Shell Canada outlined $4 billion worth of expansions and de-bottlenecking at its Athabasca Oil Sands Project yesterday. The work will eventually bring the project to 500,000 barrels per day in production.
During the next three years, de-bottlenecking at the Muskeg River mine and Scotford upgrader will increase the bitumen production rate to between 180,000 and 200,000 barrels per day, Shell said. Athabasca is now producing at a capacity rate of 155,000 barrels per day.
The new project requires regulatory review, said spokesman Jan Rowley. Shell (TSX:SHC), along with minority partners Chevron Canada Limited and Western Oil Sands L.P. (TSX:WTO), completed the $6.2-billion Muskeg and Scotford project last year, but not before $2 billion in cost overruns, partly due to labour shortages.
The partnership is confident about the proposed expansion, despite the previous difficulties, said Rowley.
“Athabasca is operating at capacity one year after startup – that’s remarkable,” said Rowley. “We’re bullish, but we know there are going to be challenges.”
In February of this year, the partnership won regulatory approval for the $2-billion Jackpine project, a further expansion to existing operations. But at that time Neil Camarta, Shell’s senior vice-president for oilsands, said Jackpine wouldn’t go ahead until the Muskeg and Scotford expansions were complete.
The proposed de-bottlenecking expansion includes modifications to the Scotford upgrader near Edmonton to enable the processing of the heaviest product stream into lighter, higher-value crude blend components.
Expansion of Scotford would also include addition of a third hydro-conversion unit and associated utilities.
“The successful ramp-up of the Athabasca Oil Sands Project is now behind us,” said Camarta in a statement. “While we need to continue working hard on increasing reliability and reducing costs – we’re now ready to take the next steps towards our long-term growth target of over 500,000 barrels per day.”
The construction workforce on the expansions is expected to peak at 2,500 at the mine and 4,000 at the upgrader, Shell said. No estimate of local spending was released. But Rowley noted that about half of the goods and services spending on the Athabasca project was through Edmonton-area and northern Alberta suppliers.