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Royal Dutch Shell chief executive Ben van Beurden speaks to reporters during the launch of Shell's new carbon capture and storage project in Fort Saskatchewan, Alberta on Nov. 6, 2015. The U.S. Reaction of the proposed Keystone XL pipeline was driven by protesters who are increasingly frustrated with inaction on climate change, van Beurden said Friday.

STAFF/REUTERS

Royal Dutch Shell's chief executive says uncertainty over pipelines such as Keystone XL, killed by the U.S. government on Friday, played a role in the company's decision to scrap a major oil sands project last month – a sign that export constraints are squeezing some of the industry's largest players.

Last month, Shell took a $2-billion (U.S.) hit after halting construction of its 80,000 barrel-per-day Carmon Creek development in northwest Alberta. It cited high costs and insufficient pipeline capacity to move the supplies to market as reasons.

On Friday, Ben van Beurden said the project's economics were subject to a "very, very wide range of outcomes," including the fate of major pipelines, undermining its viability as the energy giant reins in spending to cope with lower oil prices.

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"It was basically a clear, straight-forward economical decision," he said during a meeting with reporters at the company's Scotford refining complex northwest of Edmonton.

"So many things had sort of moved against the project economically and so much uncertainty had crept into it on the financial outcomes, that with a tightening of the cash balances within the company, the more sensible thing was to shelve it."

The comments came the same day U.S. President Barack Obama formally rejected TransCanada Corp.'s $8-billion Keystone XL project, dealing a blow to the Alberta-based oil industry's long-held ambitions to expand access to more lucrative export markets.

For years, the energy industry has insisted that such constraints would not hinder growth prospects in the oil sands, arguing crude will flow by rail if pipelines are stalled indefinitely.

However, analysts have said the crash in oil prices to less than $50 a barrel has undercut the economics of the once-thriving transport niche, leaving producers more vulnerable to pipeline shortages.

Some progress has been made expanding capacity on the Enbridge Inc. network of pipelines through the U.S. Midwest.

But Shell's move to abandon Carmon Creek adds to a growing list of companies that have slammed the brakes on big-ticket expansions to weather what a growing number of analysts and executives expect to be an extended stretch of weak commodity prices.

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Mr. van Beurden said the company had not walked away from the leases entirely, but he offered no new timeline for restarting development, saying only that the project must be "resilient" compared to other opportunities in its globe-spanning portfolio. The company reclassified reserves associated with the project as so-called "contingent" resources – signifying greater risks and uncertainties associated with their development.

Shell, which operates bitumen mines with affiliates of Chevron Corp. and Marathon Oil Corp., on Friday formally opened its Quest carbon capture and storage project, billing it as a key technology designed to mitigate fast-growing emissions from Alberta's oil sands.

The project, built with $865-million in federal and provincial funding, is designed to capture one-third of the emissions from the company's sprawling Scotford upgrader, which processes as much as 255,000 barrels per day of extra-thick bitumen into a lighter crude that can be further refined into gasoline. The emissions total is equivalent to more than one million tonnes of carbon dioxide per year, according to the company.

Mr. van Beurden said such projects could make carbon-intensive oil sands crude more benign compared to other sources, but he cautioned that widespread adoption would require a carbon price equivalent to $60 to $80 per tonne – well above levels currently in place in Canada.

"We will do this, provided there is an economic rationale," he said.

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