The company believes oil demand will peak by 2030 and Brent prices will hover around US$50 over the long term
Author of the article:
Jul 29, 2020 • • 2 minute read
Total SE announced an US$8.1-billion writedown after the coronavirus pandemic hammered energy prices and challenged assumptions about long-term demand growth for oil and gas.
The company said it now believes its Canadian oilsands projects Fort Hills and Surmont are now ‘stranded’, meaning its reserves may not be produced by 2050.
The French oil giant said it was taking a US$7-billion writedown on its Canadian assets and will not approve any new project of capacity increase on the two Canadian oilsands assets.
Real Life. Real News. Real Voices
Help us tell more of the stories that matterBecome a founding member
“Finally, still consistent with the Climate Ambition announced on May 5, 2020, Total decided to withdraw from the Canadian association CAPP (Canadian Association of Petroleum Producers) considering the misalignment between their public positions and the Group’s ones.”
The French energy giant is following its peers BP Plc and Royal Dutch Shell Plc, which already warned that they could write down almost US$40 billion between them in the second quarter. The size of the impairments shows how the global health crisis, combined with the push to curb carbon emissions, is shaking the industry’s foundations.
Most major European oil companies had valued their assets using long-term crude prices of US$60 to US$80 a barrel. That’s close to where international benchmark Brent was trading before the pandemic struck, but is now considered unrealistic in the post-COVID economy.
“Beyond 2030, given technological developments, particularly in the transportation sector, Total anticipates oil demand will have reached its peak and Brent prices should tend toward the long-term price of US$50 a barrel,” the company said in a statement on Wednesday.
America’s biggest oil producers are coming under increasing pressure to disclose their long-term forecasts. Exxon Mobil Corp. and Chevron Corp. don’t publish such estimates, meaning shareholders are less able to scrutinize how their investment plans square with market realities.
Total and Shell report earnings on Thursday, and Exxon and Chevron follow on Friday. All are expected to report big losses for the second quarter.
With file from Financial Post Staff
Subscribe to the newsletter news
We hate SPAM and promise to keep your email address safe