UPDATE 1-Shell shelves 200,000-bpd Pierre River oil sands mining project

Mon Feb 23, 2015 4:00pm EST
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(Adds details and comment on Shell decision, industry background)

By Scott Haggett and Nia Williams

CALGARY, Alberta Feb 23 (Reuters) - Royal Dutch Shell Plc is shelving plans to build a new oil sands mine in northern Alberta, the largest such project to be deferred as producers struggle with low energy prices.

The company said on Monday it is withdrawing its regulatory application for the 200,000-barrel-per-day Pierre River project. Instead, it will concentrate on boosting the profitability of its existing 255,000-bpd oil sands operations.

"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 unit, said in a statement. "Our current focus is on making our heavy oil business as economically and environmentally competitive as possible."

The deferral of the mine is the latest blow to the oil sands industry as one of the world's highest-cost production regions tries to cope with low prices that fallen to six-year lows.

Cenovus Energy Inc deferred spending on some of its prospective oil sands projects while it awaits higher pricing. As well, Total SA and Statoil ASA also recently postponed big oil sands projects due to weak economics.

The government of Alberta, which expects a C$7 billion reduction in its revenue this year because of low oil prices, called Shell's move "a business decision", saying the oil sands remain viable despite low prices.

"Oil production in Alberta will continue to grow," said Derek Cummings, a spokesman for the province's energy minister. "Production may grow at a slightly slower pace ... but we see the oil sands as being resilient."   Continued...