Shell Canada to Move Ahead with Athabasca Expansion

Shell Canada Limited

Shell Canada Limited has decided to proceed with the Athabasca Oil Sands Project (AOSP) Expansion 1. This is a 100,000 barrels per day (bbls/d) expansion of oil sands mining and upgrading facilities and is subject to final regulatory approvals.

"The heated market has upped the stakes on oil sands investments," said Clive Mather, Shell Canada's President and CEO. "However, our analysis is that increasing world demand for energy will encourage the development of unconventional resources now and into the future. We take the long term view of commodity prices, and intend to invest wisely through the cycle to reach our minable bitumen production goal of 550,000 bbls/d." (330,000 bbls/d Shell Canada share).

Mather continued, "Shell Canada has some of the best land and minable ore quality in the Athabasca area. With billions of barrels of bitumen in place, we see clear potential for sustained profitable growth."

As disclosed on July 28, 2006, the cost estimates for AOSP Expansion 1 indicate a capital intensity that ranges between $100,000 and $128,000 per flowing barrel. The expansion is a sound investment under a range of commodity prices and will increase AOSP bitumen production and upgrading design capacity to more than 255,000 bbls/d by 2010. With this final investment decision, the Company's proved and probable minable bitumen reserves will increase by 631 million barrels.

The AOSP Expansion 1 consists of:

  • Construction of mining and extraction facilities at the Jackpine Mine, on the east side of Lease 13.
  • Expansion of froth treatment facilities at the existing Muskeg River Mine.
  • Expansion of the Scotford Upgrader.
  • Common infrastructure to support long-term AOSP bitumen production of 550,000 bbls/d (330,000 bbls/d Shell share).

Federal and provincial cabinet approvals for Jackpine Mine were received in 2004 and the Scotford Upgrader Expansion received Alberta Energy and Utilities Board approval in September 2006. With the application and public hearings complete, a regulatory decision on the Muskeg River Mine Expansion, including the new froth treatment facilities, is anticipated by year-end.

The AOSP minority owners Chevron Canada Limited (20 percent) and Western Oil Sands L.P. (20 percent) have also approved their investment in AOSP Expansion 1.

AOSP operations and growth plans require extensive consultation with local communities, including aboriginal neighbors, as well as the preparation of comprehensive environmental assessments and management plans. AOSP Expansion 1 calls for more than 6,000 tradespeople at peak of construction in 2008, and more than 700 new permanent operating jobs in Fort Saskatchewan and the Regional Municipality of Wood Buffalo. The majority of AOSP Expansion 1 capital spending will occur in Canada.

The existing Athabasca Oil Sands Project consists of the Muskeg River Mine located north of Fort McMurray, Alberta and the Scotford Upgrader located near Fort Saskatchewan and is a joint venture among Shell Canada Limited (60 percent), Chevron Canada Limited (20 percent) and Western Oil Sands L.P. (20 percent).