CALGARY (CP) -- European energy giant Royal Dutch Shell PLC [NSYE:RDS] says it is looking to solidify its role as a major player in the Alberta oilsands by buying the only part of Shell Canada [TSX:SHC] it doesn't own.
''We are planning to be a major investor in Canada for the years to come,'' Peter Voser, chief financial officer for Europe's second-largest oil company, said Monday after it made a C$7.7-billion offer to Shell's minority shareholders.
''We are committed to capital investments that will enable the development of our business over the next few years, particularly in the oilsands,'' Voser said in a telephone interview with The Canadian Press from The Hague.
''We are really interested in developing the conventional oil and gas business which Shell Canada has already, but we want to establish Royal Dutch Shell in Canada as a non-conventional player,'' he said, adding that the growth is planned in both upstream production and downstream refining operations.
Royal Dutch believes that is best done through full ownership of Shell.
''It's also best done in a global way, not in a local way, because there are more opportunities we can develop by having 100% ownership,'' Voser said.
Royal Dutch is proposing to pay C$40 a share to minority shareholders. Shell Canada shares gained 29.73%, C$9.75 to C$42.55 on Toronto Stock Exchange on heavy trading of 24.3 million shares.
Royal Dutch already owns 78% of Shell Canada and says its offer is conditional on 50% of minority shareholders accepting the offer.
Clive Mather, president and CEO of Calgary-based Shell Canada, said the company's board of directors has met and appointed a special committee of independent directors to study the proposal and make a recommendation to the board.
The proposal, if accepted, gives Royal Dutch access to 55 billion barrels of oil in northern Alberta through in-situ business, which harvests reserves that are too deep for conventional mining. Over the last year, Royal Dutch has acquired significant oilsands leases in the area, while Shell Canada's purchase of BlackRock Ventures bolstered its heavy oil properties in the Peace River oilsands deposits of northwestern Alberta.
Shell has already signalled it will forge ahead on aggressive oilsands development despite soaring costs for labour and materials. In July, the company said it will expand on its Athabasca project, which has seen cost estimates spiral as high as C$12.8 billion from C$7.3 billion.
Although Royal Dutch will not rule out any further oilsands acquisitions, ''I think we have enough at the moment to develop our long-term strategy,'' said Voser.
In July, Shell Canada announced plans to increase production at the Athabasca Tar Sands project in Alberta - in which it owns a 60% stake - to 550,000 barrels per day from the current 150,000 barrels per day. Shell Canada as a whole produced around 230,000 barrels per day in 2005.
The offer, announced before markets opened Monday, increased speculation that other oilsands players are ripe for takeovers.
''We believe this transaction could be the kickoff to widespread consolidation in the Canadian oils as majors seek to position themselves with large, low-risk resources,'' said Andrew Potter with UBS Investment Research.
Potter said Suncor Energy [TSX:SU; NYSE:SU], Canadian Natural Resources [TSX:CNQ; NYSE:CNQ], Nexen Inc. [TSX:NXY; NYSE:NXY] and EnCana [TSX:ECA; NYSE:ECA] could all be considered takeover targets.
''It will create a consolidation interest in Western Canada,'' agreed Andrew Boland of Peters and Co. ''People will be speculating on who the next takeout is - particularly with regards to the oilsands.''
Oil-containing sands are more expensive to develop than traditional oil fields, but costs are falling as extraction technology improves. Canada's relative political stability in comparison with many oil-producing regions of the world gives assets there a premium.
''If you believe we're in a new oil environment of $60 oil, give or take $10, the oilsands make a lot of sense,'' said Tom Ebbern of Tristone Captial Inc., noting the interest from super majors such as France's Total SA [NYSE:TOT] as well as government-owned oil companies from China, Korea and Norway.
''If you're looking for large resources with relatively low geo-political risk and fiscal risk, I'm not surprised there's this kind of interest from the large international oil companies and (government-owned) oil companies,'' said Ebbern.
The deal could also impact pipeline proposals looking to move oilsands crude south to the United States. That move was highlighted recently by the $15-billion partnership between EnCana, Canada's largest oil company, and Houston-based Conoco-Phillips [NSYE:COP] to ship Alberta crude to U.S. refineries.
''The EnCana-Conoco transaction highlighted the potential value of partnering upstream oilsands and downstream refining,'' said analyst Andrew Kuske of UBS Investment Research.
(c) The Canadian Press 2006
