Shell abandons oil refinery plans for Sarnia area

Tag : industrial engineering
Shell abandons oil refinery plans for Sarnia area
Updated Tue. Jul. 8 2008 6:57 PM ET
The Canadian Press
SARNIA, Ont -- Shell Canada abandoned plans Tuesday for a multibillion-dollarrefinery expansion near Sarnia, Ont., which would have processed upto 200,000 barrels a day of heavy crude from the company's northernAlberta oilsands operations.
The firm, wholly owned by Royal Dutch Shell (NYSE:RDS.A), told itsemployees to stop pre-development and engineering work on theproject that will be shelved indefinitely.
"This decision is a very difficult one for Shell and it is onlytaken after careful consideration,'' Amrik Ahluwalia, Shell'sgeneral manager of manufacturing expansion, said in a statement onthe company's website.
The announcement came after a comprehensive review, said ShellCanada's Graham Boje, who oversees Shell's refinery expansions.
"There are a range of conditions that we assess and evaluate fromavailability of resources, equipment costs, long lead times onequipment, the inflation that we've seen in oil and gas projects,he said.
In addition to the ballooning capital costs, oil companies havealso had to contend with the spectre of reduced consumer demandthat could result from soaring fuel prices.
Shell's existing 72,000-barrel-a-day facility in Sarnia, a bordercity that hosts an array of refineries and petrochemical plants,will continue to process oil from a variety of different sources,including some from Alberta.
The company is spending billions of dollars to expand productionfrom its Athabasca oilsands operations near Fort McMurray, Alta.
It had also planned a $27-billion expansion to an upgradingfacility adjacent to its Scotford refinery near Edmonton, whichwould turn the raw oilsands feedstock into oil that can be moreeasily refined into gasoline and other products.
"That Scotford refinery is now full, so we'll be looking at otheroptions and the Sarnia refinery project was one of those options,''said Janet Annesley, a spokeswoman for Shell's oilsands division.
"We've identified a portfolio of options to integrate oilsandscrude.''
Those could include existing refineries on the West Coast and alongthe U.S. Gulf Coast.
Shell Canada first announced its plan to study the Sarnia projectin November 2006.
It carried out early design work and initiated a comprehensiveenvironmental assessment, consulting extensively with stakeholdersin the area. The company also optioned 2,400 hectares of propertysoutheast of Sarnia for the refinery.
Lambton County Warden Jim Burn told the Sarnia Observer newspaperhe was disappointed to hear the project was dead, since it wouldhave created several jobs in the area.
"They're dismantling the team that has been working on it. It'spretty much not going to happen at this time anyway,'' he said.
But Walpole Island Chief Joseph Gilbert, who had been concernedabout the project's environmental effects, said the decision is awin for both the First Nation and the wider community.
"We've never been against progress, but we expressed concern(about) what the impact would be on future generations.''