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Shell Halts Construction On Alberta Oil Sands Project


Royal Dutch Shell Plc will not continue construction of its 80,000 barrel per day Carmon Creek thermal oil sands project in northern Alberta because of the lack of infrastructure to move Canadian crude to market, the company said on Tuesday.

Shell said the decision to halt the project was also the result of “current uncertainties” and chief executive Ben van Beurden said the company was having to manage costs in today’s low oil price environment.

“We are making changes to Shell’s portfolio mix by reviewing our longer-term upstream options world-wide, and managing affordability and exposure in the current world of lower oil prices. This is forcing tough choices at Shell,” van Beurden said in a statement.

Canada’s oil sands hold the world’s third largest crude reserves but carry some of the highest project breakeven costs globally. Western Canada also struggles with market access issues due to limited export pipelines, which can lead to a glut of crude building up in Alberta and weighing on prices.

The plunge in benchmark oil prices has prompted a number of companies to defer costly new oil sands projects, although so far few have been cancelled outright once underway.

Shell originally sanctioned the Carmon Creek in October 2013 but said in March that it would be delayed by two years as the company retendered some contracts and adjusted the design to take advantage of lower costs during the market downturn.

On Tuesday the company said following a review of potential design options, updated costs, and capital priorities, it had decided the project did not rank in its portfolio at this time.

Shell, which owns 100 percent of Carmon Creek, will retain the leases and preserve some equipment while continuing to study options for the project.

The company expects to take net impairment, contract provision, and redundancy and restructuring charges of around $2 billion as a result of the decision.

Last month Shell also pulled the plug on its plans to drill for oil in the Arctic, citing high costs and disappointing well results and in February shelved plans for its 200,000 bpd Pierre River oil sands mining project.



7 Comments on "Shell Halts Construction On Alberta Oil Sands Project"

  1. rockman on Thu, 29th Oct 2015 6:49 am 

    FYI: The amount of infrastructure in the Carmon Creek area is the same today as it was in 2913 when Shell committed to the project. Of course that’s a less alarming statement to the shareholders then telling them the project will remain uneconomical to develop until prices recover to former levels. Whenever that might happen.

  2. paulo1 on Thu, 29th Oct 2015 9:29 am 

    These guys always take a stab at anyone disagreeing with unfettered access and support for their industry. Right now, pipeline expansion is dead in the water. If we were in an emergency ff supply crunch they would be under construction ‘full speed ahead’. Oil Sands does not make sense with oil so available and inexpensive, and it has always been so. I have seen Ft Mac go to bust a few times in my life. Many of my high school buddies were in on the original early ’70s boom. None of them stayed there.

  3. Kenz300 on Thu, 29th Oct 2015 10:29 am 

    Climate Change is real….. we will all be impacted by it…… It is time to end our reliance on fossil fuels and move to safer, cleaner and cheaper energy sources like wind and solar.

    Exxon’s Climate Change Cover-Up Is ‘Unparalleled Evil,’ Says Activist
    Oil and Gas Companies Make Statement in Support of U.N. Climate Goals – The New York Times

  4. rockman on Thu, 29th Oct 2015 2:27 pm 

    “…pipeline expansion is dead in the water.” Probably given the pullback due to lower oil prices. OTOH there is existing transport to move about 1 BILLION BLLS of Canadian oil into the US every year. Given the current oil price/production dynamic I would assume most of the play has all the pipeline capacity it requires today and probably for many years to come.

  5. Ted Wilson on Thu, 29th Oct 2015 6:58 pm 

    These oil companies want us to be hooked to Gasoline / Diesel for even and to produce those fuels, they will run from Alaska to Arctic and finally burn their fingers.

    Ideally Shell can just turn the Ethane, Propane, Butane from Natural gas liquids to Ethanol, Propanol, Butanol and blend it in gasoline and sell it.

    If Ethanol can be blended in gas up to 15%, then Propanol and Butanol can be blended at a higher percentage.

    In fact, Brazil has E27 Ethanol as the base standard fuel.

  6. shortonoil on Fri, 30th Oct 2015 7:20 am 

    “In fact, Brazil has E27 Ethanol as the base standard fuel.”

    Brazil is also in a depression, that E27 doesn’t seem to have helped them very much.

  7. Kenz300 on Sat, 31st Oct 2015 7:05 am 

    All Fossil fuel companies need to transition to “ENERGY” companies and embrace safer, cleaner and cheaper alternative energy.

    Wind Power Now Cheaper Than Natural Gas for Xcel, CEO Says – Renewable Energy World

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