Shell Canada boosts capital spending 60%

C$1.8 billion capex budget includes C$335 million for Foothills region of western Canada, C$150 million for Sable gas

Petroleum News

Shell Canada says it will reinvest a portion of this year’s profits in order to boost capital and exploration spending in 2005 to C$1.8 billion, a 60 percent increase over 2004.

In the Nov. 18 press release, Shell Canada CEO Clive Mather said, “While profitability of our existing businesses remains a priority, we will be putting more emphasis on our strong and diverse portfolio of growth opportunities over the next several years.”

The 2005 capex budget includes C$780 million for exploration and development of Canadian natural gas, which Shell hopes to maintain at current production levels, despite declining reserves in its producing fields.

The Foothills region of western Canada will get a C$335 million slice of the exploration and development funds and a C$150 million chunk will go to the Sable gas project off the coast of Nova Scotia, where Shell has a 31 percent operating stake.

Other E&D funds will go to the Peace River oil sands in western Canada and the Mackenzie Gas Project in the Northwest Territories, where Shell is a partner in a C$7 billion effort to build a natural gas pipeline from the Mackenzie Delta to markets in Alberta and the United States.

The Peace River program includes additional wells to increase bitumen production to the current license capacity of 12,000 barrels per day and engineering and technical work for a potential 30,000 barrels per day expansion project. Depending on the outcomes of this work and obtaining necessary approvals, construction on the Peace River expansion project could start in 2007, Shell said.

Unconventional gas opportunities, such as tight gas and coalbed methane in Alberta and British Columbia, will also get a slice.

The 2005 program for oil sands includes C$135 million for the Athabasca Oil Sands Project “operations and profitability initiatives” and $215 million for “growth.”

Shell said planned profitability initiatives are largely focused on reducing unit costs.

The growth related piece includes Athabasca oil sands debottlenecking projects and front-end engineering for a 90,000 barrel-per-day expansion.

The program also includes funding to capitalize a lease arrangement for large mobile equipment — trucks and shovels — at the Muskeg River Mine. This arrangement is currently accounted for as an operating lease, Shell said.

The oil products spending program includes a C$110 million slice for marketing and C$370 million for manufacturing and distribution projects.