Shell in Canadian oil sands deal

Alberta's oil sands hold vast reserves

Oil giant Royal Dutch Shell is spending $2.2bn (£1.2bn) on Canadian oil sands company BlackRock as it looks to boost its reserves.

BlackRock produces 12-14,000 barrels of crude oil per day from tar-like sand deposits in Alberta, Canada.

Alberta is estimated to have deposits of about 175 billion barrels of oil - only Saudi Arabia has more.

The reserves are more expensive to get at, but rising oil prices mean they are now a commercially-viable resource.

Replacing reserves

Releasing its first-quarter results last week, Shell said it was looking at more unconventional sources of hydrocarbon such as oil sands and gas-to-liquid.

It warned that it was unlikely to meet its goal of replacing all the reserves it pumps from the ground in the five years to 2008.

Shell already has a big oil sands operation in Canada

The company replaced 67% of its proved reserves last year, well below the 95% at BP and the 112% at Exxon Mobil.

BlackRock has proved reserves of 142 million barrels and plans to increase output to 40,000 barrels per day by 2009.

The 22-person firm is backing the takeover because it lacks the funds or resources to fully develop the reserves.

Shell already produces about 150,000 barrels of oil per day from its existing Alberta oil sands operation and said the BlackRock assets would make an "excellent fit".