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The Globe & Mail (Canada): Shell seeks to double Athabasca oil sands production

The Globe & Mail (Canada): Shell seeks to double Athabasca oil sands production

By BILL GRAVELAND

Saturday, April 30, 2005 Page B2

Canadian Press

CALGARY — Shell Canada Ltd. has filed regulatory applications to double current production at its Athabasca Oil Sands Project, but shareholders are being warned it will come at a cost to them.

“Those who are well acquainted with the company will notice a slight change of emphasis from leadership in profitability and profitable growth,” Clive Mather, president and chief executive officer, said in a speech to the energy giant’s shareholders yesterday.

“Shell Canada is entering a period of great opportunity for growth that will require significant capital investment,” he said.

Calgary-based Shell is boosting its capital investment in 2005 to $1.8-billion, an increase of 60 per cent from 2004. That extra money will have an impact on shareholders, he said.

“Our focus on operational excellence will continue, recognizing our return on average capital employed may fall at times of high investment in growth,” Mr. Mather said.

The application to expand the Athabasca operation comes as the company aims to produce half a million barrels of oil a day from northern Alberta in the next decade or so.

The oil and natural gas producer said yesterday that it has applied to regulators to approve plans to expand capacity at the Muskeg River mine near Fort McMurray, Alta., and the Scotford refinery upgrader outside Edmonton.

Regulatory approval is expected in about a year.

Mr. Mather said Shell had been working on strategies in the past couple of years to prevent cost overruns, which occurred in 2003, pushing the cost of the Athabasca project to $5.7-billion — 50 per cent more than originally budgeted.

Shell said it plans to further develop its leases in the Athabasca with a continuous construction “building-block” approach, to expand capacity in 100,000-barrel-a-day increments to minimize cost overruns and deal with shortages of skilled labour in the region.

“I will not look to the future through rose-tinted spectacles, believing just by carrying on the way we did before, we will magically transform our ability to run this scale of project in budget,” Mr. Mather said.

“While as others may be looking at a big bang approach, we are looking at a series of modular expansions — a kind of cookie cutter — a fairly big cookie cutter. We believe this is the way we can minimize project risk,” he said.

In trading on the Toronto Stock Exchange yesterday, Shell Canada shares closed down 14 cents at $84.20.

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