Shell Canada (TSX:SHC) plans to proceed with the first expansion of its Athabasca oilsands project, even though the company says it could cost as much as $12.8 billion.
Calgary-based Shell has issued a formal proposal to its partners in Athabasca, including Western Oil Sands (TSX:WTO) and Chevron Canada (NYSE:CVX), with its plan to proceed even though it could cost about 75 per cent more than earlier estimates of $7.3 billion.
Chevron and Western, which each own 20 per cent of Athabasca, have 90 days to respond to Shell's plans.
Shell's decision to proceed with the 100,000-barrel-per-day expansion despite the soaring costs will be closely watched throughout the oilsands industry, where all other companies building mega-projects face the same pressures from the overheated northern Alberta economy.
Shell earlier revealed plans to rapidly develop its own in-situ oilsands projects that have come as a result of its recent $2.4-billion acquisition of BlackRock Ventures.
Meanwhile, Shell says it is looking at shifting oilsands investment to Eastern Canada. The company says it's in the early stages of a plan to evaluate the economics of building upgrader facilities and increased refining capacity, at either its Sarnia, Ont., or Montreal sites.
The location of those refineries, close to the largest markets in the country, is a key part of the debate within Shell. So is the rising cost of construction and labour within Alberta.
Imperial Oil Ltd. already ships raw oilsands bitumen from its Cold Lake facility to Eastern Canada, but only as far as its Sarnia refinery.
Two energy trusts have gassed up with separate deals valued at more than $400 million each.
True Energy Trust (TSX:TUI.UN) said it will acquire Prairie Schooner Petroleum Ltd. (TSX:PSL) in a friendly stock swap valued at $431 million, including $54 million of assumed debt.
And Harvest Energy Trust (TSX:HTE.UN) is paying $440 million in cash for an unnamed privately owned oil and gas producer. The deal will be financed from existing bank credit and a new bought-deal issue of 6.1-million Harvest units.
Both the purchases are heavily weighted toward natural gas rather than crude oil.
Canadian energy trusts are striving to maintain and increase their distributions by bulking up through acquisitions.
The proved-plus-probable reserve life index of True's acquired properties is 8.3 years, extending True's reserve life to seven years.
The Harvest transaction represents a life of 9.8 years, plus 230 sq. km of undeveloped land.
Harvest completed a merger with Viking Energy Royalty Trust in February.
Pengrowth Energy Trust (TSX:PGF.B) plans to swallow Esprit Energy Trust in a stock-swap deal as consolidation continues unabated in Canada's oilpatch income-trust sector.
Under the deal, each Esprit unit (TSX:EEE.UN) was to be exchanged for 0.53 of a Pengrowth unit after consolidation of Pengrowth's class A and class B units on July 27.
The acquisition will leave Pengrowth unitholders with about 82 per cent of the combined new firm that will retain the Pengrowth name and carry an enterprise value of about $6 billion, making it one of the largest income trusts in the Canadian oilpatch.
The deal brings Pengrowth's total production to about 75,000 barrels per day, almost evenly weighted between oil and gas production.
Canadian Natural Resources Ltd. (TSX:CNQ) expects to more than double the workforce at its Horizon Oil Sands Project over the next year as it ramps up the massive development.
In a periodic review of Horizon, the big energy producer also said it is holding down costs by building parts of the project with its own mine equipment instead of using contractors. As well, the company is making parts for the oilsands development more cheaply using modular building in Edmonton and elsewhere.
CNQ says it is flying skilled workers in weekly from Quebec and Atlantic Canada to meet labour shortages and using a mix of union and non-union labour on the site. It expects to have between 5,000 and 6,000 workers on the project by mid-2007, compared with about 2,500 today.
South Korea has joined the growing number of international players in northern Alberta's oilsands, confirming that its national energy company has bought oilsands leases from mining giant Newmont (NYSE:NEM) for $310 million.
After weeks of speculation, Korea National Oil Corp. announced it had bought full control of the Black Gold mine, located about 140 kilometres southeast of Fort McMurray.
The property contains an estimated 250 million barrels of crude oil, the South Korean Embassy said.
"KNOC is expected to begin building the production facility in 2008 and to produce 35,000 barrels of crude oil a day, beginning in 2010," the embassy said in a release.
In the last two years, energy companies from France, China, The Netherlands, and the United States have all made major acquisitions in the region.
