Shell scraps Carmon Creek oilsands project over pipeline uncertainty

Royal Dutch Shell is scrapping its Carmon Creek oilsands project in northwestern Alberta, citing a lack of pipelines to coastal waters as one reason for the decision.

The move comes after a review of the project's design and costs and where it stacks up against other projects Shell has in its portfolio.

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The European energy giant first announced it would build the 80,000-barrel-a-day, steam-driven operation near Peace Riverin October 2013.

But last March, the company said it would slow down the project while attempting to lower costs and improve its design.

However, the company now says the project doesn't rank in its portfolio and one reason is the lack of infrastructure to get Canadian crude to global markets.

Shell will take a $2-billion charge against its third-quarter results because of the decision.

"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 said in a release.

U.S. benchmark crude is at around $43 a barrel a far cry from the more than $107 US a barrel highs it hit in the middle of 2014.

'Great concern'

The Peace River town councilsaid the cancellation has caused "great concern" as Shell helped fund several community projects.

Mayor Tom Tarpey says his first thought was for those working on the project.

The town says the cancellation will not affect upgrades to Peace RiverAirport's upgrades,according to a statement posted on the town website.

Pipelines that would get Canadian oil players a better price for their product like Enbridge'sNorthern Gateway pipeline to the West Coast and TransCanada'sEnergy East pipeline to the East Coast face an uncertain future amid First Nations opposition and regulatory delays.

Environmentalists happy

"Public opposition to new tar sands pipelines is keeping the carbon in the ground, giving us time to develop the alternatives," said Keith Stewart of Greenpeace Canada.

"We hope our new federal government will put its weight behind building the green energy economy we need to stop climate change, rather than backing pipelines like the Harper government did."

Meanwhile, the timing of this week's announcementmade environmental campaigner GregMuttitt appear like a fortune-teller.

Shell's cancellation notice came just hours after Muttittreleased a 40-page report that predicted the growth of Alberta'soilsands would be stalled and the cause would be a lack ofpipelines.

His report for the anti-oilsands group Oil Change Internationalhad offered a three-part conclusion: pipelines are almost full; railis too expensive to justify new projects; and oilsands expansion isabout to stall.

"That was a very significant confirmation of our analysis. Andfortunate timing, from our standpoint," he said.

Funded by environmental and progressive organizations like theRockefeller Brothers Fund and the Tides Foundation, OCI concurs withstudies citing oilsands expansion as a major climate liability.

One that appeared in the journal Nature concluded that to avoid adisastrous temperature increase of 2 degrees C, the vast majority ofproven oil reserves need to remain untapped including 85 per centof the oilsands.