Shell Takes $2 Billion Charge to Quit Oil-Sands Project

It’s getting even tougher for the world’s third-largest reserves in Canada to attract investment with prices for West Texas Intermediate and Brent crudes both hovering below $50 a barrel. Non-producing oil sands projects require a Brent price of $80 to be profitable, the highest of any major upstream sector, according to a Rystad Energy AS analysis released earlier this month. Offshore fields, including in the Middle East, Brazil and Norway, are among the cheapest to develop, according to the oil and gas consultant.

Heavy Crude

Heavy crude from Alberta’s oil sands also trades at a discount to the global benchmarks, making it even more important to bring down costs, find efficiencies and focus on reliability, van Beurden said on a July conference call with analysts.

Carmon Creek was sanctioned by Shell in October 2013 and in May the company said it would defer the project by two years to try to take advantage of the price slump and cut costs. In Alaska, Shell had spent $7 billion searching for oil before making the decision to pull out.

The company said it will retain the Carmon Creek leases and hold onto some equipment while it decides what to do with the asset, and will reclassify the 418 million barrels of proved bitumen reserves tied to the project, as of the end of 2014, as contingent resources.

Spending and output growth in the oil sands will slow as a result of the delays and cancellations, Forrest said. “There’s going to be a flattening of supply post-2020.”

--With assistance from Dan Murtaugh in Houston.

To contact the reporter on this story: Rebecca Penty in Calgary at rpenty@bloomberg.net. To contact the editors responsible for this story: David Marino at dmarino4@bloomberg.net Millie Munshi


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