Shell may process oil sands crude at U.S. refineries

CALGARY, Alberta (Reuters) - Royal Dutch Shell Plc (RDSa.L: Quote) may process tar-like crude from its Canadian oil sands holdings at some of its U.S. refineries, rather than at a proposed C$27-billion ($26-billion) plant in Alberta, the head of the oil major's Canadian unit said on Tuesday.

Shell is still evaluating options and the timing for future phases of its Athabasca oil sands project, which now produces 155,000 barrels a day.

The company and its partners have proposed boosting oil sands output to 770,000 barrels a day over the next several years, and two years ago announced plans for an upgrading plant to be built in four 100,000-barrel-a-day stages.

"There's a range of options being looked at. One potential outcome is that all that upgrading's done in Alberta," David Collyer, Shell's country chair for Canada, told reporters.

"Another option, I suppose at the other extreme, is that none of it happens in Alberta and all of it happens in the U.S."

Shell may also decide on a combination of the two for upgrading, in which the extra-heavy crude from the oil sands is processed into lighter, synthetic oil that can be used by refineries to make gasoline and other petroleum products.

Shell and its partners, Chevron Corp (CVX.N: Quote) and Marathon Oil Corp (MRO.N: Quote), upgrade the crude from the northern Alberta mining project at the Scotford plant near Edmonton.

A C$12.8 billion expansion of that facility will boost output by 100,000 barrels a day around the end of this decade.

U.S. refineries, such as the 158,000-barrel-a-day plant at Martinez, California, and 332,000-bpd Deer Park, Texas, facility would have to be retooled to run the Canadian bitumen, Collyer said.