Royal Dutch Shell will halt construction on a site that could have produced 80,000 barrels of oil per day in the Canadian tar sands, and the delay in approving the Keystone XL pipeline could be a factor.
Shell said Tuesday it would stop construction on the Carmon Creek project in Alberta. The project became too expensive as oil prices have plummeted, according to the company.
The company also cited a “lack of infrastructure to move Canadian crude oil to global commodity markets” as a reason for halting the project. The Keystone XL pipeline has been delayed for more than seven years while the Obama administration decides whether to approve TransCanada’s construction permit.
Many industry observers believe Obama will shoot down the pipeline before he leaves office or simply not make a decision at all.
“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,” said CEO Ben van Beurden.
The decision to halt construction will cost Shell about $2 billion, the company estimated.
The company is keeping its leases on the land and will continue studying the site. They estimate 418 million barrels of bitumen are underneath the ground in the Carmon Creek site.
