CALGARY (Dow Jones)
Royal Dutch Shell PLC (RDSA) will expand its Athabasca Oil Sands Project by a third by the end of the decade, and Canada will make up a larger share of Shell's energy production over that period, Chief Executive Peter Voser said Tuesday.
Voser told reporters in an interview in Calgary that the Netherlands-based energy giant will expand the Athabasca Oil Sands Project by 80,000 to 90,000 barrels a day by debottlenecking its operations in three stages. That would bring the project, in which Shell owns 60%, to at least 335,000 barrels a day of production. Shell just finished a 100,000-barrel-a-day expansion of the project last year.
The Athabasca expansion, combined with a planned 80,000-barrel-a-day expansion of Shell's Peace River oil sands project will push Canadian production to a larger share of Shell's portfolio, Voser said. Canada produced 12% of Shell's 1.2 million barrels of oil, bitumen and natural gas liquids last year, and 10% of its 5.9 billion cubic feet of natural gas, according to its annual report. Shell is targeting a 25% increase in its global production by 2018.
"We expect Canada to play a very important role in our growth prospects," Voser said. "It will consume a sizeable portion of the total group budget."
Between 10% and 15% of Shell's capital expenditures will go to Canada over the next several years, Voser said. That compares with 13.8% of Shell's capital expenditures that went to exploration and production in Canada and Greenland last year. Shell has earmarked US$32 billion for capital expenditures this year.
Voser said Shell would split spending on Canada oil and natural gas production roughly equally over the long term, but would shift slightly toward natural gas over the next five years as it pushes its British Columbia liquefied natural gas, or LNG, export terminal forward and develops the Groundbirch shale gas project in the province.
He said that Canadian regulators are facing a deadline to get Canadian LNG exports approved, as competing projects in Australia and the Middle East come onstream over the next several years.
"If Canada wants to compete with those projects when they come into the Asia Pacific [region], there is a certain time window," Voser said.
Shell is developing 43 million tons of LNG export capacity, with 12 million tons in Canada through a proposed terminal in Kitimat, B.C., in partnership with Japan's Mitsubishi Corp. (8058.TO), China National Petroleum Corp. and Korea Gas Corp. (036460.SE). Media outlets in Asia reported the cost of Shell's Kitimat project as US$12 billion, but Shell didn't release a cost estimate. The project is expected to begin shipping Canadian gas to Asia by the end of the decade.
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