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Shell Canada to Proceed With Oil Sands Expansion

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Shell Canada’s greenhouse gas emissions (self-reported) from oil sands operations. Shell has set a reduction target by 2010. Click to enlarge.

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

The expansion will increase AOSP production to 255,000 bpd, up from the current 155,000 bpd at a cost of between C$10-C$12.8 billion (US$8.8-US$11.3 billion)—an increase ranging from 42% to 83% over the company’s estimate last year of C$7 billion.

The heated market has upped the stakes on oil sands investments. 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 mineable bitumen production goal of 550,000 barrels per day.

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

—Clive Mather, Shell Canada President and CEO

With this final investment decision, Shell’s proved and probable mineable 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 bpd (330,000 bpd 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%) and Western Oil Sands L.P. (20%) have also approved their investment in AOSP Expansion 1.

Greenhouse gases. Shell Canada has set two targets for greenhouse gas emissions: one for its total business, one for the oil sands component.

In 2005, Shell Canada’s emissions from its base businesses were 7.6 million tonnes, 217 thousand tonnes less than in 2004 and 5.6% below its 1990 level. The company’s target for 2008 is 7.567 million tonnes.

Oil sands emissions in 2005 were, however, 3.68 million tonnes, 5% more than estimated emissions at start-up. Shell has set a 2010 target for oil sands emissions of 1.750 million tonnes. (See chart at top.)

While we are making steady progress to find ways to reduce emissions, our absolute emissions total will grow as we pursue growth projects like expansion of our oil sands operations. We are investigating ways to offset those increased emissions.

Comments

allen_Z

Part of the increase, like in the Russian Sakhalin project, is due to:
a) the rise in local currency vs US Dollar, which is the intl currency
b) increased material costs, like steel and aluminum
c) labor shortage begets high and higher wages, for high quality labor.

allen_Z

Many tar sand->bitumen->syncrude projects in western Canada are running overbudget, with some behind schedule.

Andrey

Running over budget? It is very delicate expression. Budget estimations for new projects nearly doubled this summer. And it is tenth of billions of dollars.

Also, on Oct. 23, Shell Canada received offer from parent Royal Dutch Shell (owning 80% of Shell Canada) to buy out remaining 20% shares for the price of 7.7 B$US. In near future Shell Canada will become fully owned subsidiary of RDS.

critta

So Shell has two separate targets for GHG emissions to keep it's general emissions from being 'contaminated' by it's tar sands developments. This lines up with the breathtaking hypocrisy practised right across big oil. The atmosphere responds as much to Shell's tricky targets as it does to governments bragging about lowering greenhouse gas intensity per unit of GDP. It's what actually goes into the atmsophere that counts, no matter how you dress it up. We need real reductions in greenhouse gase and tar sands and dirty coal need to stay in the ground.

Harvey D.

critta:

Tar sands and coal mining activities are dirty, specially as non-essential export products. Wonder if Shell is accounting for downstream GHG from Oil extracted from tar sands and for future clean up activities.

GHG per GNP is the best way to justify very high GHG level by high consumption industrial and $70/barrel oil producing nations. A more complete (fair) method would include GHG per capita + GHG per square Km of inhabited or total land area.

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