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Royal Dutch Shell Plc .com: Shell has had three very large world-scale projects – all experienced cost overruns

Headline: Oil giant to Shell out 50pc more in Alberta

From Daily Mail – London
By: Sam Fleming

Shell’s record of overruns worsened after one of its partners in a massive Canadian project said it could go 50pc over budget.

The Anglo-Dutch oil giant’s Canadian subsidiary revealed that the GBP3.6bn expansion of the Athabasca oil sands venture in Alberta was being hit by “significant upward pressure on capital costs.”

Shell infuriated investors with repeated delays to its Bonga installation in Nigeria and a eye-watering ramp up in costs at the Sakhalin gas project in Russia.

The Athabasca expansion, which could add 100,000 barrels a day to its current 150,000 capacity, is being hit by rising costs of labour, equipment and materials.

“It’s unfortunate that Shell has had three very large world-scale projects that have all experienced cost overruns — Bonga, Sakhalin, and now Athabasca,” said Jason Kenney of ING.

“Cost inflation is something the whole industry is experiencing — but what element of this is cost inflation and what element is project complexity and under-estimates?”

Shell Canada, which is 78pc owned by Royal Dutch Shell, owns 60pc of the Athabasca project, with Chevron Canada and Western Oil each holding 20pc stakes.

Oil sands production is a costly business and requires a market price of at least $25 a barrel to be viable. The raw material is scooped up using huge diggers, then blasted with steam before being piped hundreds of miles for refining.

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