08 July 2008

Shell shelves Sarnia sands refinery

Royal Dutch Shell won't be building a new 200,000 barrel per day refinery in Sarnia, Ontario to process oil from the Alberta tar sands.

The company cited poor market conditions and surging costs, according to Reuters.

In other words, a company with its own guaranteed source of raw material isn't building a greenfield refinery close to both the source of raw material and markets. 

Instead, Shell will be expanding capacity at existing refineries to serve the North American market.

That would be pretty much consistent with this previous Bond Papers post on NLRC's problems with its larger project proposed for Placentia Bay and very much at odds with any suggestion that tight American capital markets due to the subprime crisis are to blame.



Oldschool said...

Wouldn't have anything to do with Ontario's high taxes, anti-business lefty govt?
Why would they not build in Alberta where taxes are the lowest in North America?

Edward G. Hollett said...

It isn't a tax issue, per se.

The issue for refineries right now is overall costs, of which taxes are a portion, versus, among other things the profit margin on refining.

The same issues are hitting refinery projects for heavy crude, lighter crudes and the stuff coming from the tar sands.