Shell frets over oil sands project

Wed May 28, 2008 1:45pm EDT
 
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LONDON (Reuters) - Royal Dutch Shell was disappointed to pull out of a big UK windfarm project after rising costs, and its Canadian oil sands projects were "not a good thing" for the climate, the chairman of Shell UK said.

James Smith, speaking at a climate change workshop hosted by Thomson Reuters on Wednesday, said Shell had decided to sell its share of the London Array windfarm project after capital costs increased significantly in the past year.

"We've made a decision not to proceed with it and we don't feel very good about that," Smith said, referring to the rising cost of wind turbines.

The windfarm, a one gigawatt renewable energy project at the mouth of London's Thames estuary, will provide low-carbon energy for around 750,000 homes, Smith said.

Shell also recognised the rising carbon emissions resulting from its involvement in developing Western Canada's oilsands.

"On a well-to-wheel basis ... it's 15 percent more," Smith said, comparing the greenhouse gases emitted from generating oil from oilsands to extracting it from conventional oilfields.

With rising energy prices and political instability in many oil regions, companies like Shell are developing new areas like Alberta that were previously uneconomical.

"Oilsands from the point of view of energy security is a good thing; oilsands from the point of carbon dioxide is not a good thing," Smith said.

"It is a step in the wrong direction, but not quite as large a step as some people suggest."

(Reporting by Michael Szabo; Editing by William Hardy)

 
<p>A logo on a Shell petrol station is seen in west London on April 29, 2008. REUTERS/Toby Melville</p>