Royal Dutch Shell will halt its Carmon Creek thermal in situ project in Alberta, Canada, after it dropped in profitability.
The decision to stop the project reflects current uncertainties, including the lack of infrastructure to move Canadian crude oil to global commodity markets, according to a release from Shell.
“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,” said Chief Executive Officer Ben van Beurden in the release. “This is forcing tough choices at Shell.”
Shell first sanctioned the 80,000-barrel-per-day project in October 2013 and announced in March 2015 that the project would be re-phased to take advantage of the market downturn to optimize design and retender certain contracts, according to a release from Shell. After a review of the potential design options, updated costs and the company’s capital priorities, Shell representatives said that the project does not rank in its portfolio at this time.
Shell said it will retain the Carmon Creek leases and preserve some equipment while continuing to study the options for the asset, which is 100 percent owned by Shell. The company expects to see net impairment, contract provision, and redundancy and restructuring charges of around $2 billion as a result of this decision with the third quarter 2015 results, which will be included as an identified item. Two days after the Carbon Creek news was announced, Shell also released its third quarter 2015 earnings at a loss of $6.1 billion. Last year at this time the company was seeing a gain of $5.3 billion.
The project SEC Proved Reserves estimated at 418 million barrels bitumen at the end of 2014 will be de-booked, and the project estimated recoverable petroleum resources will be classified as contingent resources.