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Providing coverage of Alaska and northern Canada's oil and gas industry
December 2005

Vol. 10, No. 50 Week of December 11, 2005

Petroleum News: Cash flow bolsters Canadian cap-ex: "One-fifth of Shell Canadaís capital budget, C$465 million, will be spent on the first-stage expansion of the Athabasca oil sands facility, operated 60 percent by Shell, with 20 percent held by both Chevron Canada and Western Oil Sands.": Saturday 10 December 2005

Suncor budgets C$2.5 billion for oil sands; Shell Canada investing in sands, gas; Canadian Natural Resources in Primrose

Gary Park

Petroleum News Canadian Contributing Writer

The payoff from a prolonged cash flow bonanza is starting to make its impact on the Canadian oil patch.

As capital spending plans start to roll out of Calgary head offices, Suncor Energy has hiked its 2006 budget by 30 percent from 2005 to C$3.5 billion, Shell Canada has pumped in an extra 60 percent to earmark C$2.7 billion and Canadian Natural Resources plans an initial investment of C$600 million in its Primrose East bitumen project in northeastern Alberta.

Suncor: C$1.8B to expansion

Not surprisingly, oil sands pioneer Suncor is pumping C$2.5 billion into its primary interest, with C$1.8 billion directed to the next phase of expansion at its Fort McMurray operations.

Although production will remain unchanged at 260,000 barrels per day next year, the company is aiming for 360,000 bpd in 2008 and 500,000 bpd in 2012.

However, Amir Arif, an analyst with Freidman, Billings & Co. in Virginia, speculated that what Suncor has allocated to the oil sands implies that the company is shooting for a 2007 completion.

Some of the capital will also go to Suncorís Firebag venture, boosting output to 70,000 bpd.

Of the remaining C$1 billion, C$250 million will lower sulfur levels at Suncorís Ontario refinery, C$225 million will produce low-sulfur fuels at the companyís two Denver refineries and converting the plants to handle synthetic crude from northern Alberta and C$325 million will be spent on natural gas exploration and production.

One-fifth of Shell Canadaís capital budget, C$465 million, will be spent on the first-stage expansion of the Athabasca oil sands facility, operated 60 percent by Shell, with 20 percent held by both Chevron Canada and Western Oil Sands.

The objective is to add 25,000 bpd to Athabasca production, reaching 180,000 bpd in 2009 as part of a C$7 billion plan to hit 600,000 bpd over the next decade.

Western Oil Sands is budgeting C$233 million for the oil sands in 2006, with the objective of hitting a net 120,000 bpd in the next 8 to 10 years.

Shell: C$405M to unconventional gas

Shell Canada is backing its commitment to grow gas production by pumping C$405 million into the unconventional sector.

A primary target is the Tay field in the west-central region of Alberta where an 800 billion cubic foot raw gas find last year has spurred the companyís reawakening interest in the gas sector.

Shell Canada also expects to spend C$45 million on its share of the Mackenzie Gas Project, which is scheduled to enter the public hearing phase in January and get a final decision from the partner companies in late 2006 or early 2007.

Canadian Naturalís plan to invest C$600 million in Primrose East underpins its goal of producing 120,000 bpd, throwing out a challenge to Imperial Oil, the regionís leader at 137,000 bpd.

Current output from Wolf Lake/Primrose is 50,000-60,000 bpd, but is expected to average 80,000 bpd by mid-2006 and chase the 120,000 bpd objective in early 2009.

The independent predicts Primrose East will generate C$1 billion in capital spending and C$600 million in royalty and tax payments over 25 years.

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