Oil sands ‘Big Five’ making billions despite oil price crash and pipeline delays

(December 12, 2018) Despite the 2014 oil price crash and the ongoing hand-wringing over pipelines and the price of Canadian heavy oil, a new study from the Corporate Mapping Project shows the reality is that the Big Five oil sands producers have remained incredibly profitable corporations. The study, released in November by the Parkland Institute and Canadian Centre for Policy Alternatives – BC Office, finds that Suncor, CNRL, Cenovus, Imperial, and Husky banked or paid out to shareholders a total of $13.5 billion last year alone. These big five oil sands corporations produce 80% of Canada’s bitumen.

The report analyzes the economics of the Big Five through the 2009–2017 boom, bust, and consolidation commodity cycle. It finds:

• The Big Five paid $31.76 billion in dividends to shareholders over the period, including $12.56 billion since the oil price crash in late 2014.
• In 2017, the Big Five transferred a total of $6.2 billion to shareholders ($4.16 billion in dividends and $2.04 billion in share buybacks) and had residual savings of $7.3 billion, while paying out $4.72 billion in taxes and royalties to all levels of government.
• "The aggregate gross profits of the Big Five in 2017 were $46.6 billion -- slightly less than the Alberta government's entire annual revenues of $47.3 billion."

There’s no question that the price crash had a major impact on the industry in Alberta, most importantly on the almost 20,000 workers who lost their jobs in 2015, but the Big Five are doing just fine. As highly integrated multinationals—all with significant midstream assets in the US—they’ve been able to shift their operations in response to market conditions to ensure they remain profitable despite the issues that have been dominating the headlines in recent months.

For example, Suncor CEO Steve Williams recently explained that the current large price differential for Canadian heavy oil means integrated companies can use the bitumen they produce as cheap feedstock for their refineries. This is the main reason that Suncor’s net earnings for the third quarter (July-September) alone were $1.8 billion.

Instead of misplaced concerns about the financial health of the Big Five, the most important question emerging from our new report is how to reconcile the forecast increases in emissions from the oil sands sector with the urgent need for science-based reductions in carbon emissions. Albertans and Canadians have to ask if it’s worthwhile to continue betting on a cost-cutting sector with weak fiscal and employment benefits that has emerged from the crash, or if now is the time to make the changes needed to benefit from the ongoing global energy transition.

The ongoing energy transition in Canada and around the world is a massive economic opportunity, even for oil-dependent jurisdictions like Alberta. Alberta and Canada can make a just transition by developing policies that recognize and respect Indigenous rights and title, put thousands of people to work cleaning up land that has been polluted by Alberta’s hydrocarbon industry and building wind and solar farms, and that minimize the impacts of such a transition on oil and gas workers by involving them in building our new economy.

Instead of suggesting that the Canadian government should invest in the crude-by-rail business, as Premier Notley recently floated—or advocating for a royalty holiday for oil sands companies, as the Royal Bank of Canada (the second largest owner of Canada’s fossil fuel sector) has proposed—we should be focused on the challenge and opportunity of transition.

Ian Hussey is a political economist at the University of Alberta’s Parkland Institute, and a steering committee member of the Corporate Mapping Project.

The Corporate Mapping Project is a six-year research and public engagement initiative jointly led by the University of Victoria, the Canadian Centre for Policy Alternatives BC and Saskatchewan Offices, and Parkland Institute. This research was supported by the Social Sciences and Humanities Research Council of Canada (SSHRC).