Royal Dutch Shell said Wednesday that it will take about $2 billion in charges in the third quarter after deciding to stop construction of the 80,000 barrel per day Carmon Creek thermal in situ project in Alberta, Canada.
Shell originally sanctioned the project in October 2013 and announced in March 2015 that it would be re-phased to take advantage of the market downturn and have its design optimized and certain contracts retendered.
“After careful review of the potential design options, updated costs, and the company’s capital priorities, Shell’s view is that the project does not rank in its portfolio at this time,” the company said.
The company said the decision reflects “current uncertainties,” including the lack of infrastructure to move Canadian crude oil to global commodity markets.
“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,” said CEO Ben van Beurden.
Shell will retain the Carmon Creek leases and preserve some equipment while continuing to study the options for the asset.
The company expects to take net impairment, contract provision, and redundancy and restructuring charges of about $2 billion as a result of the decision in its the third quarter 2015 results.
Those charges will be included as an identified item.
The project’s SEC proved reserves, estimated at 418 million barrels bitumen at end 2014, will be de-booked and the project’s estimated recoverable petroleum resources will be classified as contingent resources.
Carmon Creek is 100 percent Shell owned.