Hey Shell, not so fast! Come on back for a chat

I had the craziest dream the other night, it seemed so real…

In it, the Alberta Energy Regulator (AER) catches a kind of varmint, trying to crawl under a fence and get away.  Almost made it too. AER grabbed him by the ankle and pulled him back.

“Who are you and where d’you think you’re going?”

Sharp-dressed gentleman tries to brush dust and debris off clothes, examines dirt-caked fingernails. An expensive suitcase stands at his side. “Uh, heading home to Europe… Nothing much happening here for me so, you know, moving on.”

“Wait. I recognize you. You’re Shell. You’ve grown a beard but it’s clearly you – nice clothes, European accent…”

“Correct. No problem is there?”

“Well, there is…don’t think you’re getting away quite that quickly. There’s a little matter we need to sort out before you’re going anywhere. But wait, you haven’t gotten rid of all your Canadian business. You still own, let’s see here, a refinery, an upgrader, the Quest Carbon Capture/Storage project…”

“Yeah, that’s true, we do own a bunch of stuff yet.”

“So why are you sneaking out like this?”

“Well, you know, not really sneaking, just sort of, well, social distancing, if you will. Get it?” [Shell grins, leans over and bumps his elbow on AER in an unreturned sense of camaraderie.]

AER: “I think I’d like you to spell that out clearly for me.”

Shell stops grinning and implores, “We’re still active in the country, but I’m in public relations. You know how it is. We kind of wanted to get rid of some of the less popular things. We just want to hang onto things like Quest.”

“Yes, Quest is a big deal and everyone should be proud of it. But we have a few questions about some of your house cleaning.”

Shell looks around nervously.

“Let’s leave your most recent attempt at house-cleaning aside for a minute. Since it’s probably related, I’m curious about the oil sands thing.”

“Yes yes. They went to a good home.”

“You’d invested a lot into the oil sands.”

“Oh yes, a lot. Lots of good times. But it didn’t fit our business plans.”

“You built up huge oil sands production, secured multi-decade space on a dedicated pipeline connected to your upgrader and refinery, and kicked off a carbon capture and storage project. It was a remarkably integrated project from one end to the other.”

“Yes it was brilliant!”

“And then you sold only the production piece. Why would you do that after such a well-crafted master plan?”

Shell suddenly has a coughing fit. AER waits for it to subside for several minutes. Eventually, as it becomes obvious that Shell’s eyes are peering hopefully at AER through the attack, Shell regains composure and says, “Well, you know how it is…In Europe the oil sands are not so popular…”

“But you built those mines right? Selling them doesn’t help the environment, and it just looks weird when you continue to own the rest of the infrastructure downstream…”

“It was a natural evolution as we move away from oil towards a carbon free future!”

AER pulls out her iPad and does some quick searching. “Just pulled up your latest annual report…Hmm, this is interesting, in the ‘Risk Factors’ section: ‘Our future hydrocarbon production depends on the delivery of large and integrated projects…’ That’s critical to success, huh? Integrating projects? ”

Shell is sweating profusely, shrugs. “Well, you know, those corporate PR types, they say the craziest things…” Makes swirling index-finger circles alongside his head, forces a smile.

“I thought you said you were in PR?”

“I did? I mean, not really. PR is a bit strong. I’m just kind of, you know, an image management type.”

AER keeps reading, “ ‘These challenges are particularly relevant in certain developing and emerging-market countries, in frontier areas and in deep-water fields…’ So integration is important but just not in Canada?”

“Well, you know, it’s part of our global shift to natural gas too, there’s that…”

AER noodles around on his iPad some more. “Just pulling up your latest annual report…good lord, don’t you guys talk about oil at all? I can’t find anything except talk about how green you are.”

“We still produce some oil, a bit. But we’re really into natural gas and renewables and ESG. That’s what we’d rather talk about.”

“Just trying to find your oil production stats here…”

“Look, is that an eagle?” Shell exclaims, staring wildly off into the empty distance.

AER keeps digging. “Oh, finally, here they are. That’s interesting. In 2019 you produced 1.8 million barrels of oil per day, in 2018 1.75 million b/d, in 2017 1.73 million b/d… more than half your total production is still oil.”

“Definitely an eagle.”

“Yet you sold so much oil production in 2017 when you got rid of most of your oil sands position. Where does all that oil production come from?”

Shell is drawing figure 8s in the dirt with some very expensive and pointy shoes. “I think Asia is big, the US, Brazil. Africa. And, you know, here and there.”

“Asia? Like China? Japan? That sounds pretty strange.”

AER scrolls around on the iPad. “Oh, look at that. Yes your largest producing region is Asia…but in this table it says Asia includes Kazhakhstan, Oman, Qatar, Russia and Turkey. Kind of all lumped together in one big bucket.”

“Lazy accountants.”

“It’s pretty hard to see which countries are contributing. Isn’t that kind of important in an ESG world?”

“Not really, you know, it’s more like, well, we’re a global company so we focus on the whole and not so much getting hung up on any one country.”

“Except for Canada.”

Shell suddenly gets some dust or something in his eye, rolling around theatrically.

AER looks calmly on and repeats, “Except for Canada.”

“No, we love Canada!”

