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Financial Times: Oil sands plans to expand

By Bernard Simonin Toronto
Published: January 25 2007 02:00 | Last updated: January 25 2007 02:00

Shell Canada, 78 per cent owned by Royal Dutch Shell, unveiled plans yesterday for a vast multi-billion-dollar expansion of the Athabasca oil sands project in north-east Alberta.

Shell has a 60 per cent stake in Athabasca, with the remainder split between Chevron, the US energy group, and Western Oil Sands of Calgary.

The cost and precise timing of the proposed expansion were not disclosed. Shell said that the timing would hinge on “market conditions, key economic indicators, the ability to meet our sustainable development criteria and the outcome of the regulatory process”. Regulatory approval is expected by the end of 2009.

The latest plan would raise mine production to 770,000 barrels of bitumen a day, compared with current capacity of about 155,000 b/d. An initial expansion of 100,000 barrels was approved late last year, with a planned start-up in 2010.

Capacity to upgrade the bitumen to heavy oil would be raised to about 700,000 barrels a day. Some of the upgrading capacity may be located in Ontario, Canada’s main industrial region.

The announcement came a day after Royal Dutch Shell raised its offer for the 22 per cent of the Canadian company it does not own to C$45 a share, or a total of C$8.7bn (US$7.3bn), from the C$40 proposed last October.

The Anglo-Dutch company wants to buy out the minority holdings to consolidate and restructure Shell Canada’s management.

Shell Canada reported yesterday that its oil sands earnings fell to C$718m last year from C$783m in 2005, with higher oil prices offset by lower production caused by a mechanical problem.

The company’s total earnings dropped to C$1.74bn from C$2bn, with lower natural gas prices also contributing to the drop.

Copyright The Financial Times Limited 2007

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