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Encana Corporation Message Board

  • bluecheese4u bluecheese4u Oct 9, 2007 1:46 PM Flag

    Canadian Natural would kill $7B in projects if royalties hiked

    Canadian Natural would kill $7B in projects if royalties hiked

    Canadian Natural to kill projects if Alberta royalties hiked

    Claudia Cattaneo, Financial Post
    Published: Tuesday, October 09, 2007

    CALGARY -- Alberta heavyweight Canadian Natural Resources Ltd. said it may cancel three in-situ oil sands projects worth $7-billion and reduce natural gas drilling by 65% next year if Alberta implements proposals to significantly increase its take from the oil and gas sector.

    The senior company also said it will likely cancel expansions of its Horizon oilsands project, now under development, beyond Phase 3.

    The company was reacting to the recommendations of a panel appointed by Premier Ed Stelmach to review oil and gas royalties and taxes charged to the province's dominant energy sector.

    The panel claimed in a report made public last month that Albertans are not getting their fair share from development of the province's resources and urged the government to increase its take by 20% or $2 -billion a year.

    Mr. Stelmach, whose popularity appears to be increasing for standing up to big oil, has promised to decide whether to adopt the recommendations this month.

    Canadian Natural is the latest senior company to condemn the proposals, which it says are "flawed" because they are based on "incorrect information."

    In recent days, ConocoPhillips has warned that a proposed super-royalty on oilsands production would dramatically erode the value of many oilsands projects and lead to their cancellation or postponement. EnCana Corp. said it would move $1-billion in investment from Alberta, Talisman Energy Inc. said it would reduce spending by $500-million, Petro-Canada said the proposals would make thermal oilsands projects uneconomic.

    "The panel sought to increase royalties by approximately 20%, however, Canadian Natural's analysis and interpretation of the panel's recommendations indicate an overall increase of 50%, far exceeding the panel's estimate," the company said in a statement.

    The recommendations, which come on the heels of other changes in taxation, environmental and greenhouse gas regulation and general global cost inflation, "pose the risk of turning the oil and natural gas industry in Alberta into a 'shrinking' or 'blowdown model'," Canadian Natural said.

    The company said it would have no choice but to reduce activity, resulting in an estimated 3,900 fewer direct jobs and 16,000 fewer indirect jobs.

    Rather than spending money on uneconomic projects, Canadian Natural will use free cash flow to pay down its debt and return cash to shareholders, the company said.

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