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Oilsands companies see new royalty system as “fair”

Fort McMurray, AB, Canada / MIX 103.7
Oilsands companies see new royalty system as "fair"

If you could choose one word to describe how oilsands feel about their new royalty system, it would be “rejoiced”.

That’s according to Andrew Botterill with Deloitte’s Resource Evaluation and Advisory group.

The new system will only affect new wells while previous wells will stay under the old system. Besides this, prices will stay the relatively the same as the last 10 years.

“The new royalty system is going to allow them to actually be a little more competitive in some areas especially in a low price scenario,” said Botterill.

For the last five months, oilsands companies were expecting the worse when it came to the new system.

Botterill tells Mix News the plan will in the end help the oilsands moving forward.

“It’s provided some clarity, they think it’s pretty fair system and allows them to start making informed decisions going forward on how they’re going to spend capital.”

Speaking of capital, companies will need to pay a five per cent royalty cost for new wells until capital costs are paid off. After paying the costs a higher rate will come into effect.

Botterill says the biggest change will be incentives as oilsands are now being encouraged to adopt new technology while rewarding the most efficient drillers.

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