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Financial Times: Shell offers to buy up rest of Canadian oilsands unit

By Ed Crooks: Published: October 24 2006 03:00 | Last updated: October 24 2006 03:00

Royal Dutch Shell has delivered a vote of confidence in the potential of Canada’s oilsands by offering to buy out the 22 per cent of its Shell Canada subsidiary that it does not already own at a price 22 per cent higher than lastFriday’s close.

Shell said the purpose of the C$7.7bn (£3.6bn) offer was to continue simplification of its structure that began with last year’s company unification.

Jeroen van der Veer, chief executive, said the deal was an opportunity to integrate Shell Canada fully with its parent company’s strategy and operations.

Until now, he said, it had been pursuing the interests of its shareholders, which did not necessarily fit with Royal Dutch Shell’s global plans.

The deal will add to Shell’s investment in Canadian oilsands, which have this year been hit by concerns over rising costs and the falling price of oil.

James Neale, an analyst at Citi-group in London, said: “Shell is, in essence, taking the high commodity price view. It is formulating a strategy based on the implicit view that oil will stay at around its current levels.”

Analysts said Shell’s confidence in these higher-cost sources of oil could be justified because it was a fully integrated company with its own downstream operations to refine the oil and market the products.

Shell is offering C$40 a share for the minority interest in Shell Canada: a 22 per cent premiumto Friday’s closing price, 29 per cent to the average in the past month, but below the peak atthe beginning of the year of $46.90.

Shell Canada shares rose C$9.75, or almost 30 per cent, to C$42.55 on the Toronto Stock Exchange. Royal Dutch Shell closed 7p lower at 1,810p.

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