BP Unveils Plan to Move Ahead in Canadian Oil Sands (BP, CEO, XOM, SU, ENB)

Now that BP plc (NYSE: BP) has topped $20 billion in divestments to help pay for the estimated $40 billion in damage caused by its Macondo well blow-out in April, the company is turning to developing the properties it still has. Yesterday the company sold its 60% stake in Argentina’s Pan American Energy for $7.06 billion to another Argentinian company, Bridas Corp. Bridas is 50% owned by Cnooc Ltd. (NYSE: CEO), the international arm of China National Offshore Oil Company.

BP has also said that it plans to commit $2.5 billion to the Sunrise oil sands project it owns in a joint venture with Husky Energy Inc. (OTC: HUSKY). Husky is majority-owned by Hong Kong tycoon Li Ka-shing and his conglomerate, Hutchison Whampoa. Husky recently paid about $841 million to Exxon Mobil Corp. (NYSE: XOM) for additional oil and gas properties in Alberta and British Columbia.

BP is getting a late start in the Canadian oil sands, mainly because former CEO John Browne had concerns about both production costs and environmental damage. Suncor Energy Inc. (NYSE: SU) has been producing synthetic crude from the oil sands since 19XX. Earlier this month Suncor said it was producing an average of 275,000 barrels/day in 2010. Husky and BP expect to produce 60,000 barrels/day of bitumen after production begins in 2014 at the Sunrise project. Production could reach 200,000 barrels/day by 2020.

BP claims that by integrating production from the Sunrise project with its refinery in Toledo, Ohio, the company can make the economics of oil sands mining work. To make that idea a reality, BP/Husky needed a pipeline, and Enbridge Inc. (NYSE: ENB) has agreed to build a $475 million pipeline to move the bitumen to its Alberta distribution hub, from where it can flow to Toledo.

That takes care of the economics, but what about environmental damage? BP’s record here is, in a word, awful. Pipeline leaks in Alaska, the Gulf disaster which killed 11 workers, the 2005 Texas City refinery explosion that killed 15 workers, none of these inspires trust in BP’s commitment to safety or environmental concerns. In fact, at the company’s annual meeting in March of this year, about 150 investors charged the company with conducting an insufficient assessment of the environmental risks of developing the Sunrise project. According to the Financial Times,  the projections for development of Sunrise “entail catastrophic consequences for the climate.”

Having gotten rid of some of its Gulf of Mexico holdings and with its reserves in Alaska dwindling, BP wants to stay in North America any way it can. The US Congress has threatened to make it very difficult for BP to operate in the US. Now it’s up to Canada to decide if the company gets the chance.

Paul Ausick