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Reuters: Western agrees to Shell Canada oil sands expansion

Wed Oct 25, 2006 10:12 PM EDT
 
CALGARY. Alberta (Reuters) – Western Oil Sands Inc. (WTO.TO: Quote) said on Wednesday it has formally agreed to participate in Shell Canada Ltd.’s (SHC.TO: Quote) planned expansion of its Athabasca oil sands project at an expected cost to the company of C$2.2 billion ($1.95 billion).

Calgary-based Western Oil Sands’ main asset is its 20 percent stake in the project, which is slated for a 100,000 barrel a day expansion.

Western said the expansion is likely to cost about C$11.2 billion. In July, Shell Canada pegged the price of the project at anywhere between C$10 billion and C$12.8 billion.

The project includes the expansion of an oil sands mine north of Fort McMurray, Alberta, and an upgrading refinery near the provincial capital of Edmonton. If the project goes ahead, output will be more than 255,000 barrels of synthetic crude a day.

Western is the first of the partners to give a formal go-ahead to the project. Shell Canada, which has a 60 percent stake, said on Wednesday it will make a formal decision on whether to proceed by year-end.

That decision isn’t expected to be affected by Royal Dutch Shell Plc’s (RDSa.L: Quote) C$7.7 billion bid to acquire the 22 percent of the company it doesn’t already own.

U.S. oil major Chevron Corp. (CVX.N: Quote), which also has a 20 percent stake, has not yet said if it will participate. That decision is expected this week.

($1=$1.13 Canadian)

© Reuters 2006. All Rights Reserved.

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