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Athabasca Oil Sands Expansion Costs Jump To $13.7 Billion

CNNMoney.com

Dow Jones

February 27, 2009: 11:57 AM ET

OTTAWA -(Dow Jones)- Project costs for a 100,000-barrel-a-day expansion at Royal Dutch Shell PLC’s (RDSA) Athabasca Oil Sands Project have climbed to $13.7 billion, partner Chevron Corp.(CVX) said in a filing with the SEC.

The increase, from Shell’s previous estimate of between C$10 billion and C$ 12.8 billion ($8 billion to $10.2 billion), come as other oil sands developers signal that the plunge in crude futures prices is starting to rein in rampant cost inflation.

The Athabasca development currently produces 155,000 barrels a day of thick, tarry bitumen from the oil sands mine, which is subsequently processed into a higher-grade synthetic fuel at the project’s upgrader. Shell is the project leader with a 60% stake, while Chevron and Marathon Oil Corp. (MRO) own 20% apiece.

Shell doesn’t provide cost estimates for specific projects, senior oil sands spokesman Paul Hagel said, directing further inquiries to Chevron. Chevron wasn’t immediately available for comment.

A number of proposed developments in Alberta’s high-cost oil sands sector have been delayed or canceled as crude prices dived more than 70% off July’s record highs near $150 a barrel and financial markets seized up last year. Work on Shell’s expansion was already underway at the time, and the Anglo-Dutch major still expects the project to start up in late 2010 or early 2011, Hagel said.

-By Hyun Young Lee, Dow Jones Newswires; 613-237-0669; [email protected] dowjones.com

  (END) Dow Jones Newswires
  02-27-09 1157ET
  Copyright (c) 2009 Dow Jones & Company, Inc.

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