Shell Canada expects rising costs for Millennium project

Shell Canada Ltd., Calgary, which recently joined a list of Canadian majors reporting strong third quarter financial performance, warned it expects rising costs at its $4.1 billion Muskeg River oilsands project near Fort McMurray in northern Alberta. Shell said there is potential for a 10% cost increase in the refining side of the project, which it originally expected to cost $2.4 billion.


CALGARY�Shell Canada Ltd., Calgary, which recently joined a list of Canadian majors reporting strong third quarter financial performance, warned it expects rising costs at its $4.1 billion Muskeg River oilsands project near Fort McMurray in northern Alberta. Shell said there is potential for a 10% cost increase in the refining side of the project, which it originally expected to cost $2.4 billion.Shell said the project is on schedule for completion in 2002, and partners in the project will complete a cost review early in 2001. Shell said rising costs are due to labor and bulk material costs and more definitive engineering.

Shell has a 60% interest in the project, which includes the Muskeg River mining operation and a bitumen upgrader at Shell�s Scotford refinery, near Edmonton, which will be linked to the mine by a pipeline.

Suncor Energy Inc., Calgary, which is conducting a major expansion of its oilsands mining operation in the same region, has also said costs are rising for its Millennium project. It said an original estimate of $2 billion has increased to $2.8 billion.

Shell Canada reported third quarter earnings of $226 million (Can.) from $145 million in the same period in 1999. It said third-quarter natural gas production increased to 641 MMcfd and the sales price for its gas rose 75% from a year ago to $4.74/Mcf. Gas production was boosted by Shell�s 130-MMcfd share from the Sable Offshore Energy Project off Nova Scotia.

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