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Royal Dutch Shell defends Alberta oil sand investments
News Articles | Globe and Mail | Shawn McCarthy | March 18, 2010
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Royal Dutch Shell PLC has launched a spirited defence of its oil sandsinvestments against shareholder critics who want the Anglo-Dutch company to pull back from the Alberta fields.
In a report posted on its website, Shell said the oil sands have been hugely profitable for the company and, despite cost inflation, remain attractive at prices higher than $75 (U.S.) a barrel.
But the company is also signaling that the new investments in bitumen production and upgrading face high thresholds, including consideration of environmental factors.
“The timing of new development, such as low capital-intensive mining and upgrading debottlenecking opportunities, will be driven by economic and environmental factors in Alberta, and the ranking of these opportunities in Shell’s world-wide portfolio,” the company said.
Some institutional investors including The Co-operative Asset Managementhave introduced a resolution – to be voted on at the upcoming annual meeting – which would force the company to fully disclose and justify its involvement in the Canadian oil sands. BP PLC faces similar shareholder pressure.
Shell has a 60 per cent stake in Athabasca Oil Sands Project, which is now being expanded from 78,000 barrels per day capacity to 150,000 barrels a day.
In its report on the oil sands, Shell said global demand for energy, including oil, is expected to rise significantly in the next decades, and that the oil sands represent one of the world’s largest sources of crude oil and will be required to meet that demand.
Shell’s investment in the sector has also paid huge returns for the company and its shareholders.
The initial capital investment in its existing mining operation was recovered less than five years after start-up, when oil prices average around $54 (U.S.) per barrel. Shell says it earned $20 (U.S.) per barrel from its oil sands production between 2005 and 2009, compared to $12 (U.S.) for the rest of its production.
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