The shelving of the proposed $20.6-billion Frontier oilsands mine this week stems mostly from the length of time it took for it to win regulatory approval, says the CEO of oilsands producer Husky Energy Inc.
Teck CEO Don Lindsay said there was “no constructive path forward” in a Canadian environment marked by conflict amid Indigenous rights, climate change issues and resource development.
“What killed Teck, you know, ultimately, was a regulatory process that just went on and on and on and on,” said Husky CEO Rob Peabody on a conference call Thursday to discuss his company’s fourth-quarter results.
“Had that process concluded in a sensible timeframe, I’m sure we’d have a Teck project under construction today because there were proponents who were set and keen to move forward with that project.
“If you wait long enough, that sort of coalescence on the idea of spending that sort of money ultimately unravels.”
The Frontier project application was first submitted to the Alberta Energy Regulator in late 2011. In 2016, a joint federal-provincial review panel was appointed and it approved the project last July.
Asked if the outcome suggests large oilsands projects can’t be built in Canada, Peabody said it actually means all large projects will have a difficult time, even if they produce renewable hydroelectric energy.
“Building major highways, building pipelines, building major infrastructure projects around cities, things like that, I think this applies to everything,” he said.
Critics of the mine, designed to produce 260,000 barrels of oil a day, said it wouldn’t have been profitable unless North American oil prices were much higher than they are now, although Teck said new technologies would have been employed to bring down costs.
Husky said lower long-term commodity price forecasts were the major reason it decided to take non-cash impairment charges of $2.3 billion after tax in the quarter ended Dec. 31.
The charges are related to its upstream assets in North America, including its Sunrise oilsands project and natural gas assets, as well as the subtraction of redundant assets at its refinery in Lima, Ohio, following a project that allows it to process heavier barrels of crude.
The writedowns echo a $2.8 billion charge taken by oilsands rival Suncor Energy Inc. earlier this month related to lower forecast prices for heavy oil from its Fort Hills oilsands mine in northern Alberta.
Teck took a charge of $910 million for the same reason related to its 21.3 per cent stake in the Fort Hills mine.
Husky cut about 370 jobs in a round of layoffs in October to better align staffing with capital spending plans for 2020 and 2021 that had been reduced by $500 million due to changing market conditions.
Shares of Husky fell by as much as 11.7 per cent to $6.31 on Thursday morning in Toronto after it reported results that matched analyst expectations on production but missed by a wide margin on funds from operations.
The Calgary-based company controlled by Hong Kong billionaire Li Ka- shing blamed lower U.S. refinery margins, an extended shutdown at the refinery in Lima, the temporary shutdown of the Keystone pipeline in November and $74 million related to employee severance for posting funds from operations of $469 million.
That compared with $583 million in the year-earlier period and analyst expectations of $712 million, according to the financial markets data firm Refinitiv.
The company posted a net loss of $2.34 billion, compared with a profit of $216 million in the same quarter a year earlier.
On the call, Peabody said the company’s Asia-Pacific operations are getting back to normal after precautions related to the COVID-19 virus temporarily reduced demand for natural gas from the Liwan offshore project operated by its partner, China’s CNOOC Ltd.
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