|Overview of oil sands production (mining) process. Click to enlarge. Source: Shell Canada.|
Shell Canada is planning to expand its minable oil sands production to approximately 770,000 barrels a day—more than four times the current output—and also increasing upgrading capacity to approximately 700,000 barrels a day.
In April 2005, Shell Canada announced an incremental expansion strategy designed to increase minable bitumen production and upgrading capacity through a series of expansion projects. Shell Canada’s first 100,000-barrel-a-day expansion, AOSP (Athabasca Oil Sands Project) Expansion 1, was approved in November 2006 with full start-up expected in 2010.
OSP Expansion 1 will increase production to 255,000 bpd, up from 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 2005 estimate last year of C$7 billion. (Earlier post.)
Beyond AOSP Expansion 1, Shell Canada plans additional oil sands expansions that could potentially increase minable bitumen production to approximately 770,000 barrels a day. This is about 200,000 barrels per day more than previously projected as the top end.
In addition to existing regulatory approvals and expansion plans, Shell Canada’s growth strategy includes Jackpine Mine Expansion and an additional mine, called Pierre River Mine, on the west side of the Athabasca River.
Bitumen upgrading capacity could also potentially be increased to about 700,000 barrels a day through a series of Shell Canada-owned upgrader projects in the Fort Saskatchewan area, east of Edmonton. New upgrading facilities would process Shell Canada’s share of future Athabasca minable bitumen production as well as bitumen from the company’s in situ oil sands developments. As previously announced, heavy oil upgrading and refining options in Ontario are also being considered.
We are issuing these Public Disclosures so that we can start the process of our next phase of oil sands development. Shell Canada has major land holdings in the Athabasca region and we estimate that our minable bitumen resource base could ultimately support 770,000 barrels a day of production. This will provide a secure source of energy and economic benefit for Canadians for decades to come.—Clive Mather, Shell Canada President and CEO
The regulatory review process for the expansion begins with the issuance of the Public Disclosure document. Shell Canada is working to prepare regulatory submissions for this project, and public consultations will be ongoing through 2007 and 2008.
With bitumen production and upgrader production increasing, Shell will face a significant increase in greenhouse gas emissions. Shell Canada plans to design its upgrader expansions to be carbon capture ready.
Implementation and use of CO2 capture technologies depends on the establishment of appropriate government policy and supporting framework, as well as project economics.—Upgrader Public Disclosure Document
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.
Shell Canada holds a 60% interest in the Athabasca Oil Sands Project (AOSP), a joint venture with Chevron Canada Limited (20%) and Western Oil Sands L.P. (20%). The AOSP consists of the Muskeg River Mine located north of Fort McMurray in northern Alberta, and the Scotford Upgrader near Edmonton, Alberta. Shell Canada also has in situ bitumen operations near Peace River and Cold Lake in Alberta.
Chevron Canada Limited and Western Oil Sands L.P. have the option to participate with Shell Canada in the development of the Jackpine Mine Expansion and the Pierre River Mine.
The day before the announcement, the board of Shell Canada had agreed to a C$8.7-billion buyout offer from Royal Dutch Shell (RDS). RDS already owns 78% of Shell Canada, and wants to buy the rest. On Monday, RDS upped its offers from C$40 per share to C$45. That deal now goes to the shareholders.