Terry Macalister, Guardian
Canada's energy reserves: It only makes sense if the oil price is high - yet it needs lots of cheap energy
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A recent decision by Shell to pay $2.2bn (£1.18bn) for a Canadian oil company with only 22 employees and no reserves recognised by the US financial regulator has surprised some in the business.

Is it another wrong turn from a group that "mis-stated" 25% of its reserves in 2004 or a smart move that allows Shell to steal a march on competitors by taking a dominant position in "unconventional" oil production?

BlackRock Ventures owns three properties containing estimated "reserves" of 209m barrels of tar-like bitumen that saturate the sands a relatively small way below the surface. These unusual oil assets are extensive but the costs of extraction are very high at a time when Shell says it is postponing some of its projects worldwide because of the rising equipment, staffing and other costs.

If prices remain high, which Shell clearly believes they will, BlackRock could be a good investment. Ironically, though, the economics of this business are particularly vulnerable to rising energy costs. A huge amount of power is needed for the various processes to turn the sand to petrol - an issue that worries analysts as well as environmentalists concerned about the carbon-intensive nature of the operations.

There is also divergence among professionals, with Shell's major rival, BP, led by its astute chief executive, Lord Browne, steering clear of oil sands for now.

Meanwhile, the US securities & exchange commission, which regulates the New York stock listings of Shell and other major oil companies, does not recognise oil sands in its calculations of reserves. Neither do many industry experts when they are assessing the world oil order.
Full Article:


Shell looks to turn sand into oil

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