Shell Canada Oil-Sands Cost Target Jumps to C$7.3 Bln [View All]

Shell Canada Oil-Sands Cost Target Jumps to C$7.3 Bln (Update2)

(Bloomberg) -- Shell Canada Ltd., the fourth-largest Canadian oil company, said the cost to expand its Alberta oil- sands development will almost double to C$7.3 billion ($6 billion) as prices of steel, cement and equipment rise.

Design changes that will make additional expansions easier also are inflating the cost, spokeswoman Janet Annesley said today in a telephone interview. Calgary-based Shell Canada and its project partners, Chevron Corp. and Western Oil Sands Inc., in April said the expansion would add 100,000 barrels a day of mining and refining capacity at a cost of at least C$4 billion.

Rising oil prices, which today touched a record $64.27 a barrel in U.S. futures trading, are spurring more investment in Alberta's oil sands, which contain the world's largest petroleum deposits outside Saudi Arabia. Such companies as Syncrude Canada Ltd., the world's largest oil-sands miner, have raised spending targets as competition for labor and materials increases.

``Costs are just getting mind-boggling,'' said Glen MacNeill, who manages C$800 million in assets, including 105,000 Shell Canada shares, at Sentry Select Capital Corp. in Toronto. ``It's making me a lot more cautious. Investors just can't go in and buy the models that the companies are giving you because they don't work.''

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