TORONTO (miningweekly.com) – LSE- and NYSE-listed Royal Dutch Shell on Wednesday announced that it would pull out of the 80 000 bbl/d Carmon Creek thermal in situ project located in Alberta, Canada, citing current uncertainties, including the lack of infrastructure to move Canadian crude oil to global commodity markets.

Shell originally sanctioned the project in October 2013, but in May said it would delay the project by about two years to take advantage of the market downturn to optimise design and retender certain contracts.

Shell became the third major to shelve an Alberta project this year, as West Texas Intermediate crude prices traded below $50/bl since July, having fallen 44% in the past 12 months. Suncor Energy and Cenovus Energy had also earlier this year suspended investment in the expensive-to-produce oil sands, which held the world’s third largest reserves of oil.

Bitumen from Alberta’s oil sands traded at a discount to the global benchmarks, as it had to be transported great distances to refineries and to reach global markets. Four proposals to build new oil pipeline infrastructure had been delayed by environmental opposition and regulatory red tape. This also included TransCanada’s proposed Keystone XL line that had been pushed back by several years under US regulatory reviews.

Shell stated that after undertaking a careful review of the potential design options, updated costs, and the company’s capital priorities, “the project does not rank in its portfolio at this time”.

“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,” CEO Ben van Beurden stated. 

Shell had in September also abandoned drilling offshore Alaska indefinitely, where it had spent about $7-billion, after it failed to find enough oil or gas in the Chukchi Sea.

Shell indicated that it would retain the Carmon Creek leases and preserve some equipment while continuing to study the options for this asset.

The company expected to take net impairment, contract provision, and redundancy and restructuring charges of some $2-billion as a result of this decision with the third-quarter results.

Carmon Creek contained about 418-million barrels of bitumen at the end of 2014, which would now be de-booked and the project’s estimated recoverable petroleum resources would be classified as contingent resources.