However, the markets have turned against Shell. In March, the company said that it would alter the design of the project to “take advantage of the market downturn to optimize design and retender certain contracts.” The logic was that low oil prices are forcing cost reductions up and down the supply chain, potentially allowing the company to lower construction costs.
Still, the company would need a rebound in oil prices to make the project viable, a rebound that never came. “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,” the company said in a statement.
But that is not all. Shell also included a very intriguing justification for cancelling the project. They said that the decision to scrap Carmon Creek “reflects current uncertainties, including the lack of infrastructure to move Canadian crude oil to global commodity markets.”
In other words, the 80,000 barrel-per-day project will not be completed because Canada does not have enough pipelines. For years environmental groups have been protesting the Keystone XL pipeline under the premise that blocking infrastructure would force oil companies to keep their reserves in the ground. Such a strategy could also help stop greenhouse gas emissions from rising.
Supporters of the controversial pipeline, which would see Alberta oil sands travel to the U.S. Gulf Coast, argued that the project would have no effect on carbon emissions because the oil sands would be developed with or without Keystone XL. If the pipeline wasn’t built, the thinking goes, the oil sands would find another way to market.
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