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Politics : Sioux Nation -- Ignore unavailable to you. Want to Upgrade?

To: T L Comiskey who wrote (72409)	7/7/2006 12:22:42 AM
From: Wharf Rat	Respond to of 361495

Tar sands ain't gonna save us... Shell Canada oil sands cost woes felt by other projects Thu Jul 6, 2006 3:05 PM EDT Top News US pushes for joint action OK!!! ...(Rat deletes "over Korea" cuz it is a better read) By Scott Haggett CALGARY, Alberta (Reuters) - Oil sands developers may have to rework or delay projects to avoid massive cost overruns, analysts and investors said on Thursday, after Shell Canada Ltd (SHC.TO: Quote) said expanding its Athabasca Oil Sands Project would cost billions more than earlier estimates. Western Oil Sands Inc. (WTO.TO: Quote), which owns 20 percent of Shell Canada's oil sands project, said late on Wednesday that a planned expansion of its oil sands mine and upgrading refinery could cost close to C$11 billion, 50 percent more than estimated just a year ago. The project, which will boost output by some 100,000 barrels a day to about 255,000, faces rising costs for labor, materials and equipment. A spokeswoman said Shell Canada, 78 percent owned by Royal Dutch Shell Plc (RDSa.L: Quote), is deferring a final decision on going ahead with the project until the fourth quarter instead of September as it firms up a budget. But other operators in the oil-rich region may also need to rethink plans as costs rise across the board. "They are going to have to find ways to get their costs down," said Glenn MacNeill, chief investment officer at Sentry Select Capital Management in Toronto. "Clearly they can't have these cost escalations continue and still be profitable." Some C$125 billion in projects are either planned or under construction in Alberta's oil sands region, which contains an estimated 174 billion barrels of recoverable oil, a resource second in size only to Saudi Arabia's reserves. Shell Canada's cost woes are expected to spread to other firms planning large-scale projects, and shares of smaller firms operating in the region plunged on word of the cost pressures. Western Oil Sands shares dropped C$2.59, or 8.4 percent to C$28.41 by midafternoon. UTS Energy Corp. (UTS.TO: Quote), a 30 percent owner of Petro-Canada's (PCA.TO: Quote) planned Fort Hills oil sands project, fell 52 Canadian cents, or 8.6 per cent to C$5.56 on the Toronto Stock Exchange. Out of control costs and a lack of skilled labor have been a prominent feature of nearly all major oil sands projects and the C$8.4 billion tally for a recent 100,000 barrel a day expansion of Syncrude Canada Ltd.'s mine and upgrading refinery was billions more than first estimates. Firms like Canadian Natural Resources Ltd. (CNQ.TO: Quote), which is now building its Horizon oil sands mine and upgrading refinery, have kept costs in check by flying in labor from elsewhere in Canada and internationally. Continued ... ca.today.reuters.com Another take... Costs explode at Shell Canadian venture By Carl Mortished, International Business Editor SHELL is facing a cost explosion in the expansion of the Athabasca Oil Sands Project, a mining venture that extracts oil from bitumen deposits in the Canadian province of Alberta. The first phase of expansion, intended to add 100,000 barrels daily to the current 155,000 barrel per day output was budgeted at C$7.3 billion (£3.6 billion) only a year ago. It is now expected to cost as much as C$11 billion, according to estimates published by Western Oil Sands, Shell’s partner in the project. Shell Canada said yesterday that it was conducting an assurance review of the project’s cost, pending a final investment decision later this year. Planned in three phases, the Athabasca expansion is intended to raise output to 500,000 bpd, and represents a large part of Shell’s oil production ambitions. Shell admitted to “significant upward pressure on capital costs” but declined to confirm its partner’s prediction of a 50 per cent increase. The Dutch oil giant is the leading player in an overheated market where the high price of steel, cement and a chronic shortage of skilled labour is weighing on investors. The tar-soaked sands of northern Alberta, reckoned to hold reserves as large as Saudi Arabia, are the oil industry’s hottest new property but the costs of operating in the harsh and remote environment of Northern Alberta are weighing on the industry. The soaring price of crude oil set off a scramble for oil sands, a resource once ignored due to the high costs. However, the high price is rebounding on oil sands investors. “The high price of oil is a double-edged sword,” said a Shell Canada spokeswoman. “It leads to a heated marketplace and adds to input costs.” The extraction of bitumen from sand requires heat and steam and the oil sands companies use vast amounts of natural gas to fuel their plant. Opposition is mounting to oil sands expansions in Fort McMurray, a town at the centre of Alberta’s oil sands boom. The provincial government has been slow to respond to a massive influx of people into an area weak in infrastructure. business.timesonline.co.uk