Shell, Exxon Face Higher Costs on Carbon Limits

(Bloomberg) — Royal Dutch Shell Plc, Exxon Mobil Corp. and the rest of the oil industry may face higher costs to exploit Canada’s tar sands, the biggest deposit outside of Saudi Arabia, because of efforts to rein in climate change.

A Canadian mandate to bury carbon dioxide emitted during the process of extracting the oil may add between $2 and $13 a barrel to production costs, according to Pembina, an Alberta-based environmental group. Mining crude from the area now costs around $60 a barrel.


The additional costs are likely to feed through to consumers, leading to higher energy bills and contributing to inflation. Oil prices two days ago reached a record near $117 a barrel in New York, led by increasing demand from emerging markets, threats to supply in Nigeria and a U.K. refinery strike.

Canada’s increasing costs “are important in how the market looks to the world,” said Michael Wittner, Societe Generale SA’s head of oil research in London. “One way or another it will push up prices for Canadian oil sands,” he said.

Bloomberg