NewsWire.ca (Canada): Shell Canada provides updates for oil sands operations and expansion plans: “We are also building on the lessons learned from our first project to capture cost and operating efficiencies," said Neil Camarta, Senior Vice President Oil Sands, Shell Canada Limited.”: Posted Tuesday 9 August 2005
CALGARY, Aug. 8 /CNW/ - Shell Canada Limited provides the following
update on current operations and expansion plans for the Athabasca Oil Sands
Project (AOSP), located in northern Alberta.
In April 2005, Shell indicated that planned maintenance in the third
quarter of this year would result in single train operation at the upgrader
for a period of one to two months. Ongoing inspections and equipment
monitoring now indicate that major shut down activity can be deferred until
the second quarter of 2006. A production cutback is still required in
September to accommodate reduced availability of third-party hydrogen to the
upgrader and to allow minor planned maintenance to be carried out on the
Scotford hydrogen plants and the Muskeg River Mine cogeneration plant.
Production will be limited to about 140,000 barrels per day, or 90 per cent of
nameplate capacity, for up to three weeks.
Shell has over six billion barrels of recoverable bitumen in its
Athabasca leases, which could ultimately support over 500,000 barrels per day
of production. To achieve this goal, Shell announced in April 2005 a
continuous construction growth strategy that would expand the AOSP in three
"building blocks", each of approximately 100,000 barrels per day. The first
building block will include an expansion of the mine and a matching expansion
of the upgrader. Regulatory applications were filed in April 2005 and front-
end engineering is on track for a final investment decision in 2006. Major
contractors have been selected for both the mine and upgrader expansions. The
AMEC-Colt engineering joint venture will complete the final phase of front-end
engineering of the mine expansion and, when a final investment decision is
made, will be positioned to undertake the engineering, procurement and
construction management of the first and subsequent mine expansions.
Similarly, Bechtel Canada Co. has been selected as the major contractor for
the upgrader expansions.
The scope of the first expansion has been defined in more detail, and now
includes the construction of certain common infrastructure such as pipelines
and utility systems, which will be sized to support the longer-term production
level of 500,000 barrels per day. The first expansion design also includes
learnings from construction and operating experience gained from the original
AOSP. For example, reliability enhancements in the bitumen extraction plant,
while requiring additional capital, will result in fewer shutdowns for planned
and unplanned maintenance. Also included in the first expansion are
profitability-driven capital investments such as a deasphalting plant at the
upgrader. As a result of this additional investment, the upgrader expansion
will produce less heavy oil, thereby reducing exposure to light to heavy oil
differentials and improving the value of the synthetic crude oil blends. It is
critical that the design of the first expansion is carefully optimized because
it provides the template for future building blocks.
The front-end engineering process includes updates to capital costs.
While cost estimates will not be finalized for another year, it is clear that
there is a significant upward trend in construction costs due to the heated
global market for engineered equipment and bulk materials. Shell's current
view is that the first expansion, including the common infrastructure required
to support subsequent expansions, could be up to $200 per annual barrel of
production. Subsequent expansions will utilize this "pre built"
infrastructure, lowering their expected capital requirements.
"With the strategic decision to pre-build infrastructure for our future
expansions, we've taken another important step on our path to 500,000 barrels
per day. We are also building on the lessons learned from our first project to
capture cost and operating efficiencies," said Neil Camarta, Senior Vice
President Oil Sands, Shell Canada Limited. "Our challenge is to continue to be
the most profitable oil sands producer and, when our final investment decision
is made, to deliver expansion projects on time and on budget. Shell has the
experience and the resources to meet that challenge."
The Athabasca Oil Sands Project consists of the Muskeg River Mine located
north of Fort McMurray, Alberta and the Scotford Upgrader located near
Edmonton and is a joint venture among Shell Canada Limited (60 per cent),
Chevron Canada Limited (20 per cent) and Western Oil Sands L.P. (20 per cent).
Chevron Canada Limited and Western Oil Sands L.P. have the option to
participate with Shell Canada Limited in developing additional oil sands
resources in the Athabasca area.
This document contains "forward-looking statements" based upon current
expectations, estimates and projections of future production, project startup
and future capital spending. Forward-looking statements include, but are not
limited to, references to future capital and other expenditures, drilling
plans, construction activities, the submission of regulatory applications,
refining margins, oil and gas production levels, references to resources and
Readers are cautioned not to place undue reliance on forward-looking
statements. Forward-looking statements involve numerous risks and
uncertainties, which could cause actual results to differ materially from
those anticipated by the Corporation. These risks and uncertainties include,
but are not limited to, the risks of the oil and gas industry (including
operating conditions and costs), demand for oil, gas and related products,
disruptions in supply, project schedules, the uncertainties involving geology
of oil and gas deposits, the uncertainty of reserves estimates, fluctuations
in oil and gas prices and foreign currency exchange rates, general economic
conditions, commercial negotiations, changes in law or government policy, and
other factors, many of which are beyond the control of the Corporation.
For further information: Media Inquiries: Janet Annesley, Manager,
Oil Sands Public Affairs, (403) 691-2023; Investor Inquiries: Cathy Williams,
Chief Financial Officer, (403) 691-4600