THE LONDON TIMES: High crude price props up this costly process: “The Athabasca sands could restore Shell’s reserves, so it must be galling that not a single one of Shell’s six billion barrels in Northern Alberta features in Shell’s statement of reserves. The US Securities and Exchange Commission refuses to consider the deposits as oil reserves…” (ShellNews.net) 5 March 05
By March 05, 2005
Carl Mortished
WILL Alberta’s oil sands boom come back to earth with a bump? The answer lies with Opec and its success in keeping high the price of crude oil which reached a new peak this week.
John Snow, America’s Treasury Secretary, yesterday described the $55 oil price as “way, way too high” but for Shell, Suncor and ExxonMobil, it was building a comfortable buffer in their business plans.
Clive Mather, chairman of Shell Canada, put it simply: “If you thought the oil price would fall to $18 per barrel, you would not invest. But it gives you huge upside when the price is high.”
Alberta helps with low taxes: a 1 per cent royalty and full investment recovery, and profits taxed at 25 per cent.
Shell has been pruning away at cash operating costs which fell steadily last year from C$22 to C$19.
Add to that a C$5 depreciation charge on the capital invested and you have an all-in cost of US$20 per barrel, an overhead that less than five years ago would be project-defeating.
Over the long term, Shell wants to get its operating cost down to $12 to $14, a task its chairman describes as “a thousand small things, not a silver bullet”.
Meanwhile, there are few oil companies today that are budgeting their projects on anything less than a $25 barrel and the escalating cost of crude is making Shell feel that its extraordinary investment in oil sands is clever, satisfying for a company whose reputation has been damaged over the past year.
The Athabasca sands could restore Shell’s reserves, so it must be galling that not a single one of Shell’s six billion barrels in Northern Alberta features in Shell’s statement of reserves. The US Securities and Exchange Commission refuses to consider the deposits as oil reserves, a strange logic given there is no uncertainty about the bitumen deposits and great uncertainty about the oil that can be recovered from a well.