In a major blow to fossil fuel industry lobbyists, Royal Dutch Shell has sold almost all of its Canadian oil sands activities in a US$7.25-billion deal, the Anglo-Dutch energy giant said Thursday, which would result in cutting its debt and reducing involvement in one of the most environmentally damaging forms of fossil-fuel extraction.
Shell said in a statement that it had signed agreements to sell its interests in two oil sands projects, Athabasca and Peace River, to Canadian Natural Resources Limited.
Shell will, however, receive a net US$7.25 billion in the vast transaction, which is subject to regulatory approvals and pegged for completion in mid-2017.
“This announcement is a significant step in reshaping Shell's portfolio in line with our long-term strategy," said Chief Executive Ben van Beurden in Thursday's statement.
"We are strengthening Shell's world-class investment case by focusing on free cash flow and higher returns on capital, and prioritizing businesses where we have global scale and a competitive advantage such as integrated gas and deep water."
The oil sands are some of the most expensive forms of fossil fuel explorations as it cost more to process the crude oil after extraction. This process is also considered one of the worst for the environment as it emits more carbon dioxide than production of conventional crude oil.
Last decade, the Canadian tar sands became attractive for major oil companies as the price of a barrel of oil reached a record high at more than US$100.
However, with the price plummeting to record lows since 2014, as well as increased pressure from environmentalists, companies have found themselves in massive debt and have been selling out their shares.
Oil firms Exxon Mobil, ConocoPhillips and Statoil have written down or sold their Canadian oil sand assets over the past few months. Therefore the future for the environmentally-disastrous Canadian tar sands looks grim, as the price of oil is unlikely to change and renewable energy is getting rapidly cheaper.
Environmentalists welcomed news of international majors pulling out of the oil sands and said they were likely wary of being locked into long-term investments in the region.
"There isn't much room for bitumen in a low-carbon, low oil price future and the smart money recognizes that's where we are headed," said Greenpeace Canada energy strategist Keith Stewart.