Colossal fossil ExxonMobil has dropped virtually all its tar sands/oil sands holdings from its list of recoverable assets, and its Canadian subsidiary Imperial Oil followed suit by cutting a billion barrels of bitumen from its inventory, in what Bloomberg News calls a “sweeping revision of worldwide reserves to depths never before seen in the company’s modern history”.
Exxon reduced its estimate of recoverable reserves to 15.2 billion barrels world-wide as of December 31, Bloomberg reports—still a massive quantity, but far last than the 22.44 billion barrels it reported just a year ago. In the tar sands/oil sands, “the company’s reserves of the dense, heavy crude extracted from Western Canada’s sandy bogs dropped by 98%,” the news agency adds.
On the same day, The Canadian Press writes, Imperial cut its estimate of its “proved plus probable bitumen reserves” to 4.46 billion barrels, down from 5.45 billion a year earlier.
The two companies previously announced write-offs of up to US$20 billion for Exxon and C$1.2 billion for Imperial.
“Proved” or “proven” reserves have a specific meaning in fossil industry financing—in contrast to the total resource a company has discovered, proven reserves “refer to the quantity of natural resources a company reasonably expects to extract from a given formation,” Investopedia explains. To fit the definition, the resource must have “a 90% or greater likelihood of being present and economically viable for extraction in current conditions.”
It’s largely the deteriorating economic conditions the industry faces that led to Exxon’s and Imperial’s epic write-down this week.
“The pandemic-driven price crash that rocked global energy markets was the main driver of Exxon’s reserve downgrade, along with internal budget cuts that took out a significant portion of its U.S. shale assets,” Bloomberg says. “The oilsands have historically been among the company’s higher-cost operations, making them more vulnerable to removal when oil prices foundered.”
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