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Minister says Kyoto won't kill Canada oil projects

Date: 24-Jan-03
Country: CANADA

"Although Kyoto has some impact, it does not have an impact that will cause projects to be canceled," Herb Dhaliwal, minister of natural resources, told reporters.

"In fact, if you look at the announcements, projects are going ahead and I'm confident that more will be announced."

Before Canada ratified the international treaty on cutting greenhouse gas emissions late last year, the oil industry had complained that uncertainty of the costs threatened oil sands development.

Canada's oil-laden sands are seen as its oil industry's future as it moves to boost production to meet a growing thirst in North America for secure oil supplies.

But in December, Dhaliwal promised to limit the industry's costs, capping the amount it would have to pay for cutting carbon dioxide emissions at C$15 a tonne and setting a maximum "emissions intensity" target of 15 percent below business-as-usual levels for 2010.

Last week, TrueNorth Energy, a unit of U.S. industrial giant Koch Industries, shelved a C$3.5 billion ($2.2 billion) northern Alberta oil sands project, blaming rising labor and material costs, jittery capital markets and uncertainty over Kyoto.

However, Suncor Energy Inc. (SU.TO), the biggest single oil sands player, has said Kyoto's impact would not be "material" and said its spending would continue.

"We predicted right from day one that the cost would be anywhere around 12 to 14 (Canadian cents per barrel of synthetic crude produced from the oil sands). Some of the industries have put it a little higher at 20 to 27 cents a barrel," Dhaliwal said after announcing Ottawa would kick C$1.66 million into industry research on clean coal technology.

"I think that's manageable and they'll be able to deal with that in their costs."

He downplayed Kyoto's impact on TrueNorth's Fort Hills project, for which construction was slated to start this year. The firm was unable to find a partner to share the risk.

"Of course, some of these projects, they're based on many issues, not just on Kyoto," he said.

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