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Reuters: UPDATE 1-Shell applies to build C$27 bln oil sands plant

Mon Jul 30, 2007 9:20 PM BST
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CALGARY, Alberta, July 30 (Reuters) – Royal Dutch Shell Plc has applied to build a massive oil sands upgrading complex at the site of its Edmonton, Alberta, refinery that could cost as much as C$27 billion ($25 billion), putting it among Canada’s costliest projects, it said on Monday.

Shell said Upgrader 2 would be built in four 100,000 barrel a day stages, processing tar-like bitumen from the Athabasca Oil Sands Project in northern Alberta — which is undergoing a multibillion-dollar expansion — as well as its steam-driven oil sands projects in the same region.

Construction on Shell’s new project could start in 2009 and the first phase would be operational by 2012, the Anglo-Dutch oil major said. It did not give a timetable for future phases.

Overall costs are estimated at C$22 billion to C$27 billion, Shell said in a regulatory document.

The upgrader already in operation at Shell’s Scotford refinery has a capacity of 155,000 barrels a day. Upgraders are tangles of pipes and vessels that turn the heavy crude wrung from oil sands into refinery-ready synthetic oil.

Several other developers are either building them or are planning to construct them, stretching Alberta’s labor supply thin, bidding up the price of materials and forcing cost overruns across the sector.

Shell’s new project is part of an overall initiative by Shell and its partners Chevron Corp. (CVX.N: Quote, Profile , Research) and Western Oil Sands Inc. (WTO.TO: Quote, Profile , Research) to boost output of the unconventional crude to 770,000 barrels a day over the next several years.

The expansion of the Athabasca mining project, located near Fort McMurray, Alberta, could cost a further C$12.8 billion, the partners have said.

($1=$1.07 Canadian)

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