In both our scenarios, harder-to-extract oil – from the deep ocean, remote areas such as the Arctic, and from oil sands – is needed to fill the supply gap that opens up around 2015. Using our technology and skills to help deliver this difficult or frontier oil, and doing it in environmentally responsible ways, is central to our business strategy.
DRILLING RIG BEING TOWED TO THE
PERDIDO PROJECT SITE
Deep water
Our technology is helping to unlock reserves of oil and gas in water up to 3,000 metres deep, overcoming the challenges of extreme pressures and freezing temperatures. Shell pioneered deep-water production in the 1970s and we are determined to remain a technology and commercial leader. In 2007, we began work on two large new offshore oil projects: BC-10, off the coast of Brazil and the Perdido hub in the US Gulf of Mexico, which will be the deepest production platform in the world. We also decided to develop the Gumusut-Kakap field off the coast of Malaysia.
Arctic
Our technology and experience is also helping us to operate responsibly in the Arctic and sub-Arctic regions of Alaska, Canada, Norway and Russia where conditions can be extreme, the environment fragile and the traditional way of life of local communities needs to be respected.
We are producing oil at Salym in Western Siberia with joint-venture partner Sibir Energy. Construction of the world’s largest integrated oil and gas project on Russia’s Sakhalin Island is nearing completion (see Sakhalin II). In early 2008, we were the highest bidder for 275 exploration leases in the Chukchi Sea off the coast of Alaska. We hope to resume exploring in Alaska’s Beaufort Sea before the end of 2008 (see Exploring for oil off Alaska's northern coast).
Oil sands
Oil sands are a mixture of heavy oil and sand. If near the surface, they are dug up in open-pit mines and the oil separated out using warm water. If deeper underground, the oil is made to flow to the surface through conventional wells, often by heating the mixture “in situ” to make it flow.
Canada’s oil sands are thought to be the world’s second-largest source of oil after Saudi Arabia’s. Extracting and refining them into transport fuel requires a lot of water and more energy than conventional oil. That means more CO2 emissions on a life-cycle basis for minable sands and more still for in-situ production.
The Athabasca Oil Sands Project (Shell share 60%) is our first minable oil sands operation. The capacity of the current operation is 155,000 barrels of oil a day, with construction under way to expand by another 100,000 barrels a day.
The current operation’s advanced design has reduced the amount of energy used during processing compared with other oil sands operations. And the operation has a greenhouse gas management plan developed with the help of Shell Canada’s independent Climate Change Advisory Panel that includes an aggressive voluntary target to reduce CO2 emissions by 50% by 2010. While the panel was disbanded with the full integration of Shell Canada’s operations into our global business in 2007, its extensive input will continue to underpin the operation’s work to meet its 2010 target. For example, Quest, a large-scale CO2 capture and storage project is under consideration. It would store more than 1 million tonnes of CO2 per year from Athabasca’s Scotford Upgrader. In early 2008, a critical assessment of the sustainability of oil sands projects by the Pembina Institute and WWF, acknowledged the environmental leadership of our current operation.
We also have a number of small in-situ oil sands operations in Canada’s Cold Lake and Peace River areas, and are considering expanding several of these.
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