1. INTRODUCTION Royal Dutch/Shell officially opened an oil extraction facility on June 19, 2003 in Alberta, Canada, where an estimated 180 billion barrels lie beneath the oil sands. With the plant producing less than 200,000 barrels a day at $12 apiece, the company faces growing competitive pressures and a growing number of uncertainties. At this point, the strategic decision must be made whether to expand capacity in the oil sands and, if so, when. This study identifies the key uncertainties and situational analysis tools that Royal Dutch/Shell will need to use to answer the question of capacity expansion (see Figure 1). Uncertainties are classified into four levels, from level one to level four; the situation of true ambiguity (Courtney, Kirkland & Viguerie, 1997). “Residual uncertainties” that cannot be accurately predicted even with in-depth analysis are a cause for concern REFERENCE/excluded.Figure 1: Table showing the main uncertainties faced by Royal Dutch/Shell, respective uncertainty levels and situational analysis tools. 2. UNCERTAINTIES FACED BY ROYAL DUTCH/SHELL2.1 The price of oil and investor interest in AlbertaThe price of oil and investor interest can have a significant impact on the success or failure of oil production ventures in Alberta. With the cost of production remaining relatively stable, it is primarily the price of oil that will determine the profitability of the oil industry in Alberta and investor interest. In this situation, the price of oil and the interests of investors are intrinsically linked. Proponents of utilizing this vast and largely untapped resource have speculated that oil prices will remain stable when gauging future viability and potential investor interest in Alberta's industry. However, assumptions like this can be disastrous if without solid foundations. Key factors that could influence the price of oil in the future: Saudi Arabia's vast reserves and low costs give the Saudis the ability to manipulate prices and have in the past instigated Collapse in prices scares investors away from marginal projects such as the oil sands project. Political and social unrest in the Middle East potentially jeopardizes oil and pushes prices higher. This would encourage more investment in less volatile regions like Alberta. Global oil demand; Developing countries like China have the potential to stimulate demand for oil and put inflationary pressure on prices as supply exceeds demand. Oil prices and investor confidence represent an uncertainty level of two. There are a few distinct outcomes that define the future, one of which will occur.