Monday July 10, 2006

Oil sands cost explosion

peakoil.com -> timworstall.typepad.com -> business.timesonline.co.uk :

Shell is facing a cost explosion in the expansion of the Athabasca Oil Sands Project, a mining venture that extracts oil from bitumen deposits in the Canadian province of Alberta. The first phase of expansion, intended to add 100,000 barrels daily to the current 155,000 barrel per day output was budgeted at C$7.3 billion only a year ago. It is now expected to cost as much as C$11 billion, according to estimates published by Shell's project partner Western Oil Sands.

The Dutch oil giant is the leading player in an overheated market where the high price of steel, cement and a chronic shortage of skilled labour is weighing on investors. The tar-soaked sands of northern Alberta, Canada, are reckoned to hold reserves as large as Saudi Arabia, but the costs of operating in the harsh and remote environment are weighing on the industry. The extraction of bitumen from sand requires heat and steam and the oil sands companies use vast amounts of natural gas to fuel their plant.

- Looks like things have changed a bit from the enthusiastic "wildly profitable" write-ups not too long ago (see below). I have doubts about the EROEI (energy return on energy invested), the environmental impact is horrendous, and all that natural gas could surely be put to a better use. I think I will take these tar sands companies off my portfolio watch-list.

See also :

1. Canadian oil sands "wildly profitable"

(2006-07-10 13:05:49 SGT) [Energy] Permalink

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