Shell to boost oil sands spending
By RICHARD BLOOM
Globe and Mail Update
Shell Canada Ltd., said it will spend $4.4-billion on its capital and exploration expenditure program over the next five years, with a large chuck of that heading to its Athabasca oil sands project.
The company, one of the country's largest integrated oil-and-gas firms, said $1.8-billion of the total amount will be dished out in 2002 alone.
Shell said will spend $1.2-billion on the oil sands project over the next five years, of which it owns 60 per cent. Cost estimates for the Athabasca project have been raised to $5.2-billion from its originally pegged amount of $3.8-billion, the company said.
In October, the company warned of higher costs without giving a final figure during its quarterly earnings report.
"Our investment plans indicate our commitment to growth. The Athabasca oil sands project is the largest project ever undertaken by Shell Canada," Tim Faithfull, Shell Canada's president and chief executive officer, said in a statement.
"High levels of activity in the oil and gas industry and related impacts on productivity and costs have added to the challenges of effectively executing this project."
The expenditure also includes $1.3-billion to move projects in the Maritimes and Mackenzie Delta frontier forward, pending approval.
Shell's share of project costs, the company said, is now forecast to total $3.6-billion, up 33 per cent from the original estimate.
"The primary reason for upward pressure on project costs is the high level of construction activity in the oil and gas industry," it said.
Last month, Shell dished out a double dose of bad news, reporting a drop in third-quarter earnings and warning investors that its 60-per-cent owned Athabasca oil sands project is suffering from even bigger cost overruns than previously thought.
The company, owned 78 per cent by Anglo-Dutch energy giant Royal Dutch/Shell Group, said its third-quarter profit fell 24 per cent from a year earlier to $172-million or 63 cents a share. The company blamed weaker oil and natural gas prices and "volatile" refining margins.
Shares of Shell, traded on the Toronto Stock Exchange, were down 45 cents in trading Thursday to $41.80.
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