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The Edmonton Journal: Shell buyout will cost Canada oilpatch ‘clout’: Company wants to simplify North American operations

Lisa Schmidt, Calgary Herald; CanWest News Service
Published: Tuesday, April 10, 2007

CALGARY – When Shell Canada Ltd. leaves the public realm later this year, it will mark the end of a long history in Canada.

With all but one per cent of Shell’s shares in the hands of its Anglo-Dutch parent Royal Dutch Shell, transition plans are underway.

Last week, four members of Shell Canada’s board resigned, reducing its number to eight. Senior executives, including chief executive Clive Mather, are expected to remain in their positions until the formal handover, expected before the end of June.

While Europe’s largest oil company Royal Dutch has released few details about the transition, its officials have said the buyout will simplify its North American operations.

“It is unfortunate, from a patriotic point of view, to lose a head office,” said Joseph Doucet, a professor of energy policy at the University of Alberta.

“Even though there are something in the order of 4,500 people still working here, if the upper echelon moves to Houston or the Netherlands and there is less clout here … that is certainly a loss.”

But with Royal Dutch already the largest shareholder — it held 78 per cent of Shell Canada shares before launching the $8.7-billion buyout last fall — there’s no expectation operations will change radically once it becomes a wholly owned subsidiary like its U.S counterpart Shell Oil Co.

The takeover ends nearly a century of business in Canada, where the company grew from a single Montreal gas station to one of the country’s largest integrated petroleum producers.

A key player in building natural gas production in Canada, Shell also helped kick off a massive expansion in Alberta’s oilsands, where a number of international firms are seeking to gain a larger foothold.

Royal Dutch set up the Canadian subsidiary in 1911, selling gasoline in Montreal. It then moved its headquarters to Toronto where it continued to expand. Today, the Shell logo is found on nearly 1,700 gasoline stations across the country.

Its first major gas find would come in 1944 at Jumping Pound, west of Calgary, followed in 1957 by the Waterton gas field in southeastern Alberta, one of the largest in Canadian history.

It also pioneered gas exploration in the Mackenzie Delta in the 1970s and off Nova Scotia’s coast, where it is a partner in the Sable Offshore Energy Project. More recently, the company reported Alberta’s biggest natural gas find in nearly two decades with the Tay pool in the Rocky Mountain foothills.

The company shares have traded in Canada since 1963, the same year it officially became Shell Canada Ltd.

Head office was moved again in 1984, this time from Toronto to Calgary. The same year, Shell opened its Scotford refinery near Edmonton, the first to process synthetic crude from Alberta’s oilsands.

But it would take another 15 years before Shell would enter the oilsands business as a producer, selling off its conventional oil assets in Western Canada and setting the stage for the massive expansion plans now underway.

The Athabasca Oil Sands Project would become the first major oilsands-mining operation built in Alberta in a quarter century and serve as a milestone for the oilsands, the precursor for massive undertakings by other companies that will turn the promise of the sands into a multimillion-barrel-a-day reality.

“We took the decision at the end of 1999 and I think it was a big step forward for the company,” said Tim Faithfull, former Shell Canada chief executive who oversaw the project.

“It was quite a roller-coaster building a big project like that — as I think everyone has found out — but I think it was a tremendous success and it was always clear that it would open up a completely new area for the company.”

Shell holds a majority in the project, which includes the Muskeg River mine, a pipeline and a massive upgrading refinery near Edmonton that turns the tar-like slurry produced at the mine site into synthetic crude.

“The company had tried for many years to find an economic way to exploit a very good resource in the leases that it had,” Faithfull said.

“It was important for the company to find a way, which we did, through the integration of the project with the downstream and with the use of different bits of technology that make it slightly different from Syncrude and Suncor to find a way to go ahead,” Faithfull said.

© The Edmonton Journal 2007

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