Royal Dutch Shell to abandon oil sands project in Canada
28 October 2015
Construction of Royal Dutch Shell's thermal oil sands venture in Canada would be halted due to ''uncertainties'' facing the project, including a lack of infrastructure.
The decision to call off the project in the western province of Alberta comes as Shell is forced to cut costs and as pipeline capacity shortage stunts growth in the country's oil sands industry.
Shell chief executive officer Ben van Beurden said, ''We are making changes to Shell's portfolio mix by reviewing our longer-term upstream options worldwide, and managing affordability and exposure in the current world of lower oil prices, AFP reported.
''This is forcing tough choices at Shell.''
Oil giants such as Shell and its rival BP had been cutting investment and jobs following falling crude prices, which are trading at less than half of their 2014 highs due to a global supply glut.
The cancellation of the 80,000 barrel per day Carmon Creek project comes after Shell, abandoned its search for oil off the Alaskan coast in September, at a cost of several billion dollars.
The move by Shell comes after several other undeveloped oil-sands projects had been deferred due to cost issues and raised questions about how much of Canada's oil-sands, the world's third-largest source of untapped crude, could be recovered profitably.
Three major Canadian energy companies said earlier this year that they would shelve plans for new or expanded oil-sands projects and last year, while France'sTotal SA and Statoil ASA of Norway indefinitely postponed projects.
Oil production from oil sands is a high cost affair and had been hard hit by lower oil prices. It also faced the prospect of difficulty accessing markets due to the lack of pipelines, and uncertainty about the prospect for tougher regulations on carbon dioxide emissions in Canada.
Shell Canada, president Lorraine Mitchelmore, said last year that the company's oil-sands business needed Brent crude, the global oil benchmark, to trade above $70 a barrel to meet internal profitability measures.
However, prices for Brent had fallen in recent months and had traded below $50 a barrel.
Canadian energy major Suncor Energy Inc has submitted an unsolicited all-share offer of approximately C$4.3 billion ($3.3 billion) for oil sands investor Canadian Oil Sands Ltd (COS), taking benefit of slumping oil prices and aiming to boost production from Alberta. (See: Suncor tables $3.3-bn hostile bid for Canadian Oil Sands).