March 18, 2008
Carl Mortished, World Business Editor
Shell’s Canadian oil sands business is suffering a profitability squeeze because of the soaring cost of energy needed to extract bitumen from sand.
The oil company’s annual report, published yesterday, reveals that operating expenses at the Athabasca Oil Sands Project in Alberta have soared by almost 50 per cent in the two years since 2005, while output at the bitumen mining project has either remained static or declined.
Shell’s oil sands profits dipped sharply last year when a fire temporarily reduced the output of its upgrader, a refinery that converts bitumen into a synthetic crude oil. Earnings from oil sands fell from $651 million in 2006 to $582 million (£291 million), which the company attributes to lost output from the shutdown. The net production of the oil sands business, after deducting royalty payments, fell from 95,000 barrels per day (bpd) in 2005 to 81,000 bpd in 2007. read more
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