Shell to Build $25 Billion Oil Sands Plant

Oil giant Shell is seeking to build a new $25 billion plant to process bitumen from Alberta’s oil sands.

The “Scotford Upgrader 2 Project”, to be built near Fort Saskatchewan, Alberta, will be built in four phases with a capacity of 100,000 barrels a day each. Construction may start as early as 2009.

“It’s big, both in terms of capacity and cost”, said Mark Friesen, an analyst at FirstEnergy Capital Corp. in Calgary. “This means Shell is very bullish on its longer-term oil-sands strategy in Canada.”

It is Shell’s first major strategy announcement for Canada since the company paid C$8.7 billion in April to buy the 22 percent of Shell Canada it didn’t already own. Shell also plans to spend as much as C$12.8 billion to expand the capacity of its Athabasca Oil Sands Project by 100,000 barrels a day.

Shell’s announcement shows how serious the oil majors are about developing Alberta’s tar-like polluting oil sands that may have reserves the size of Saudi Arabia. Over $100 billion may be spent to almost triple oil-sands output to about 3 million barrels a day year by 2015.