Royal Dutch Shell is exiting a key natural gas project in Abu Dhabi owing to the collapse in global energy prices, the oil giant said Monday.
The Anglo-Dutch group said in a statement that it had decided not to develop the Bab sour-gas reservoirs with state-run Abu Dhabi National Oil Co (ADNOC) against a backdrop of plunging oil markets.
“Following a careful and thorough evaluation of technical challenges and costs, Shell has decided to exit the joint development of the Bab sour gas reservoirs with ADNOC in the emirate of Abu Dhabi, and to stop further joint work on the project,” it said.
“The evaluation concluded that for Shell, the development of the project does not fit with the company’s strategy, particularly in the economic climate prevailing in the energy industry.”
Faced with a dramatic collapse in oil prices, the energy sector is seeking to cancel or delay projects, slashing expenditure and thousands of jobs, and taking billions of dollars of writedowns in the value of assets.
Sour gas typically contains high amounts of hydrogen sulfide, which needs to be removed before the fuel can be burned. The process can drive up costs.
Shell’s exit from the sour-gas project follows its decision last year to abandon drilling in Alaska after failing to find commercial qualities of oil. The company also shelved the Carmon Creek oil-sands project in Canada in October.
Shell was selected as ADNOC’s partner at Bab in 2013, giving the company a 40-percent stake in the onshore field about 150 kilometers (90 miles) southwest of Abu Dhabi city. The project had been scheduled to begin gas sales in 2020.
