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Shell open to reviving mothballed projects
GARY PARK For Petroleum News
If oil prices regain US$80 levels, Royal Dutch Shell may be open to restarting shelved oil sands projects, said Marvin Odum, the company’s director of Upstream Americas.
The three operations put on hold are the 200,000 barrels per day Pierre River mine, a 100,000 bpd expansion of its Jackpine mine that has yet to be sanctioned and the 80,000 bpd Carmon Creek project that has been delayed two years to 2019.
Apart from oil prices, decisions on these investments also depend on Shell’s ability to wring cost savings from suppliers and, in the case of Carmon Creek, redesigning the thermal recovery project and re-tendering some contracts.
Two months ago, Shell mothballed work on oil sands projects as part of a company-wide effort to eliminate US$15 billion from its capital budget over three years.
Costs have come down But the company said it has seen costs come down “considerably,” helping to offset the decline of oil prices over the past year.
Odum told the Financial Post that there is “no particular driver to make (the projects) happen right now as we look at other parts of the portfolio,” which has pushed the oil sands towards Shell’s backburners.
Shell also has to adjust to the oil downturn at the same time it is accommodating a US$70 billion takeover of BG Group, which is due for closure early in 2016.
That transaction is expected to eliminate one of the two LNG projects that the companies had under consideration, but Odum believes there is still scope to proceed with LNG Canada, the consortium it is leading, because of its proximity to the largest stranded gas reserves in North America.
LNG Canada has just filed for a 40-year National Energy Board export license to cover 40 years, up 15 years from the current permit.
Odum said the “hard work around engineering and design” is in the completion stages “so we can put a specific cost on the project.” But he rejected an earlier estimate of C$40 billion previously placed on the project by Shell officials.
He told a Toronto forum that Canada remains “an extremely important country in the Shell portfolio and it is hard to see that changing.”
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