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Exxon Relents, Wipes Oil Sands Reserves From Its Books ... Low prices force the oil giant to stop counting 3.5 billion barrels as an asset, a major turnaround in its accounting.

Burgess COMMENTARY

Peter Burgess

Exxon Relents, Wipes Oil Sands Reserves From Its Books ... Low prices force the oil giant to stop counting 3.5 billion barrels as an asset, a major turnaround in its accounting.

Exxon's tar sands projects have become a burden to its bottom line

Persistently low oil prices have pushed Exxon to stop counting a big chunk of its reserves in the Alberta oil sands. Credit: Getty Images

ExxonMobil announced Wednesday that it had wiped off its books all 3.5 billion barrels of tar sands oil reserves at one of its projects in Canada. Because of recent low oil prices, the company said none of those reserves can be considered economical according to the accounting rules of the Securities and Exchange Commission.

The accounting change at its Kearl project, a momentous if expected development, represented a turnaround for the company, which has long resisted calls to revise its reserves estimates. Over the past decade, Exxon had steadily increased its holdings in Canada's tar sands to become a leading producer there.

Exxon also removed from its books 800 million barrels of oil-equivalent reserves in North America, though the reductions were offset by the addition of 1 billion barrels of oil and gas elsewhere.

Exxon said in October that low prices would likely force it to 'de-book' up to 4.6 billion barrels of reserves in its end-of-year accounting. Securities and Exchange Commission rules allow oil companies to count reserves only if they are profitable based on average prices over the previous year.

But while the accounting change removes billions of dollars worth of tar sands investments from the company's annual report, and is watched closely by investors, it will not directly affect operations. Exxon plans to continue operating its Kearl project, and said it will add back the reserves if oil prices rise or costs drop. After the reduction, the company now reports holding 1.3 billion barrels of tar sands reserves.

Exxon will hold an analyst meeting on March 1.

Earlier this week, ConocoPhillips said it had reduced its oil sands reserves by more than 1 billion barrels, bringing its total to 1.2 billion for 2016. These moves had been expected, as low oil prices have placed a heavy burden on tar sands projects, which are among the most expensive and polluting sources of oil.

Nicholas Kusnetz
Nicholas Kusnetz is a reporter for InsideClimate News. Before joining ICN, he ran the Center for Public Integrity's State Integrity Investigation, which won a New York Press Club Award for Political Coverage. He also covered fracking as a reporting fellow at ProPublica and was a 2011 Middlebury Fellow in Environmental Journalism. His work has appeared in more than a dozen publications, including Slate, The Washington Post, Businessweek, Mother Jones, The Nation, Fast Company and The New York Times.
Nicholas can be reached at: nicholas.kusnetz@insideclimatenews.org. PGP key: http://bit.ly/2k5fncn