Royal Dutch Shell to sell Canadian oil sands interests for $7.25bn

Oil giant Royal Dutch Shell is to sell its oil sands interests in Canada and reduce its share in the Athabasca oil sands project to 10% from 60% for a total of $7.25bn.

Shell will remain the operator of Athabasca’s Scotford upgrader and the Quest carbon capture and storage project so it can focus on its Canadian downstream business and leverage proprietary technology.

As part of the deal the FTSE 100 explorer will sell its 60% stake in Athabasca and its Peace River Complex asset, which includes undeveloped oil sands leases in Alberta, to a subsidiary of Canadian Natural Resources, which will be the operator of the Athabasca’s upstream mining assets, for about $8.5bn, comprised of $5.4bn in cash and around 98m Canadian Natural shares worth $3.1bn.

Shell, along with Canadian Natural will also jointly buy Marathon Oil Canada, which holds a 20% stake in Athabasca, from an affiliate of Marathon Oil Corporation for $1.25bn each.

The sale, which is expected to close mid-2017 and is subject to regulatory approval also includes intellectual property agreements valued at up to $285m and a long-term supply agreement for the Scotford refinery, which could potentially allow for additional cost reductions for Shell.

Shell chief executive Ben van Beurden said: “This announcement is a significant step in re-shaping Shell’s portfolio in line with our long-term strategy. We are strengthening Shell’s world-class investment case by focusing on free cash flow and higher returns on capital, and prioritising businesses where we have global scale and a competitive advantage such as Integrated Gas and deep water.

"The proceeds will accelerate free cash flow and reduce gearing and make a meaningful contribution to Shell’s $30bn divestment programme.”