Shell Canada Ltd., targeted for a buyout by parent Royal Dutch Shell plc, is nearly doubling its investment spending in 2007 to C$4 billion ($3.5 billion) from C$2.7 billion set aside this year. More than C$3.6 billion is directed for capital expenditures, and another C$400 million is tagged for related exploration and pre-development expenses.
In October, London-based Royal Dutch Shell, which owns 78% of Calgary-based Shell Canada, unveiled a US$6.8 billion offer to buy out 22% of the shares it doesn't already own (see Daily GPI, Oct. 24). Analysts said the buyout is part of a long-range plan to expand oil sands exploration.
And about two-thirds, or C$2.9 billion, of Shell Canada's 2007 investment budget is earmarked for oil sands and related oil projects, including a 100,000 b/d expansion of the Athabasca oil sands project in which it holds a 60% stake. Shell Canada also plans a 100-well production program in the Peace River area, and it will begin pre-development of a possible new heavy oil refinery, which would be located near Sarnia, ON.
Natural gas exploration remains a priority. About C$1.07 billion will be spent on upstream projects, including gas exploration in the Western Canadian Sedimentary Basin. Shell Canada's basin exploration is targeted to deliver 100 MMcf/d by the end of 2007.
"This investment plan supports Shell Canada's growth in unconventional oil and gas while maintaining the leadership position of our oil products business," said CEO Clive Mather. "North American and global economies are generating long-term energy demand, which encourages the development of Canadian oil sands and unconventional gas. Growth will be funded from our robust operational earnings and strong balance sheet. Key points of leverage are our high quality leases, access to technology, depth of professional skills and our overarching commitment to sustainable development."
Within the E&P business unit, C$4 million will be spent on pre-development projects, and C$470 million to explore and develop unconventional coalbed methane and shale gas basin projects. Another C$130 million will be spent in Canada's frontier basins, including the Orphan Basin offshore Newfoundland, and C$430 million will be spent on E&P in the Alberta Foothills.
Shell Canada's E&P unit now operates four sour gas processing facilities in the Alberta Foothills and several sour gas wells in northeast BC. The producer also holds a 31.3% stake in the Sable Offshore Energy Project offshore Nova Scotia and is partnering on the proposed Mackenzie Gas Project in northern Canada. The producer did not detail its funding plans for the Mackenzie pipeline project, nor its SOEP plans.
"In 2007, Shell Canada will continue its focus on operational excellence to make the most of our existing assets," said Mather. "We will benchmark our operations and adopt global best practices to generate top performance. Strong earnings and operating cash flow will provide the basis for continued investment levels of about C$4 billion per year over the planning period."
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