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Shell May Revisit Oil-Sand Projects as Procurement Costs Drop

Bloomberg

 

 

By Juan Pablo Spinetto and Mathew Carr

Dec. 19 (Bloomberg) — Royal Dutch Shell Plc said construction and engineering costs may fall in Canada, allowing Europe’s largest oil producer to revisit plans to expand oil- sand projects.

“We expect that procurement costs will come down quite a lot,” Chief Executive Officer Jeroen van der Veer said today in an interview at an energy conference in London. “If the overheating goes out of the market, the break-even price that you can build an oil-sands project will come down again.”

Shell last month delayed seeking regulatory approval for its Carmon Creek oil-sands development in Canada. That followed October’s indefinite postponement of the second-phase expansion of The Hague-based company’s Athabasca project because of rising construction costs.

Shell will go ahead with projects that could be profitable under various scenarios for oil prices, van der Veer said. “More oil sands will come, but you don’t know exactly when.”

Shell planned to drill wells and inject steam into the tar- like sands at Carmon Creek to increase production from the deposit in northern Alberta.

Shell operates the 155,000 barrel-a-day Scotford upgrader in Alberta, which converts bitumen extracted from oil sands into refinery-ready crude. The upgrader forms part of the Athabasca project, together with the nearby Muskeg River Mine, which supplies the bitumen.

To contact the reporter on this story: Juan Pablo Spinetto in London at[email protected]Mathew Carr in London at [email protected]

Last Updated: December 19, 2008 11:02 EST

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