Shell puts its Orion project on the auction block

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Royal Dutch Shell PLC is focusing its future oil sands growth on the Peace River area as it looks for a buyer for a Cold Lake, Alta.-area heavy oil project that it acquired six years ago as part of a $2.4-billion acquisition.

The Anglo-Dutch super major is selling its Orion project, which produces 5,000 barrels a day of heavy oil using steam-assisted, in-situ processes and has the capacity to expand to 10,000 barrels a day.

"The decision to divest this asset is part of our ongoing efforts to manage our overall heavy oil portfolio to focus on our core assets," company spokesman David Williams said.

"We have decided to focus our in-situ growth aspirations on our Peace River oil sands assets where we have a significant resource base."

Shell purchased the Orion project along with the Peace River acreage from BlackRock Ventures Inc. in 2006 for $2.4-billion, but later wrote down the properties by $1-billion saying they had fallen down the company's list of priorities.

Scotia Waterous, the Calgary-based investment bank that is managing the sale, said the Orion property had operating income of $15.6-million in the first quarter of 2012.

Shell is the operator and 60-per-cent owner of the Athabasca Oil Sands Project, a 255,000-barrel per day mining and upgrading operation near Fort McMurray.

But the company has high hopes for the Peace River region. It currently has capacity to produce 62,500 barrels per day from three properties.

It has filed for regulatory approval to construct a 80,000-barrel-a-day, in-situ oil sands plant at its Carmon Creek property The company says the Carmon Creek leases contain 4.9 billion barrels of bitumen.

Shell has been looking for a buy for Orion at the same time that ConocoPhillips Co. is marketing a 50-per-cent stake in its oil sands assets, including Surmont, a 25-000-barrel-per-day joint venture with Total SA.

State-owned India Oil confirmed that it is considering a bid for the Conoco assets, Reuters reported Monday.