact OCTANE editor Kelly Gray at Kgray@ensembleiq.com


File photo: Jeff McIntosh Canadian Press

Suncor CEO predicts slow recovery for sector from pandemic demand crunch

Incoming Suncor president and CEO Mark Little addresses shareholders. Photo: Jeff McIntosh Canadian Press

Suncor president and CEO Mark Little. File photo: Jeff McIntosh Canadian Press

CALGARY – Consumer demand for fuel is growing slightly after a sudden decline due to measures to deal with the COVID-19 pandemic but the CEO of Suncor Energy Inc. says he doesn’t expect a full recovery for his company or the Canadian energy sector until at least 2022.

The Calgary-based oilsands and refining giant surprised analysts by cutting its quarterly dividend by 55% to 21 cents per share as it reported a first-quarter net loss of $3.525 billion on Tuesday.

It had 18 years of consecutive annual dividend increases, with the latest announced in February.

The cut was necessary as the company resets its target of breaking even at a West Texas Intermediate price of US$35 per barrel, down from the previous mark of US$45, said CEO Mark Little on a conference call on Wednesday.

“Although we expect the crude market to substantially recover by 2022, the risk of an extended period of economic uncertainty, translated into weaker commodity prices and higher volatility, remains possible,” he said.

“In the second quarter, we know our industry is being challenged by … a significant supply and demand imbalance which has resulted in the largest collapse in crude prices ever. These market conditions require decisive leadership and action.”

The company, which sells fuel across Canada through its Petro-Canada network, has seen a reduction in demand of 50% for gasoline, 70% for jet fuel and 20% for diesel, Little said.

As North American oil storage fills to near capacity, any rebound in upstream oil production must be led by recovery in the downstream and that means it depends on when governments reopen the economy and consumers feel confident about travelling again, Little said.

There will be further delays as the high level of crude inventories is drawn down, he added.

Chief financial officer Alister Cowan said on the call he expects that Suncor’s gross debt of about $20 billion will grow by $2 billion or $3 billion this year, but the company will break even on a cash flow basis in 2021.

In a report, analyst Michael Dunn of Stifel FirstEnergy estimated the dividend cut will save Suncor about $1.56 billion per year.

“While not altogether surprising, the cut was not a sure thing given Suncor’s liquidity and track record of dividend increases. We agree with the move,” he said.

Suncor’s capital spending plan for 2020 is being cut to $3.8 billion, a further reduction of $400 million compared with its recent guidance and down $1.9 billion or about one-third compared with its original 2020 plan.

It added it intends to cut operating costs by $1 billion or 10% this year compared with 2019 levels.

Suncor registered an impairment charge of $1.38 billion on its 54.1% share of the Fort Hills oilsands mine it operates and $422 million against its share of the East Coast offshore White Rose and Terra Nova assets.

Suncor also recorded a $397-million after-tax inventory writedown, as well as a $1-billion unrealized after-tax foreign exchange loss on U.S. dollar denominated debt.

Due to lower demand for refined products, Suncor is reducing its outlook for refinery throughput to between 390,000 and 420,000 barrels per day from the previous goal of between 440,000 and 460,000 bpd.