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Shell CEO keeps oil sands options open, touts gas

Reuters Africa

* Says faster expansion in oil sands still possible

* Costs remain a concern

* Sees growing gas demand from emerging economies (In U.S. dollars)

MONTREAL, Quebec, Sept 13 (Reuters) – Royal Dutch Shell Plc (RDSa.L: Quote) could switch away from its slow-growth strategy in Canada’s oil sands but costs in the region remain a concern, the company’s chief executive said on Monday.

Shell, which operates the 155,000 barrel-per-day Athabasca oil sands mine and upgrader in northern Alberta, has nearly wrapped up a 100,000 bpd expansion of the project.

However it stepped back from plans for a further series of big expansions of its oil sands holdings after a squeezed labor pool in northern Alberta inflated construction costs and oil prices fell following the economic crisis.

Instead of big-ticket expansions, Shell Chief Executive Peter Voser steered the European oil major to smaller projects, looking to increase output in 30,000 bpd increments by tweaking operations at its two oil sands mines.

But Voser said that the alternative strategy of expanding oil sands output more and faster remains a possibility, though he’s uninterested in stoking further inflation.

“We left it open to go back to a more aggressive expansion if that is needed and if that actually is possible because of the costs,” Voser told reporters at the World Energy Congress in Montreal.

Chevron Corp (CVX.N: Quote) and Marathon Oil Corp (MRO.N: Quote) each hold a 20 percent stake in Shell’s Athabasca Oil Sands Project.

Voser was more optimistic about increasing production from the company’s natural gas operations, particularly its shale gas holdings in the Groundbirch region of northeastern British Columbia and the acreage in Pennsylvania’s Marcellus shale region that Shell acquired through its $4.7 billion purchase of East Resources Inc earlier this year.

Though some legislators and environmentalists are concerned that the techniques used to develop shale and other unconventional gas resources may threaten drinking water supplies, Voser said the company could safely produce its shale reserves.

“We comply with regulations and follow strict procedures to ensure that the process is safe,” he said in the text of his speech. “The natural gas we produce lies far below the fresh water layers. As a an extra protection measure we line the wells with steel barriers and concrete.”

Voser said the rise in shale gas production in North America frees up supplies of liquefied natural gas for other markets like China, Thailand, Singapore and Pakistan.

He expects economic growth in emerging markets to raise the demand for natural gas by 25 percent above current level of 110 trillion cubic feet annually by 2020 with much higher consumption of the fuel in China, the Middle East and North Africa. (Reporting by Scott Haggett; editing by Peter Galloway)

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REUTERS ARTICLE

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