Royal Dutch Shell has shelved a big project in the Gulf. The $11bn (£7.7bn, €10.1bn) gasfield development plan in Abu Dhabi adds to the list of projects that the Anglo–Dutch company has ditched in recent times due to concerns over declining oil prices.
The Hague-headquartered company, which was evaluating the development of the Bab field in the United Arab Emirates, said it took the decision to pull the plug "[after] a careful and thorough evaluation of technical challenges and costs".
"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."
In 2013, the oil and gas giant was recruited by Abu Dhabi National Oil Company and made a 40% owner and operator of the project. The gas from the project, however, was not favourable because it had high levels of sulphur dioxide in it. The development process of such sour gases is more expensive than others, according to The Times.
Analysts at Bernstein appreciated the company's decision. It said the exit of "yet another high-cost [and] low-return project" is a good decision even if it comes at the cost of risking long-term relationships with countries. "Such actions are increasingly placing Shell further down the cost curve, while making it even stronger at the cycle bottom," the analysts added.
The pullout decision comes a week ahead of a meeting, where shareholders would meet to discuss Shell's merger with the BG Group. The merger received approval from US regulators in June 2015, the first clearance from a group of regulators including the European Union, China, Australia and Brazil. Shell announced in December 2015, that it would axe 2,800 jobs ahead of the BG deal.
Today (19 January), Royal Dutch Shell's Class A shares were trading higher by 3.21% at €18.32 on the Amsterdam stock exchange.