Royal Dutch Shell Plc offered C$7.7 billion ($6.8 billion) for the 22 percent of a Canadian venture it doesn't own to increase production from oil sands as violence curbs Nigerian supplies and fields mature in the North Sea.

Shell will offer C$40 a share for the Shell Canada Ltd. stake, The Hague-based company said today in a PR Newswire statement. That's 22 percent more than the closing price of Shell Canada's stock on the final day of trading last week.

Chief Executive Officer Jeroen van der Veer needs access to reserves to counter shut production in Nigeria because of militant attacks and aging fields in the North Sea and Gulf of Mexico. As much as C$125 billion may be spent in the next decade to almost triple output from Canada's oil sands, according to the National Energy Board. Reserves there may be second only to Saudi Arabia.

``It's a sensible deal to do at this time,'' said Jason Kenney, an oil equity analyst at ING Wholesale Bank in Edinburgh, who rates Shell ``hold.'' ``The timing is indicative that Royal Dutch Shell sees the oil price stabilizing at current levels.''

Shell Canada shares trading in Germany jumped to the equivalent of C$40.38. Shell A shares in London lost 14 pence, or 0.8 percent, to 1,752 pence.

Oil prices in New York have jumped 81 percent since 2003, boosting the appeal of projects such as oil sands. Oil today traded at $58.70 a barrel, down 25 percent since a July record.

Viable at $30

Shell Canada, Canada's fourth-largest oil company, earlier this month said oil-sands projects would remain viable should crude prices fall to $30 a barrel. Shell's oil sands project is in a region known as the Athabasca in northeastern Alberta, where oil-laden sands are strip mined and then processed with heat and solvents to extract the tar-like crude.

Shell Canada said on July 28 that costs to expand the Athabasca project may surge 75 percent to as much as C$12.8 billion. The budget for the expansion had already risen to C$7.3 billion in August 2005 from an original estimate of C$4 billion.

Royal Dutch Shell has struggled with cost overruns on other projects, including Russia's Sakhalin 2 venture, where it owns a majority. Shell last year said costs for the second phase of the venture doubled to $20 billion, prompting a review by the government of President Vladimir Putin and threats to cancel construction permits.

Cost Overruns

Shell in July said it will make fuels from Qatari natural gas in a project that may cost as much as $18 billion, triple earlier estimates.

The company is ``suffering cost overruns elsewhere in its portfolio,'' Kenney said today by telephone.

The Athabasca venture consists of a mine in northern Alberta and a processing plant that upgrades bitumen, an extra-heavy crude extracted from the tar-like deposits, into synthetic crude. The synthetic crude can be refined into gasoline, diesel and other fuels.

The company has long-term plans to produce as much as 550,000 barrels a day at the Athabasca project, Shell Canada said in July. The joint venture currently is designed to produce 155,000 barrels a day. Chevron Corp. and Western Oil Sands Inc. each own 20 percent of the project.

The buyout proposal ``is a further step in simplifying the group structure'' after the company merged its Dutch and U.K. boards last year, Shell said today. Owning 100 percent of Shell Canada will give it ``full access to the group's financing capabilities,'' the statement said.

Seeks Board Support

The buyout will allow the Shell group to gain more control over the costs of expanding its oilsands project, said ING's Kenney.

Shell said it wants support from the Shell Canada board, which will make its own valuation of the holding. ``The group reserves the right, however, not to proceed with the making of an offer if it is unable to obtain this support,'' the statement said.

The oil sands contain an estimated 175 billion barrels of recoverable oil, second only to Saudi Arabia's 259 billion barrels, according to the Canadian Association of Petroleum Producers.

Shell's announcement in January 2004 that it had misstated its reserves hurt the company's reputation with investors and led to the ouster of then-Chairman Philip Watts. The company overstated 2002 reserves by 41 percent.