Shell moves mountains to take oil from the land of the Cree

Under the cold soil of the province of Alberta in western Canada lie oil reserves as huge as those of Saudi Arabia. This astounding fact has led the industry giant Shell to launch a massive operation to recover that oil. It's taken four years, and one of the biggest construction projects in the world, to prepare for the launch. And it's an undertaking that has been fraught with environmental and social concerns, raising difficult questions about the green and socially aware image Shell has been trying to project in recent years.

The Alberta reserves are held in what are called oil sands, mixed with individual grains of fine sand in a sticky black mess that is the consistency of Plasticine and smells of tar. But it's the method of extracting the oil that worries environmentalists.

"You just add hot water and stir," says Neil Camarta, the genial senior vice-president of Shell Canada in charge of the oil sands project. He makes it sound like making a cup of coffee. But it's a process that uses relatively large amounts of energy and water compared to conventional oil wells, and it's also a more expensive method of extraction.

In energy terms, fuel is needed to run both the huge shovels that dig up the oil sands and the giant trucks – the largest in the world – that carry away hundreds of tonnes of sand. And that's before you start adding hot water and stirring on an industrial scale, a process from which emerges black gloopy bitumen, as thick as molasses. That's diluted and taken away along hundreds of miles of pipeline for further energy-intensive processing at an enormous new plant, the Scotford Upgrader. The result is a light crude oil, ready for refining into petrol.

Gail McCrimon, a policy analyst with the Pembina Institute, a Canadian environmental think-tank, explains: "Because the oil is bound up with sands and clay, you have to put in a lot of energy to separate them. You have to use chemicals and you get waste streams when you've finished, as well as air emissions and pollution of water."

The oil sands project will increase Shell Canada's emissions of the greenhouse gases blamed for global warming by almost 50 per cent, yet the company has pledged to cut emissions from the project itself by half over the next decade. Shell Canada's president Tim Faithfull argues this proves the company is making the project "robust against challenges". But it still means that, overall, Shell's output of harmful emissions will have been boosted.

And then there's the liquid waste left behind from all that adding of hot water, which gathers in what are called tailings ponds. Not to mention the devastation of the bleak but beautiful landscape, a habitat of caribou and grizzly bears. Shell Canada is working on the waste problem, and on long-term reclamation projects to make the land usable again, drawing lessons from other companies that have mined the Alberta oil sands.

The project marks a new departure for Shell Canada, and it has pulled out all the stops to persuade, mollify and cajole objectors, inviting people such as Ms McCrimon on to a raft of committees, which negotiate compromises to allow the project to go ahead. "There is common ground," says Ms McCrimon. "They want not only to do the right thing, but to be seen to do the right thing."

The lengths Shell is going to in dealing with objections have included installing a bird-scarer to deter birds from alighting on the waste-filled tailings ponds. But this is no scarecrow. It's a portable caravan full of electronics which activates a robot hawk to flap its wings and screech if any bird comes near.

Objections to the oil sands project have not all been on environmental grounds. Also of concern is the impact on the Cree and Chipewyan tribes, the indigenous people of this part of Canada. This is a sensitive issue for Shell as a global company, raising the spectre of the controversy caused by its involvement with the Ogoni people of Nigeria, which led to the tarnishing of its reputation. Violent protests by the Ogoni against Shell's operations forced the company to abandon its oil wells on their land. In 1995 the late General Sani Abacha, the Nigerian dictator, reacted to the rebellion by hanging nine Ogoni leaders, including the writer Ken Saro-Wiwa.

So the Canadian arm of Shell has to tread carefully in its dealings with the Cree and Chipewyan, who like to be known as people of the First Nations. They used to hunt and fish on the land now leased by the Canadian government to the oil sands project. You might expect them to object loudly to the extraction process. They don't.

Jim Boucher is the president of the Athabasca Tribal Council. Dressed in a leather jacket and designer spectacles, he speaks wearily of how his people lost their traditional livelihoods as fur trappers after protests by animal rights campaigners in the 1980s. So when Shell and other extraction companies appeared, offering lucrative contracts for trucking services at the oil sands mine, plus funding for social and educational projects, the die was cast.

"We were faced with a bleak future," says Mr Boucher. "We saw a need to establish positive working relationships with the companies." First Nations people now sit on 32 separate committees connected with the oil sands.

However, Mr Boucher warns that if the development moves too fast and is too disruptive, support could still be withdrawn. For now, though, he concedes that the relationship between Shell and the First Nations is one of mutual respect, thanks to their common goal of boosting the local economy.

Shell's oil sands project actually started producing bitumen last December. Soon after, a small fire at the mine disrupted production, but the company maintains it's still on track to produce its target of 155,000 barrels per day by later this year. Already it has plans to expand further, which are causing some concern locally. But it's a tribute to the executives at Shell Canada that the project has got as far as the start-up phase, given all the possible objections.

One last question hangs over the operation: will it make money? After all, extracting oil in this way is far more expensive than getting it out of an oil well. It costs around $7 to recover one barrel, compared with just $2 in Saudi Arabia, but with Brent crude now selling at more than $31 a barrel, that leaves a healthy profit margin.

It looks as if Shell Canada has thought of everything. "They had some learning to do," Ms McCrimon says. "They're reasonably progressive. I think they've gotten better as they've gone along." Certainly, the way the company has tackled external resistance to the project is proof that, these days, global giants must spend generously to persuade communities to support their operations, wherever there are real social and environmental issues at stake.

This article is based on the BBC World Service series 'Inside the Global Giants', to be broadcast on Monday at 15.30 GMT and repeated on Tuesday at 10.30.