Shell Canada to cut 5% to 10% of jobs at Albian Sands mining project

Anglo–Dutch multinational oil and gas giant Royal Dutch Shell plc says it will reduce its 3,000 workforce at its Albian Sands mining project in northern Alberta by between 5% and 10%, i.e. up to 300 jobs, making it the first major energy firm to lay off workers in Canada’s oil patch. An ‘oil patch’ is an oil-producing region in a country.

Shell spokesperson, Cameron Yost, made the announcement on Friday, but did not go as far as saying the move was linked to plummeting oil prices (in fact, he denied it). Employees were told about the cuts on Thursday.

Mr. Yost added that the company does not yet have a finalized number of job reductions, but assured that it would be “well below 10%.”

He added that they were not layoffs in the traditional sense of the word because the affected workers would be considered for other posts within the company.

Albian Sands Energy Inc. is a joint venture between Shell Canada (60%), Marathon Oil Canada (20%) and Chevron Canada (20%). It is the operator of the Muskeg River mine, an oil sands mining project located in Alberta, about 47 miles (75 kilometers) north of Fort McMurray. It also includes the 255,000 barrel-per-day Scotford upgrader. Its headquarters are located in Calgary, in the Shell Tower.

Cameron Host, Shell

Mr. Yost claimed that even if the oil price had not fallen “we’d still be looking at these areas of our business.” Meaning, Shell would still be cutting its Albian Sands workforce. (Image: Shell Canada)

In February, 2014, Shell suspended work on its planned 200,000 barrel-per-day (bpd) Pierre River oil sands mine in Alberta.

Lorraine Mitchelmore, president of Shell Canada, said in August that its oil-sands business met its internal profitability yardstick – at the time Brent crude trades were well above $70 per barrel, compared to less than $50 this week.

Since hitting a peak in June 2014, oil prices have plunged by more than 50%. On Friday they sank to their lowest level since April 2009.

The main reasons for the price decline have been the surge in shale oil production in North America, falling demand from emerging markets (especially China), and OPEC’s decision not to reduce production.