Anglo-Dutch oil and gas company Royal Dutch Shell has announced that it will take a write down of $2bn and abandon its Carmon Creek oil sands project in Alberta, Canada.
Carmon Creek is a thermal in situ project which was designed to produce 80,000 barrels of oil per day (bpd).
Shell has abandoned the project after careful review of the potential design options, updated costs, and the company’s capital priorities.
The company has also added that the project lacks infrastructure like pipelines to transport crude oil from western Canada to international market.
“This is forcing tough choices at Shell.”
Shell said that the decision was influenced by current market uncertainties.
Royal Dutch Shell chief executive officer Ben van Beurden said: “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.”
The company will however continue to retain the Carmon Creek leases and preserve some equipment it exploring option for this asset.
Shell will take an impairment charge of $2bn for this project in the third quarter 2015 results, which will be included as an identified item.
Shell has 100% ownership of the project which has an estimated resource of 418 million barrels of bitumen, by the end of 2014.
Following the abandonment of the project, the reserve will be de-booked and will be classified as Contingent Resources.
In January 2010, Shell had submitted a regulatory application for the Carmon Creek Project and received regulatory approval in April 2013.
The company had already completed site clearing, designing and procurement process, accommodation building for the project.
In an in-situ project the oil is heated underground to pump them out.