Shell Canada Begins First Production of Synthetic Crude

The Athabasca Oil Sands Project (AOSP) has achieved another major milestone with start-up and first production of synthetic crude oil at the Scotford Upgrader, located near Fort Saskatchewan, Alberta.

Commissioning, testing and start-up of the synthetic crude units is a complex process and has been the primary focus at the Scotford Upgrader through the first quarter of 2003. Utilizing purchased feedstocks, the upgrader has now successfully started making initial runs of light synthetic crude, which will be sold to the Scotford Refinery. The next step will involve the processing of bitumen from the Muskeg River Mine.

Bitumen production from the Muskeg River Mine, located 75 kilometres north of Fort McMurray, Alberta, started late last year but was interrupted by a fire on January 6, 2003. Fire damage was mainly limited to the solvent recovery area in the froth treatment plant. Although severe weather conditions impeded progress, repairs to Train 1 of the froth treatment plant are now essentially complete. Final repair costs are expected to be higher than originally estimated primarily due to additional costs related to freezing damage. The company expects to draw on extensive project insurance coverage to recover repair costs.

Re-start of the Muskeg River Mine is in progress and bitumen production is expected to resume shortly. The Corridor Pipeline and associated tankage will have to be filled before the Scotford Upgrader can begin processing bitumen from the mine. Until then, the upgrader will continue to build operational experience by running purchased feedstocks.

The Athabasca Oil Sands Project is a joint venture of Shell Canada Limited (60 percent), Chevron Canada Limited (20 percent) and Western Oil Sands L.P. (20 percent). The project is expected to ramp up to its design rate of 155,000 barrels per day of bitumen in the third quarter of 2003. At full rates, the project will supply the equivalent of 10 per cent of Canada's oil needs. Shell's share of AOSP production will increase the Company's total barrels-of-oil equivalent production by more than 50 percent.

Tim Faithfull, Shell Canada's President and CEO, said, "We're very proud of the Scotford team who are delivering a world-class start-up of the upgrader. It won't be long before we see fully integrated production from the Athabasca Oil Sands Project - a goal that thousands of people have worked long and hard to achieve."