Shell plans sale of Canadian oil sands project

Oil company Royal Dutch Shell Plc. announced recently that it intends to sell a significant unconventional oil project located in Alberta, Canada, according to Reuters.

Just six years ago, Shell purchased the Orion project, a steam-injected oil sands mine in the northeastern region of Alberta, for $2.3 billion.

Estimates suggest that the project could potentially produce as much as 10,000 barrels of oil equivalent per day, but at present the project's 22 oil wells combine for an output of no more than 5,000 barrels per day.

"They are probably getting rid of it because it's such a small part of the portfolio," Chad Friess, an analyst with UBS Securities, told Reuters.

However, with significant potential output still left to be tapped, analysts suggest that Shell could be able to offload the Orion project for potentially more than $195 million.

The Wall Street Journal reported earlier this year that the head of Shell had reemphasized the company's interest in focusing on unconventional gas exploration, though Shell also owns several other oil sands projects in the region.

PennEnergy's Research area offers analyses of Canada's oil sands industry.

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