Shell Canada Files Regulatory Applications for Oil Sands Expansion Project

Shell Canada has filed regulatory applications to expand capacity at both the Muskeg River Mine and Scotford Upgrader.

The Muskeg River Mine expansion plan includes developing additional mining areas on the west side of Lease 13 and on Lease 90, adding another bitumen extraction train to the existing plant and a number of debottlenecking projects. These plans will increase the capacity of the Muskeg River Mine from 155,000 to about 300,000 barrels per day. Regulatory approval for this expansion is anticipated in mid-2006. This, in combination with the Jackpine Mine approval received in 2004, would provide Shell with regulatory approvals for mining developments encompassing all of Lease 13 and Lease 90, totalling 500,000 barrels per day of bitumen.

The Scotford Upgrader expansion plan includes the addition of a third bitumen upgrading train which, along with debottlenecking of the existing facilities, will increase upgrading capacity to approximately 300,000 barrels per day. Regulatory approval for this expansion project is also anticipated mid-2006. Further additions to upgrading capacity will be made in due course to bring total capacity to 500,000 barrels per day in line with future mining expansions.

Shell's strategy to achieve its longer-term goal of producing more than 500,000 barrels per day has been refined to take account of lessons learned from the original project execution and new construction techniques. Shell plans to further develop its leases in the Athabasca area by employing a continuous construction, "building-block" approach. Each building block would be sized, at least initially, at approximately 100,000 barrels per day. As part of this strategy, Shell would start construction of the first 100,000 barrels per day mining expansion on Lease 13 in 2006 concurrent with a similar-sized expansion of the Scotford Upgrader and debottlenecking projects at both facilities. Opportunities to integrate new production trains with existing facilities will be considered where practical to reduce construction and operating costs. Additional building blocks, including both mining and upgrading expansions, would follow in due course.

"We believe that a building-block approach will maximize construction efficiency as we grow our oil sands business," said Clive Mather, President and Chief Executive Officer, Shell Canada Limited. "We're building from a solid base of oil sands experience and will leverage off that as we drive toward more than 500,000 barrels per day of production."

Subject to final investment approvals, construction of the first expansion projects on Lease 13 and at the Scotford Upgrader is expected to start in 2006 and to be completed in 2009. These projects, including debottlenecking of the existing facilities, are expected to increase synthetic crude production to about 300,000 barrels a day by 2010. Actual timing for these projects will depend on the outcome of the regulatory process, market conditions, final project costs and consultation with key stakeholders. A capital cost estimate for these projects will be provided in 2006 following regulatory and final investment approvals. Peak construction workforces are expected to be approximately 4000 at the mine site and 6400 at the upgrader.