SHELL CANADA EXPECTS TO SPEND $3.8 BILLION ON OIL SANDS DEVELOPMENT

Shell’s proposed Athabasca oil sands development is one of the largest projects in Canada in recent years. As reported in Shell Canada Ltd.’s 1998 Annual Report, plans for the three elements of the oil sands project, namely the Muskeg River mine on Lease 13 in the Athabasca region of Alberta, an upgrader at Shell’s Scotford site and the Corridor Pipeline are proceeding on schedule. The total investment is an estimated $3.8 billion.

At the initial planned production level of 150,000 barrels per day, the oil sands project will almost triple Shell’s current liquids production. This production level could be sustained for more than 30 years based upon the 1.6 billion barrels of proved reserves at the Muskeg River mine site. In total, Shell’s Athabasca oil sands leases contain an estimate 6 million barrels of proved, economically mineable bitumen reserves, which could support an ultimate production level of more than 500,000 barrels per day.

The new upgrader will supply specially tailored feedstocks to the Scotford refinery. These feedstocks are designed to make the most of the refinery’s underutilized hydroconversion capacity and will allow the refinery to switch its diet away from higher-cost synthetic crude oils currently purchased on the open market. Integration with the existing refinery also reduces the new upgrader’s capital and operating costs.

Corridor Pipeline Ltd., a subsidiary of B.C. Gas Inc., will build and own the Corridor Pipeline to transport bitumen from the Muskeg River mine to the Scotford upgrader. Trans Mountain Pipe Line Company Ltd., also a subsidiary of B.C. Gas Inc., will operate the pipeline.

Status of Project

During 1998 the achievement of several major milestones advanced the oil sands project:

C. Wilson of Shell Canada is optimistic about the future of the oil sands project. He notes that as the oil sands project progresses, the company will have to fund it with higher levels of debt. Within a conservative and prudent outlook, Wilson believes that internal cash flows and additional debt can finance the required capital, without affecting Shell Canada’s strong credit rating.



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