Much to the chagrin of environmentalists, Shell Canada Ltd. and its partners are immediately beginning construction of a $3.5 billion (Can.) oilsands project in northern Alberta.
The group received approval from the Alberta Energy and Utilities Board last October for the Athabasca Oil Sands Project (OGJ, Oct. 11, 1999, p. 47). Shell will have a 60% interest, with Chevron Canada Resources Ltd. and Western Oil Sands Inc. each holding 20%.
The project will be operated by Albian Sands Energy Inc., a joint venture of the three partners. It is scheduled for completion in 2002.
The project includes:
- The $1.8 billion Muskeg River Mine, to be built on Lease 13, 70 km north of Fort McMurray, Alta. The mine will use trucks and shovels to excavate the oilsands and advanced extraction technologies to separate the bitumen from the sands.
- The $1.7 billion Scotford Upgrader, to be constructed next to Shell's Scotford refinery north of Fort Saskatchewan, Alta. The upgrader, to be operated by Shell, will use hydrogen-addition technology to convert the bitumen to synthetic crude oils. Shell will also spend $400 million upgrading its Scotford refinery to handle synthetic crudes from the upgrader.
Construction of the mine and upgrader will begin immediately. Bitumen production of 155,000 b/d is expected to begin in late 2002.
Shell Canada Pres. and CEO Tim Faithfull said, "This is an exciting opportunity for Shell Canada. It will be the largest capital investment Shell Canada has ever made, in a growth business that will more than double our liquids production."
A number of companies will construct new facilities to serve the new Athabasca Oil Sands Project under long-term commercial agreements. These projects include:
- The Corridor Pipeline will transport diluted bitumen from the mine to the upgrader and connect the upgrader with Shell's refinery and with pipeline terminals in the Edmonton area. Corridor will also provide oil storage facilities for the project. The total investment of $600 million will be made by Corridor Pipeline Ltd., a wholly owned subsidiary of BC Gas Inc. The pipeline will be operated by another BC Gas subsidiary, Trans Mountain Pipe Line Co. Ltd.
- ATCO Power Canada Ltd. will build a gas-fired cogeneration plant to provide steam and electricity for the mine, plus additional electricity for Alberta consumers. The 170-Mw cogen unit and associated heat-recovery equipment will cost $200 million.
- The $37 million ATCO Pipelines Muskeg River Mine natural gas pipeline will transport natural gas fuel to the cogen unit.
Shell's announcement that the project would proceed drew fire from the environmental community. Tooker Gomberg of Greenpeace said, "Shell talks a good line about protecting the environment, about reducing greenhouse gas emissions, and about investing in solar energy. They say they will spend $750 million on solar energy over the next 5 years. And then they announce spending 61/2 times that sum on a carbon-belching tar sands project. This tar sands project shows their true colors, and it certainly isn't green."
Faithfull said, "We are committed to balance profitability with social and environmental responsibility in this project. For example, we will proactively manage greenhouse gas emissions from the project and will set goals for reductions and offsets.
"We are establishing an independent advisory panel of environmental groups and local representatives to assist us," he added.