Shell taps oilsands brakes
CEO blames high costs for slowed growth
By Shaun Polczer, Calgary Herald
January 26, 2010
D espite signs of a revival in Alberta's oilsands, one of the world's largest oil companies plans to limit growth in the sector in the coming years, its CEO said Monday.
Speaking to the Londonbased Financial Times in his first major interview since he became the company's chief executive in July, Royal Dutch Shell CEO Peter Voser said the company will slow its oilsands expansion plans and shift focus to conventional exploration in other parts of the world.
In the report, Voser said the company had "clearly scaled down" its earlier plans to triple production from the Athabasca Oil Sands Project to 750,000 barrels per day.
"Over the past two years and certainly over the past six to eight months, I've taken the pace out of that because we have enough other growth opportunities," he told the newspaper.
In the interview, Voser complained that costs in Canada were still too high.
Along with partners Chevron and Marathon Oil, Shell owns 60 per cent of the Athabasca project, which is currently producing about 150,000 bpd, and is spending about $16 billion US to increase production to 250,000 bpd when the expansion is completed later this year.
Shell's move to rein in growth contrasts with other companies such as Conoco- Phillips, Total, Husky and BP, which have announced more than $8 billion in oilsands expansion projects over the past few weeks, sparking renewed optimism in the sector.
Although Shell shelved its oilsands growth plans in 2008, the company has submitted a regulatory application for the 80,000-barrels-per-day Carmon Creek thermal project near Peace River. In addition, it holds various approvals to more than double its mined oilsands production to 470,000 bpd.
But European investors have begun to scrutinize big oil majors such as BP, Shell and StatoilHydro for their Canadian growth plans, especially when it comes to oilsands, which they view as "dirty oil."
Last week, a group of pension funds said it plans to introduce a motion at Shell's annual meeting in May questioning the sustainability of the company's oilsands investments.
Mike Hudema, an oilsands activist with Greenpeace based in Edmonton, said he thinks the group's protests at production facilities have raised awareness of the issue in the United States and Europe, resulting in increased pressure on companies such as Shell to discontinue oilsands activities altogether.
In the fall, he and other activists were arrested after occupying Shell's Scotford refinery and upgrader near Edmonton. He noted Shell remains one of the country's largest oilsands players.
"I definitely think it has an effect," he said. "We're glad that companies are finally starting to recognize the economic, environmental and social costs of the tarsands industry."
Shell representatives said they were precluded from discussing development plans pending the release of fourth-quarter financial results next week.
Nonetheless, a company spokeswoman at The Hague said Shell remains committed its oilsands portfolio and reducing the environmental impact of its operations through initiatives like its Quest carbon capture and storage project, which qualified for Alberta government funding.
Rather, Shell might be shifting its sights to other countries such as Iraq, said Geopolitics Central president Vincent Lauerman.
On Monday, Iraq's oil ministry signed deals with ExxonMobil and Shell to increase production at its second-largest oilfield to 2.3 million bpd from current output of 285,000 bpd.
Lauerman said the re-emergence of Iraq on the world oil stage has the potential to spark a price war with the rest of OPEC, while shifting the focus of the world's oil majors away from unconventional sources such as the oilsands. At 155 billion barrels, Iraq has the world's third-largest oil reserves in the world, after Saudi Arabia and Canada.
In addition, he said the oilsands still face uncertainties over costs -- which are still high compared with other parts of the world -- and price, which remains volatile.
Lauerman said Voser's comments could be indication that the world's third-largest oil company thinks long-term oil prices could be headed down.
Lauerman is the author of a study released in conjunction with the Centre for Global Energy Studies dubbed "Canada's Oil Sands" that suggested the pace and scope of oilsands development will be affected as much by geopolitical developments as purely environmental or economic factors.
"A potential game-changer is Iraq," he said. "That oil can be brought on in large volumes very quickly and quite cheaply. It's a basic case of risk versus reward. It's a major shift in priorities for Royal Dutch Shell."
spolczer@theherald.canwest.com
© Copyright (c) The Calgary Herald
http://www.calgaryherald.com/entertainment/Shell+taps+oilsands+brakes/24...
