With pipeline projects mired in environmental battles and oil prices trapped below $50 a barrel, Royal Dutch Shell announced Wednesday it is halting its oil sands project in Canada.
Shell stopped development at its Carmon Creek facility in Alberta, a project that would produce 80,000 barrels of oil a day. The loss will be posted in Shell’s earnings report expected to be released Thursday, reports Bloomberg.
The prolonged slump in Crude oil prices is forcing many oil companies to reevaluate portfolios and cancel planned projects. According to Bloomberg, last month Shell cancelled plans to begin drilling in the Alaskan Arctic, after deciding it wasn’t financially viable in the present energy climate.
Ben van Beurden, chief executive officer for Shell 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. This is forcing tough choices at Shell.”
A big factor in Shell’s announcement to halt the Alberta project is also the lack of infrastructure, namely pipelines, to transport extracted crude to the market. The pipeline shortage has hampered growth in the oil sands industry in Canada. According to Bloomberg, environmentalists have helped stall all four proposed pipeline projects to deliver Alberta crude for shipment, including the Keystone XL Pipeline, which has been postponed over climate concerns for the last eight years.
Between regulations, environmental barriers to pipeline production and cheap oil eroding the market, the entire industry is struggling to stay afloat. The Guardian reports that BP, Shell’s biggest rival, cut jobs and investments as prices stay low, output from OPEC stays high and demand fizzles.
Oil sands projects were already suffering, due to the U.S. shale industry which can extract at a much lower cost. According to Bloomberg, non-producing oil sands projects need a benchmark crude oil price of $80 a barrel to beprofitable, a far cry from current prices resting at under $50 a barrel. Jackie Forrest, vice-president of ARC Financial Corp. said, “With this new Shell announcement, 18 future oil-sands announcements have been delayed this year.”