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Toronto Star: Shell Canada plans to expand in oil sands despite rising bill

Jul. 29, 2006. 01:00 AM

CALGARY—Shell Canada Ltd. aims to proceed with expanding its oil sands mining operation despite surging costs, and has given its partners 90 days to respond to its proposal, it said yesterday.

Shell Canada, which owns 60 per cent of the Athabasca Oil Sands Project, said it believes boosting the production to 255,000 barrels a day from the current 155,000 could cost between $10 billion and $12.8 billion.

That is up from last year’s $7 billion estimate, with the huge increase driven by a squeeze on labour and materials supplies in Alberta’s heavy construction boom.

Western Oil Sands Inc., which has a 20 per cent stake in the development, warned earlier this month the cost of the expansion could be 50 per cent higher than previously thought. The other partner is Chevron Corp.

Shell Canada said it would make a final investment decision for the expansion in the fourth quarter, assuming it wins regulatory approvals. Production from the new facilities would start in 2009 and 2010.

CEO Clive Mather said Shell’s decision to proceed is “a key milestone” in Shell’s strategy to grow Athabasca production from its current 160,000 barrels a day to 550,000 barrels.

It is not Shell’s only exposure to the oil sands.

Earlier this week, the company revealed plans to rapidly develop its own in-situ oil sands projects that have come as a result of its recent $2.4 billion acquisition of BlackRock Ventures.

Shell hopes that the in-situ plants, which use steam technology to access oil sands reserves that are too deep for conventional open-pit mining, will produce 50,000 barrels per day within the next two years and 150,000 barrels a day in the longer term.

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