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Petroleum News: Shell Canada stays course, C$4B capex

Week of December 03, 2006

Calgary-based company has aggressive capital spending plan for 2007, talking about building Canada’s first refinery since 1984

Gary Park
For Petroleum News

Shell Canada doesn’t operate like a company that may be on the verge of losing its Canadian identity if parent company Royal Dutch Shell concludes its offer to buy the 22 percent it doesn’t already own.

Whatever the outcome of that proposal, the Calgary-based company has unfurled an aggressive capital spending plan for 2007 and is talking about building Canada’s first refinery since Shell Canada opened its Edmonton refinery in 1984 to upgrade synthetic crude from its Alberta oil sands operations.

The capital budget has been set at C$4 billion, nearly 50 percent greater than 2006 and includes C$50 million to assess the viability of a new 150,000-200,000 barrel per day refinery in Sarnia, Ontario, giving it ready access to Canada’s major consuming region.

Chief Executive Officer Clive Mather said that expanding the company’s “manufacturing base” in Ontario might allow it to maximize the value from its rising oil sands production.

“It’s a market where demand for light oil is growing and it’s part of our strategy to harness the integrated value from the oil sands,” he said.

David Aldous, Shell Canada’s senior vice president of refined products, said a new refinery made more sense than refitting an existing refinery by creating an opportunity to build a pacesetting facility.

Mather declined to put a price tag on the facility, but indicated a decision is likely within three years.

Whatever the verdict, Shell Canada has put paid to any notion that it might look for a joint refining venture in the United States, following the lead of EnCana’s joint production/refining venture with ConocoPhillips.

Of the capital budget the bulk, or C$2.45 billion, is earmarked to expand oil sands operations in the Alberta regions of Athabasca, where Shell plans to add 100,000 barrels per day to its existing 155,000 bpd project, Peace River, where it is aiming for 50,000 bpd by 2008; and the Cold Lake start-up of the 10,000 bpd Orion project.

Another C$1.07 billion has been assigned to exploration and production, with a special emphasis on unconventional gas development in the Foothills region of Alberta, along with coalbed methane and shale gas prospects and drilling the Orphan Basin offshore Newfoundland.

Mather said North American and global economies are “generating long-term energy demand, which encourages the development of Canadian oil sands and unconventional gas.”

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