Royal Dutch Shell Plc will sell almost all of its production assets in Canada’s oil sands in a $7.25 billion deal that cuts debt and reduces involvement in one of the most environmentally damaging forms of fossil-fuel extraction.
All of the company’s oil-sands interests apart from a 10% stake in the Athabasca mining project will be sold to Canadian Natural Resources Ltd., Shell said Thursday, Bloomberg reported.
The Hague-based company will continue as operator of the Scotford upgrader, which converts heavy oil to lighter liquids for easier transport, and the Quest carbon capture and storage project.
The deal puts the Anglo-Dutch producer almost two-thirds of the way through a $30 billion divestment program to reduce debt, which soared following its biggest-ever acquisition of BG Group Plc last year.
The company this week ended an almost two-decade old US refining partnership with Saudi Arabian Oil Co. and earlier this year sold a collection of oilfields in the UK North Sea. Canadian Natural said the transaction will make its operations more efficient.
“This announcement is a significant step in re-shaping Shell’s portfolio,” Chief Executive Officer Ben Van Beurden said in a statement. “The proceeds will accelerate free cash flow and reduce gearing and make a meaningful contribution to Shell’s $30 billion divestment program.”
The sale marks another step toward Van Beurden’s goal of preparing Shell for a world of lower oil prices and tighter restrictions on carbon emissions. Oil sands—reserves of heavy crude found primarily in northern Alberta—lured investors in the past decade as the surge in crude prices above $100 made the difficult extraction process economic. They have since fallen out of favor amid a two-year price slump.
Shell on Thursday also amended its pay policy to better reflect incentives to control emissions. Progress in cutting greenhouse gases from its refineries, chemical plants and burning of natural gas at its fields will determine 10% of executives’ bonuses.
This portion of the payout was previously based on a range of environmental measures including controlling oil spills and water use.
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