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Shell CEO Says Higher Costs Limit Canadian Oil Sands Projects

By Tina Seeley

Oct. 8 (Bloomberg) — Higher costs and low oil prices are limiting further development of oil sands projects in Canada, the chief executive officer of Royal Dutch Shell Plc said.

“Costs have risen very clearly in the Alberta region for new projects, hence new projects are not entirely profitable at today’s oil prices,” Peter Voser told reporters today after giving a speech in Washington. “Costs have to adjust to lower oil prices. Once they come down, then further projects can be considered.”

Voser said existing oil sands projects and those under construction now are profitable. Companies extract the oil by using heat to separate fuel from tar-like sands.

Environmentalists say the process is more energy intensive, generating more greenhouse-gas emissions than other methods of retrieving oil.

Canada’s oil sands hold the world’s second-biggest crude reserves after Saudi Arabia. The reserves are located about 750 kilometers (466 miles) north of Calgary. Output from the oil sands may almost double to 2.2 million barrels a day by 2015, the Canadian Association of Petroleum Producers estimates.

Crude oil for November delivery climbed $2.13, or 3.1 percent, to $71.70 a barrel at 1:48 p.m. on the New York Mercantile Exchange. Futures touched $72.55, the highest since Sept. 18. Oil has traded between $65.05 and $75 since Aug. 1.

He also said The Hague-based company is working with the Canadian government to capture and store carbon dioxide emissions from the oil sands projects.

Voser said the company is involved in a project that will sequester 1.1 million tons of CO2, “roughly 20 percent of the CO2 we generate, which will actually bring oil sands back to normal, average conventional crude oil from a CO2 perspective.”

To contact the reporter on this story: Tina Seeley in Washington at [email protected].

Last Updated: October 8, 2009 14:16 EDT

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