Shell Canada Ltd. has revised its estimate of original sales gas reserves for the Sable Offshore Energy Project (SOEP) fields downward by approximately 90 Bcf, to 700 Bcf, and has reclassified approximately 200 Bcf of sales gas reserves from the proven developed category to proven undeveloped.

Announcing the revision along with fourth quarter 2002 financial results, the producer said the reclassification was based on indications that more significant infill drilling and compression will be needed to maintain production and recover remaining reserves from the Tier I fields. These reserve changes will result in higher depreciation charges for Shell’s share of SOEP, which are expected to increase total depreciation expense for its resources unit in 2003 by approximately 20%.

Shell said it continues to assess exploration and development opportunities in the shelf and deepwater plays offshore Nova Scotia, and in the Mackenzie Delta. On the East Coast, development of Alma, the first of the planned SOEP Tier II fields, is under way and expected to be completed by the end of 2003.

In the Mackenzie Delta, Shell is participating in an exploration well with Devon Energy Corp. and is a member of the Mackenzie Delta Producers Group currently working on regulatory applications to develop existing reserves in the area.

Fourth quarter 2002 earnings for Shell Canada’s resources unit were $152 million, up significantly from $79 million for the same period in 2001 and based on higher prices for natural gas and other commodities, despite lower natural gas and condensate volumes. The lower production was due mainly to maintenance activities, temporary pipeline outages in Western Canada and field declines.

Continued successful exploration and development investments, however, have sustained full-year gas production close to 2001 levels, the company said.

During the fourth quarter of 2002, Shell’s share of natural gas production from (SOEP) averaged 153 MMcf/d, down from record levels seen in the fourth quarter of 2001, due mainly to maintenance work hampered by weather. SOEP full-year production for 2002 averaged 158 MMcf/d (Shell share), up slightly from 2001.

Overall, including its oil sands project and refining business, Shell Canada’s 2002 fourth quarter earnings were $247 million or $0.89 per common share compared with $170 million or $0.62 per share for the same period in 2001. Full-year 2002 earnings of $561 million or $2.03 per common share compared with earnings of $1,010 million or $3.67 per share in 2001. Recent earnings were reduced from record performance in 2001 as a result of lower commodity prices and refining margins.

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