Another Canadian Oil Sands Project on Hold

The delay is the latest blow to what had been an ambitious schedule of projects for Canada's oil sands. The oil sands region of northern Alberta contains the largest oil reserves outside the Middle East, but they are technically challenging and expensive to extract.

Shell, one of the biggest players in the oil sands, last month delayed an expansion of its oil sands mining operation when costs rose and oil prices fell.

Adrienne Lamb, a spokeswoman for the company, said Shell is reviewing and redesigning the Carmon Creek project and plans to submit a new application to regulators. The company hasn't yet decided when that will take place.

Shell had been expected to make an investment decision on Carmon Creek in 2010. However, Ms. Lamb said that will now be delayed because of the changes and the company hasn't decided on a new schedule.

Shell had not released a cost estimate for the project, which was to have been built in two 50,000 barrel per day tranches.

Unlike the company's mining operations, Carmon Creek would use thermal techniques to produce the reserves, pumping steam into the ground to liquefy the tar-like bitumen so that it can be pumped to the surface.

Along with Shell, Suncor Energy Inc , Nexen Inc , Petro-Canada , Canadian Natural Resources Ltd. and others have said they'll delay or defer projects in the region because falling oil prices have squeezed profits while costs stay high.

A shortage of skilled labour in the remote region has helped push up costs as companies compete for a small pool of tradesmen and contractors.

Author: Ksenia Kochneva