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UPDATE 1-Shell scraps plans for new Canadian refinery

Reuters UK

UPDATE 1-Shell scraps plans for new Canadian refinery

Tue Jul 8, 2008 8:04pm BST

(Adds details, background)

CALGARY, Alberta, July 8 (Reuters) – Royal Dutch Shell Plc (RDSa.L:QuoteProfileResearch) has canceled plans to build a new multibillion-dollar refinery near Sarnia, Ontario, due to poor market conditions and surging costs, the oil major said on Tuesday.

Shell had been studying the feasibility of a new plant in St. Clair Township over the past two years that would process tar-like crude from its Alberta oil sands operations.

The refinery in southwestern Ontario was to have processed 150,000 to 200,000 barrels a day.

“This decision is a very difficult one for Shell and it is only taken after careful consideration,” Amrik Ahluwalia, Shell’s general manager of manufacturing expansion, said in a statement on Shell’s Canadian website.

The company had studied the environmental impact and held consultations with residents in the area.

Surging costs and a stretched labor force have hit projects throughout Canada’s oil and gas industry, forcing some oil sands and upgrading projects to be delayed in recent months.

The head of Shell’s Canadian operations said on Tuesday the company was considering building upgrading capacity into two U.S. refineries rather than going ahead with a full, C$27 billion ($26 billion) expansion of its Alberta upgrading complex near Edmonton.

Shell still runs a 72,000 barrel a day refinery at Sarnia. (Reporting by Jeffrey Jones; editing by Rob Wilson)


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