“But you abandoned the oil sands even though it was a perfect integration with the assets you kept, including a carbon capture storage product. You didn’t sell it at the top of the market, you sold it when oil was in the doldrums. And everyone is working terribly hard to reduce emissions in the oil sands. And then you go to these places like Russia where accurate environmental reporting will probably get you a one-way ticket to a gulag. The oil sands are more energy intensive it’s true, but improving all the time, and you sunk tens of billions into the mines, then sold them off and redeployed the capital in places that aren’t all that interested in emissions reporting.”

“That’s one way to look at it. Another is, well, no protesters!” The joke falls flat.

AER is scrolling around some more on the device. “Well, look at this. In 2019 you announced a $15 billion investment in Nigeria’s oil sector, kind of like you sold off the oil sands and replenished the lost production in a, shall we say, quieter part of the world.”

Shell answers reflexively. “Hoo boy you got that right. No problem with the permits there!” His impulsive grin slowly fades…

AER keeps scrolling. “Here’s an interesting article. ‘Nigeria’s oil-rich Bayelsa state opens enquiry on oil spills… The Commission’s aim is for oil companies to agree to a global standard of behavior, conducting their operations in Bayelsa as they would in Norway, Scotland or the USA… soils and groundwater in the community have been so contaminated by more than 50 years of oil spills that it would take up to 30 years to reverse the damage…’ but the oil sands were unacceptable to you because emissions intensity per barrel is high for heavy oil deposits? What about the entire emissions footprint of oil production in those places? The military? The spills? The pollution? The flaring? Isn’t there value in how well things are measured and observed here in Canada?”

“Look, we’re European, you don’t know what it’s like over there. They don’t want to hear about oil sands progress. A big carbon bomb, you know, that’s the stuff they believe, tar sands will destroy the planet. So we got rid of the dirty oil, and other stuff that, you know, just doesn’t look very good…”

“But the carbon bomb thing was total fiction; that statement was if every barrel of oil in the oil sands was burned, all 1.8 trillion barrels. That’s impossible and you know it. It would take a hundred years to consume 10 percent of that.”

“Could be, we’re not really involved with the oil sands anymore. Interesting point you make though, I’ll be sure to bring that up at an ESG meeting some day.”

AER’s exasperation is mounting. “Let’s get back to the abandonment issue. Seems to be some trouble here with the assets you sold to a smaller company.”

Shell grimaces. “Oh, that stuff was nasty.”

“Pardon?”

“I mean the smell, yes, the smell, that’s what I meant. Sour gas isn’t fun. But In hindsight it wasn’t so bad! All that production around Waterton, so pretty down there. I used to call the project sweet and sour. Get it?”

“Yes I get it.”

“Made lots of money which was pretty sweet.”

“And the sour?…”

“Yeah, that was the not fun part.”

“So you sold the whole mess off to a small company.”

“Yes, but they’re good guys and we sent them lots of help. And we wished them good luck and we really really meant it. And don’t forget we are still on the hook for old liabilities, for certain things.”

“They are good guys and I’m sure they know what they’re doing. But small petroleum producers are, to put it mildly, in pretty great distress these days don’t you think?”

Shell shrugs. “We don’t really notice what’s going on down there with the little guys. We’re pretty big you know.”

“Oh yes. Big. Big Oil.”

“Yes for sure…no wait! Not Big Oil! I didn’t say that!”

 “So you cleaned house just to tidy up your image?”

Shell looks forlornly at his GQ-gone-homeless-man outfit. “It’s all about ESG, you know?”

“ESG, yes…Environment, Social, Governance…”

“Shell is knocking it out of the park!”

“In what way? Looks like you’ve created some big E targets, like this huge old sour gas field that made you a lot of money, and multi-decade bitumen production sites that did the same, then grabbed the money and ran away, trying to distance yourself from anything that has a bad appearance. You even accept existing liability for the Waterton assets! It looks terrible, like you’re just trying to get your name off ownership of something so you look like a winner back home. Worse, you grabbed the money and invested it where environmental monitoring is a fraction of what it is in Canada, where flaring and pollution is obscene and/or unreported. Is that good for the S category? Or the G? When you cut bait and run on all these projects that you initiate, and make money from, what does that do for Canada, and why do you think that helps your image? It just makes you look sneaky and superficial.”

“I’m sorry my English isn’t so good. Can I get someone from our PR department to get back to you?”

AER closes the iPad case. “Looks like you’re stuck here for a bit yet. We better have a little chat about those sour gas liabilities. But first go get cleaned up. You’re dressed up pretty fancy, but, let’s face it, you don’t smell very good.”

Lawyers of the world: the above characters are entirely fictional and no such situation actually happened. Shell did not try to escape Canada by crawling under a fence, to the best of my knowledge. Shell does not sweat profusely when questioned, nor does it feign coughing attacks. Shell is a progressive global energy powerhouse that is incredibly capable of cleaning up messes, and is also quietly and unassumingly supporting the people of Russia, Nigeria, and countless other interesting jurisdictions we hardly notice. The AER does not catch people by the ankle and interrogate them in the middle of fields. I don’t know where they do it.

Having trouble understanding how we’re supposed to be shutting down the fuels that keep us alive? You’re not alone, find some answers in “The End of Fossil Fuel Insanity” available at Amazon.ca, Indigo.ca, or Amazon.com