Shell is canceling another major oil project, this one the Carmon Creek oilsands project near Peace River in western Alberta. Shell announced the project in 2013 when oil prices were much higher, then slowed it down when oil prices fell last year. Now it is dropping the project from its investment list and taking a $2 billion accounting charge as a result of the canceled project. At CBC News:
It is surely the right decision for Shell. With no sign of an oil price rebound in the near term, and facing higher costs than originally expected in the oilsands extraction, Shell would be taking a big risk if it went forward with such a large dig. It is also good news for Alberta, providing some assurance that will still be some recoverable oil in the ground 25 years from now when rising prices for oil make the asset actually mean something.
The move also makes sense in terms of pipeline capacity. Existing pipelines can pump oil out of Alberta over the next century or so, and that is better management than the proposed expansions that could pump the region dry in 35 years or less.
There are new signs of softness in oil prices, with petroleum vessels taking the long route around the Cape of Good Hope because all available petroleum storage in Europe is already filled. The lack of storage for oil products suggests that prices of gasoline and diesel will have to decline between now and December, possibly setting up a new decline in crude oil.
