Patch International (fka PTCHF)

[rossi]

New 'green' oilsands rules costly post 2012
Posted: March 11, 2008, 8:40 AM by David Pett
Energy

Oilsands projects beyond 2012 will likely face higher costs, given new rules announced by the federal government regarding its Green legislation.

UBS analyst Andrew Potter said in a note to clients that the key change to the legislation is that projects on-stream after 2012 will face mandated CO2 Sequestration & Storage (CSS). Mr. Potter added that projects on-stream before 2012 appear unaffected by the recent changes.

CSS would reduce or eliminate investor concerns with oil sands pollution, the analyst wrote. "However, the cost is potentially high,"

For example, he said a mandated 25% intensity reduction accomplished through CSS at a cost of $65 per tonne would imply an incremental $1.50 per barrel in cost. He added any mandated CSS beyond this level would result in significant net asset value (NAV) reduction.

He said investors will likely react negatively to the news but told clients that stock valuations generally reflect no value for projects coming on-stream later than 2009.

"With oil prices remaining well above street forecasts we are still more likely to see oil sands NAV estimates increase substantially over the next year even when incorporating these added costs."