Shell shelves oil sands project in Canada that had a power plant component

Royal Dutch Shell plc announced Oct. 27 that it will not continue construction of the 80,000-barrel-per-day Carmon Creek thermal in situ oil sands project in Alberta, Canada.

Shell originally sanctioned the project in October 2013 and announced in March 2015 that the project would be re-phased to take advantage of the oil market downturn to optimize design and retender certain contracts. 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. This decision reflects current uncertainties, including the lack of pipeline 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 Chief Executive Officer Ben van Beurden.  

Shell said it will retain the Carmon Creek leases and preserve some equipment while continuing to study the options for this asset. The company expects to take net impairment, contract provision, and redundancy and restructuring charges of some $2 billion as a result of this decision with the third quarter 2015 results, which will be included as an identified item. The project’s SEC Proved Reserves, estimated at 418 million barrels bitumen as of the end of 2014, will be de-booked and the project estimated recoverable petroleum resources will be classified as Contingent Resources. Carmon Creek is 100% Shell owned.

The Alberta Utilities Commission in March 2014 approved three related applications by Shell Canada Ltd., with one of them involving the construction of a 690-MW, gas-fired cogeneration plant for the Carmon Creek project. The approved applications were for: an industrial system designation (ISD); the cogeneration power plant itself; and three related substations.

The Carmon Creek project was to utilize a thermal technology – vertical steam drive thermal recovery process along with cyclic steam stimulation. Shell proposed to install the cogeneration facilities at the Shell Carmon Creek project site to supply the steam and electrical energy needs for the project. The electric system components designated as an industrial system was to be composed of a cogeneration power plant consisting of three 230-MW gas turbine generators, the 240-kV Brock 232S substation, the 34.5-kV CPF substation, a 25/34.5-kV temporary drilling substation and the associated 34.5-kV distribution system.

Shell submitted that the proposed cogen plant would consist of three 230-MW natural gas turbine generators each equipped with a heat-recovery steam generator, with a total generating capability of 690 MW. In addition, the power plant was to include two standby diesel-fueled generators, each with a preliminary generating capability of 5 MW.

About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.