Oil Giant Shell Shelves Dirty Tar Sands Mine

In a sign that the oil price plunge is really beginning to bite, yesterday oil giant Royal Dutch Shell announced that the company is indefinitely postponing plans to develop a new tar sands mine in northern Alberta.

The Pierre River Mine is the largest tar sands project to be shelved so far and its postponement will be seen as a major blow to the tar sands industry.

It comes hot on the heels of announcements by Total and Statoil to also delay projects, and Shell’s decision to lay off 300 workers last month from its Albian Sands bitumen project. That amounted to 10 per cent of Shell’s tar sands workforce.

In the announcement yesterday, Shell confirmed that it was withdrawing its application for regulatory approval for the 200,000-barrel-per-day Pierre River Mine project which is north of Fort McMurray, saying it will concentrate on trying to boost profitability elsewhere in its tar sands operations.

The company was at pains to point out that it still planned to develop the mine at some point in the future, although the Canadian press are reporting that the delay will “effectively kill” off the project.

Shell though tried to spin it differently. “The Pierre River Mine remains a very long-term opportunity for us, but it’s not currently a priority,” Lorraine Mitchelmore, president of Shell’s Canadian operations, said in a statement.

The Government of Alberta, which already faces a whopping big C$7 billion reduction in revenues this year due to the oil price collapse, was also quick to go into damage limitation mode, arguing that the dirty tar sands remained economically viable despite the plunging oil price.

Derek Cummings, a spokesman for Alberta’s Energy Minister, was trying to put a brave face on it. “Oil production in Alberta will continue to grow … we see the oil sands as being resilient.”

The truth is somewhat different. According to the Canadian Association of Petroleum Producers, spending on the tar sands is projected to fall this year by about a quarter to C$25 billion.

Shell’s announcement was, though, welcomed by the Athabasca Chipewyan First Nation, which said it was “a clear sign that oilsands development is no longer business as usual.”

This certainly seems to be the case. Indeed, Bloomberg reported yesterday how “the pain of crude’s collapse is beginning to bite in Alberta, from the oil sands boomtown of Fort McMurray to the corporate boardrooms of Calgary.”

“Everyone from oil drillers to real estate agents is feeling the pinch,” added Bloomberg.  As workers are laid off in their droves, house prices fall, and hours are cut, many are feeling the pain.

“It’s not nice” one crane worker says “A lot of people are going to suffer.”