Shell Canada plans major investments in Alberta oil sands

Mar 14, 1997 01:00 AM

Shell Canada plans to build the country's second-largest oil sands mining and synthetic oil project at a cost of $ 734 mm. Calgary-based Shell Canada said it filed a proposal with regulators to develop its Lease 13 in northern Alberta, in a project that will initially produce 120,000 bpd of bitumen starting in 2002. "We are working on the technical and commercial milestones we have to meet to make this project a reality," said Shell Canada vice-president Neil Camarta. The regulatory procedure, called a public disclosure, lets Alberta's Energy and Utilities Board know general plans for the project based on preliminary studies.
Lease 13, first acquired by Shell Canada in 1956 but never developed despite two previous proposals, is located 70 km (44 miles) North of Fort McMurray, Alberta, where the Syncrude Canada Ltd. and Suncor oil sands projects have been in operation for several years. Production from Syncrude, Canada's biggest project, and Suncor now feed 20 % of Canada's crude oil demand.
Shell Canada said it would transport its bitumen through a new pipeline, and was mulling a number of possibilities for upgrading it into synthetic petroleum products. Options include building a new upgrading plant at the company's Scotford refinery near Edmonton. The company, which told investors last year it was considering the Lease 13 development, said it hoped to win full regulatory approval in late 1997 and start preparing the site before the end of 1998 if studies showed the economics to be good.
The company is one of 18 that announced plans last June to spend a $ 4.2 bn over the next decade developing oilsands projects in northern Alberta.
Development of Alberta's vast oil sands, estimated to contain more crude oil than Saudi Arabia's reserves, was accelerated last year after the Alberta and Canadian governments unveiled favourable new tax and royalty changes.
Projects require massive capital investment because, while conventional oil is pumped from wells, oil sands -- which have the consistency of damp clay -- are mined in open pits and transported to extraction plants where heat and chemicals separate the bitumen from the sand. It has only been in the last five years that technological advancements have pushed oil sands production costs down to near those of conventional oil.

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