Shell announced Tuesday afternoon that it will not continue construction of the 100% Shell-owned, 80,000 bpd Carmon Creek thermal in situ project located in Alberta, Canada. Shell previously described the project a key part of the company’s broader production, refining and marketing business across the full value chain in North America.
In October 2013, Shell sanctioned the Carmon Creek Project on its Peace River heavy oil leases. The Carmon Creek Project was intended to produce 80,000 barrels of bitumen per day using vertical steam drive wells. Carmon Creek was intended to build on Shell’s more than 30 years of experience developing its Peace River heavy oil leases and established relationships with local communities and First Nations.
In March 2015, Shell said the project would be re-phased to take advantage of the market downturn to optimize design and retender certain contracts.
However, after a careful reevaluation of the potential design options, updated costs, and the company’s spending priorities, Shell said its “view is that the project does not rank in its portfolio at this time.” Shell said the decision to cancel construction of the project reflects current uncertainties, including the lack of infrastructure to move Canadian crude oil to global commodity markets.
Shell says it will retain the Carmon Creek leases and preserve some equipment while continuing to study the options for the project. The company expects to take net impairment, contract provision, and redundancy and restructuring charges of about $2 billion as a result of this decision with the 3Q15 results (to be released Thursday), which will be included as an identified item.
The project SEC Proved Reserves estimated at 418 million barrels bitumen at end 2014 will be de-booked and the project estimated recoverable petroleum resources will be classified as Contingent Resources, Shell said.