Royalty incentives spawn Alberta oilsands plans

A number of companies are unveiling new oilsands projects in Alberta following an improved royalty deal disclosed recently by the provincial government. Suncor Inc. and Amoco Canada Petroleum Ltd., Calgary, will spend as much as $122 million (Canadian) the next 4 years in a project to test a new steam assisted recovery process.

Dec. 18, 1995

2 min read

A number of companies are unveiling new oilsands projects in Alberta following an improved royalty deal disclosed recently by the provincial government.

Suncor Inc. and Amoco Canada Petroleum Ltd., Calgary, will spend as much as $122 million (Canadian) the next 4 years in a project to test a new steam assisted recovery process.

Suncor, which operates an oilsands plant at Fort McMurray, Alta., will have 79% interest and Amoco 21% in a project at Burnt Lake where reserves are estimated at 1 billion bbl of oil. Suncor hopes to produce 2,500 b/d by yearend 1996 in the initial $22 million phase using the steam assisted gravity drainage (SAGD) technology.

Alberta Energy Co. Ltd. and Gulf Canada Resources Ltd., Calgary, also plan separate SAGD projects worth about $13 million and $30 million, respectively.

SAGD technology

The system involves drilling two parallel horizontal wells. Steam is pumped into the upper well to melt bitumen, which flows into the lower well and is pumped to the surface.

Suncor says if the first phase is successful, a $100 million second phase will increase production to 12,500 b/d by 2000.

There has been considerable research on SAGD technology at a field project funded by industry and the Alberta Oilsands Technology & Research Authority.

Under the new royalty rules, companies will pay a 1% royalty on all production. They will pay a 25% royalty on profitable barrels produced after capital investments in projects have been recovered and after earning a rate of return equal to the rates paid for long term Canadian bonds.

Ottawa is expected to make changes in a federal budget next spring to provide more favorable tax treatment for resource companies.