Shell Canada Oil-Sands Cost Target Jumps to C$7.3 Bln

[sintax]

Shell Canada Oil-Sands Cost Target Jumps to C$7.3 Bln (Update2)

(Bloomberg) -- Shell Canada Ltd., the fourth-largest Canadian oil company, said the cost to expand its Alberta oil- sands development will almost double to C$7.3 billion ($6 billion) as prices of steel, cement and equipment rise.

Design changes that will make additional expansions easier also are inflating the cost, spokeswoman Janet Annesley said today in a telephone interview. Calgary-based Shell Canada and its project partners, Chevron Corp. and Western Oil Sands Inc., in April said the expansion would add 100,000 barrels a day of mining and refining capacity at a cost of at least C$4 billion.

Rising oil prices, which today touched a record $64.27 a barrel in U.S. futures trading, are spurring more investment in Alberta's oil sands, which contain the world's largest petroleum deposits outside Saudi Arabia. Such companies as Syncrude Canada Ltd., the world's largest oil-sands miner, have raised spending targets as competition for labor and materials increases.

``Costs are just getting mind-boggling,'' said Glen MacNeill, who manages C$800 million in assets, including 105,000 Shell Canada shares, at Sentry Select Capital Corp. in Toronto. ``It's making me a lot more cautious. Investors just can't go in and buy the models that the companies are giving you because they don't work.''

http://www.bloomberg.com/apps/news?pid=10000082&sid=aNothDhdqZPs&refer=canada

[Chicago Democrat]

1. Isn't the process EXTREMELY polluting?

Like in Venezuela?

[daleo]

5. Yes, the settling ponds are huge

After the oil is extracted from the sands, huge settling ponds full of contaminated water (mud and oil, I think) are left over. But they settle at a very slow rate, and the chances of a spill eventually are quite high. Also, the process itself is very energy intensive, so this is a very significant greenhouse gas source. Not to mention the strip mining effect on the environment, heavy metals, etc.

[justinsb]

2. By the time they start prudcing any oil

Oil prices will justify the expense. I expect to see oil prices in the 90-100 dollar a barrel range by the end of the year. It is a good example of the peak oil problem though. As the cost of oil rises so does the cost of extracting it, both because of having to get it from harder to reach places but also because of increased costs of shipping, transportation and refining.

[whistle]

3. Why build facilities there. Just expand the rail lines and freight....

...capacity and dig that stuff up and just transport it like you would coal to where facilities are to process the tar sands more economically. God we need oil right away, not big white elephant multi-billion dollar construction projects.

[daleo]

6. The oil is trapped in sand

So, you would spend a lot of energy shipping sand around the continent.

[Strelnikov_]

4. "Using Cheap Natural Gas To Make Expensive Petroleum"

Is the best description I have heard of the tar sands project.

The tar sands will be valuable as a feedstock for those chemicals that require petroleum, but it is questionable as an energy source.

[applegrove]

7. They pay the workers great wages for dangerous work. They must

be desperate for a little under-employment in Canada. What can they do??

[hatrack]

8. Hmmm . . . minimally efficient huge energy facilities pricier than thought

Who could possibly have predicted that! :eyes: