Wednesday » July 18 » 2007
Shell to review its Canadian projects, investments
Billions Of Dollars; Ontario Refinery, Role In Gas Pipeline Under Microscope
Jon Harding
Financial Post
Wednesday, July 18, 2007
CALGARY - Billions worth of investments in Canada that were in the queue before Royal Dutch Shell PLC took Shell Canada Ltd. private will be re-examined, Shell Canada's new president said yesterday.
Adrian Loader, who is overseeing the integration of the Canadian subsidiary into Shell's various global business units, said the Anglo-Dutch parent is reviewing Shell Canada's large projects, which include plans for a new refinery near Sarnia, Ont., and its role in the proposed $16.2-billion Mackenzie Gas Project.
"We now have to step back and say, from a strategic perspective, what opportunities are there avail-able," Mr. Loader told the media. "Should we move faster with some? Should we look at others in a different way? And that process will take longer because these are strategic decisions."
As recently as March, Canada's third-largest oil producer and refiner said it was eyeing the small community of Sombra, Ont., south of petrochemical-hub Sarnia, as the potential home for a plant to process 150,000 barrels to 250,000 barrels a day of heavy oil from the oilsands into refined products. A final investment decision was not due until 2010, however.
The $16.2-billion pipeline to deliver natural gas to Alberta from the Mackenzie Delta in the Northwest Territories, where Shell owns a gas field, is in the final stages of regulatory hearings. The Imperial Oil Ltd.-headed joint-venture announced a doubling of costs this year and Imperial has yet to negotiate fiscal terms for the project with Ottawa.
Mr. Loader said Shell Canada's aggressive expansion plans in the Alberta oilsands are not being reassessed.
Royal Dutch spent $8.7-billion in April buying the 22% of Shell Canada it didn't previously own.
Mr. Loader said the parent already owned a large portion of Shell Canada before the buyout and so it was aware of pending investment decisions.
"I think all plans that Shell Canada had would have to be looked at," said Jan Rowley, a Shell spokesperson. "They'd be looked at in the context that these types of capital investments are now being considered by a new board of directors, which strategically has global objectives and not just Canadian."
A Canadian analyst who covered Shell Canada, and who requested anonymity, said the Ontario refinery plan would likely fall first, if any investment is scrapped.
"They already have three million barrels a day of refining capacity in the United States," he said. "Integrating their oilsands operation in Canada with their U.S. refineries was a big reason for the buyout, and given the costs of building in Canada, it just makes sense for them to do expansions in the U.S. ahead of building a new refinery in Canada."
Mr. Loader echoed comments made to the Financial Post several weeks ago that Royal Dutch remains "committed" to investing in Canada.
In the oilsands, Shell and its partners in the Athabasca Oil Sands Project are moving ahead with a $12.8-billion expansion that will add another 100,000 barrels a day worth of production from the project's mine north of Fort McMurray and upgrader near Edmonton.
Shell Canada has 5,600 employees across the country, with more than 2,000 based in Calgary, and Mr. Loader would not comment on potential downsizing once the integration process is complete.
He said the parent will appoint a country chair to Calgary by year-end, when Mr. Loader will step down as president, and he added that a Canadian will be assigned to the post.
The country chairman is responsible for cross-business activities, reputation, stakeholder engagement, relationship management and recruitment.
Mr. Loader said Calgary remains a critical decision-making hub for oilsands, which now falls under Shell's downstream business unit, based in London.
Calgary will also be home to a new unconventional oil group responsible for in-situ oil activities in Canada and the United States, headed by Frits Eulderink, formerly with Shell's Houston base.
Shell's North American onshore business, which is mostly gas, will also be housed in Calgary.
Brian Straub, already in Calgary, will continue to run Shell's large oilsands unit.
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