CALGARY, Alberta, Oct. 28 (UPI) -- An uncertain market and the lack of infrastructure needed to move Canadian oil to the global market means it's time to scrap an Alberta oil project, Shell said.
Royal Dutch Shell said it would no longer continue with the construction of its Carmon Creek project in Alberta, Canada, and take a $2 billion write down for the loss.
Sanctioned in 2013, the company said it had moved in early 2015 to retool construction operations at the oil sands project, which was expected to yield 80,000 barrels of oil per day. Costs at a time of lingering market weakness and the lack of pipelines needed to move Canadian oil to the global market forced the company to reconsider its priorities.
"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," Shell Chief Executive Officer Ben Van Beurden said in a statement. "This is forcing tough choices at Shell."
Canada exports the vast majority of its oil to the United States, where the increase in shale oil production is curbing the need for foreign reserves. A new pipeline meant to carry Canadian crude oil to southern U.S. refineries, Keystone XL, has been plagued by long U.S. regulator delays. Northern Gateway, a pipeline from Alberta to western Canadian ports, has faced similar obstacles in Canada.
The Canadian oil economy may be changing with new federal leadership. Last week, Alberta Premier Rachel Notley welcomed the upcoming tenure of Prime Minister designate Justin Trudeau of the Liberal Party. Economic growth under Trudeau, she said, can be realized while protecting the environment.
Alberta's government introduced a new budget that aims to reduce the provincial reliance on non-renewable resources. Provincial Finance Minister Joe Ceci stressed the government can't be reckless during the oil market downturn.
"Energy is going to be Alberta's business and the heart of our economy and our economic development for many decades to come," he said in a statement. "But jobs and diversification must also be at the top of our agenda this year and every year from now on."
Shell, meanwhile, said it would hold on to some of its leases at the Carmon Creek project and keep some equipment on site while it reviews its options. The company said it was considering the estimated 418 million barrels of oil at the site as contingent, rather than recoverable, resources.