Shell Canada Ltd aims to proceed with expanding its oil sands operation despite ballooning costs that may make it one of the country’s most expensive construction projects, it said.

Shell Canada, which owns 60 per cent of the Athabasca Oil Sands Project in Alberta, said it had determined that a project to boost output by 100,000 barrels per day could cost C$10 billion-C$12.8 billion ($8.8 billion-$11.3 billion).
The new estimate - which at its high end is slightly less than the 2005 gross domestic product of Jamaica - is up from last year’s C$7 billion figure. The existing operation was completed in 2003 at a cost of C$5.7 billion.
The jump is driven mostly by a squeeze on labour and materials in an oil sands construction boom that has been fueled by surging crude prices, Shell Canada Chief executive Clive Mather said. Almost all oil sands developers have complained of major cost pressures.
In addition, the company has made some design changes that will lower operating costs once production starts, he said.
But returns are still favourable with oil prices high, he said. They have been above $60 per barrel for most of this year.
“There could be relief in terms of some projects not going ahead. There could be a relief in terms of a step change in crude prices,” Mather said. “But right now we have to imagine that we’re going to live with this kind of environment, at least for this expansion work.”