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21

Shells Delays Planned Oil Sand Investment in Canada

In the latest sign of companies adjusting their plans to reflect the global economic downturn and the fall in the price of oil, Royal Dutch Shell has delayed a planned investment in Canadian oil sands

In the latest sign of companies adjusting their plans to reflect the global economic downturn and the fall in the price of oil, Royal Dutch Shell has delayed a planned investment in Canada's oil sands.

Shell had planned to make a decision next year on the second phase of the expansion of its Athabasca oil sands project, but Jeroen van der Veer, the chief executive, said the company would "wait for costs to cool down . . . before any new investment decision is made".

Mr van der Veer was speaking as Shell reported a 31 per cent rise in under-lying net income to $8.04bn. The result was ahead of expectations but less buoyant than those of its rivals BP and ExxonMobil.

Shell is one of the western oil companies that is most strongly committed to "unconventional" resources such as the oil sands, and has set a target of deriving 15 per cent of its production from those sources by 2015.

Projects in the oil sands of Alberta, which are fiercely criticised by environmentalists, are among the world's highest-cost oil developments.

In recent weeks, several companies operating there, including Suncor, PetroCanada, Nexen and Opti Canada, have delayed investment plans.

Construction of the first phase of Shell's Athabasca expansion is already under way, and will go ahead as planned, adding 100,000 barrels per day of additional capacity, of which Shell has 60 per cent.

Phase two is intended to add a further 100,000 barrels per day.

Shell announced on Wednesday that Peter Voser, chief financial officer, would take over from Mr van der Veer on July 1 next year.

The results gave a sense of the challenge he will face in delivering growth at a turbulent time for the world economy, financial markets and the oil price.

Shell's oil and gas production fell by 6.6 per cent in the quarter, mostly caused by hurricanes in the US and planned maintenance in the North Sea.

Mr Voser said Shell stuck by its "long-term aspiration" that in the next decade production would grow by 2-3 per cent a year as a result of Shell's investment in long-lived projects such as the oil sands.

Mr van der Veer called the results, which benefited from the sharp rise in the oil price, "satisfactory".

The group was "watching the world economic situation closely" but was "robust across a wide range of energy prices", he added.

Shell promised "competitive and progressive dividends", echoing BP's recognition on Tuesday that investors are concerned about the income from their shares.

Shell declared a third-quarter dividend of 40 cents a share, a rise of 11 per cent over the same quarter last year.

Author: Jo Amey