Alberta Oilsands Sales Drop

(February 12, 2008) Sales of Alberta oilsands leases and licenses are down dramatically this year as compared with the same time the past two years. Results from last weeks sales saw only $150,000 worth of oilsand leases sold, the lowest amount generated in over two years.

To date in 2008, oilsand landsales have generated the province of Alberta only $25-million, versus $138-million the same time last year and over $846-million the same time in 2006. Peter Tertzakian of ARC Financial Corp commented "There's a lot of uncertainty about the environmental legislation that's coming at us . . . rising costs are an issue. Put all those things together and there's no question that the excitement that was there in '06 seems to have tapered off."

Carbon Tax Likely

The environmental legislation Tertzakian refers to relates to concerns oil companies have of a future federal carbon tax, which likely will be implemented long before many of the proposed oilsand projects ever produce a single barrel of oil. Canada is under intense pressure from world-powers to put a carbon tax in place that will cost producers millions for carbon dioxide emissions associated with the production of the tar-sand bitumen.

The other concern oil-sand producers have are rising costs, not only from a material / labour point of view, but ultimately the increased royalties the province of Alberta is poised to implement. The recent royalty review process the Stelmach government carried out has recommended significant increases to oil and gas royalties paid by not only conventional oil and gas producers, but primarily the oilsands. Many companies are now reviewing their proposed oilsands projects, while some have even deferred their projects while they re-examine the economics in light of the soaring capital costs and probable royalty changes.

The oilsands in northern Alberta hold close to an estimated 200 billion barrels of crude oil, and production was forecast to more than quadruple from the current 1.1-million barrels a day by the year 2020. CAPP (Canadian Association of Petroleum Producers) has now trimmed their 2020 oilsands output forecast to 3.8-million barrels a day.

Jim Sparrow is a consistent top-producing Calgary REALTOR® with Keller Williams Platinum Realty specializing in South Calgary estate and luxury homes. Visit our website at Calgary Real Estate or contact me directly at 403.703.2404

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