Skip to comments.Shell cancels big Canadian oil sands project
Posted on 10/28/2015 6:17:03 AM PDT by thackney
Royal Dutch Shell says it will stop building a large Canadian oil sands project after low crude prices pushed it out of the companys shortlist of profitable projects.
Its the second large project Shell has canceled since August, when it ditched a $7 billion effort to drill for oil in the Arctic Ocean north of Alaska. Shell said Tuesday its Carmon Creek project in Alberta, which was expected to pump 80,000 barrels of crude a day, was sanctioned in late 2013 when oil prices were still hovering around $100 a barrel.
Viscous Canadian crude is costly to extract through via in situ methods that extract the gelatinous oil sand through steam-assisted gravity drainage, a process in which producers pump hot steam underground to stir up thick crude that usually doesnt move deep in the earth. Most of these projects need oil to fetch $80 a barrel to be profitable.
Shells project also didnt have adequate infrastructure to move the oil into the market, the company said.
We are making changes to Shells portfolio mix by reviewing our longer-term upstream options world-wide, and managing affordability and exposure in the current world of lower oil prices, Shell CEO Ben van Beurden said in a written statement. This is forcing tough choices at Shell.
Shell said it would take an impairment charge but didnt disclose its size. It would also take about $2 billion in restructuring charges which are related to severance costs in the third quarter. It estimates there were 418 million barrels of proved reserves at the site last year, and those will have to be de-booked and classified as contingent resources.
In October 2013, Shell announced it was proceeding to construct the Carmon Creek Project on its Peace River heavy oil leases. The Carmon Creek Project will (would) produce 80,000 barrels of bitumen per day using vertical steam drive wells.
More info about the project at the link:
In January 2010, Shell submitted a regulatory application for the Carmon Creek Project. The project received ERCB regulatory approval in April 2013.
It’s interesting that fracking projects are now more economical to produce than tar sands. Have you ever worked any tar sands projects?
So the low arab oil prices are finally starting to do what they intended all along- drive out new competition
Maybe for drilling there. But i think fracking costs are dropping pretty quickly.
I always put my money on American innovation :)
But there are many jobs being lost in the states and for that i feel bad,
dont feel bad getting 2 dollar gas.
No, I have not worked in an oil sands project.
Part of their economics is moving the heavy bitumen to market so much farther. Or spending significant dollars to upgrade it to syncrude and still move to market.
How much of this is because the winds of change blowing against them with Canada’s Prime Minister Justin Trudeau who may i fact be Obama on Steroid’s when it comes to Decarbonization, Greenieism, and generally against business and they are saying No-Mas, we can’t do business here....
That entered my thoughts as well. I suspect it will become more expensive to produce oil/bitumen in Canada with Trudeau in charge.
So, how far is “Keystone” construction, and does it connect to Bakken in Montana?
Do they really need to cross the border or even deal with the Tar Sands oil?
The proposed Keystone XL that Obama keeps blocking would go through Montana.
They would have to start the application process all over again to stop the route short of the border. That includes redoing the open season to get commitments from those wanting to ship oil.
Note that 90% or so of the oil committed to move through the Keystone XL is from the Canadian oil sands area.
I didn't realize it was that complete and crossed the border. So, are they using it to transport any ND oil>
I should have added, the original Keystone oil pipeline is on the eastern side of North Dakota and the Bakken oil production is on the western side.
The following Presentation includes maps of production areas, piplines, rail lines as well as a historical chart of the movement on rail versus pipelines.
ND Pipeline Authority
Energy Development & Transmission Committee
July 29, 2015
There are a number of pipelines hauling North Dakota oil to market, but still the majority is moved on rails.
It sounds like a great number of jobs in the making, if they can enhance/supplement the existing lines.
Lifting and exploration cost in Canada are very high. I think we will see more slow downs there.