Alberta premier urges oil sands firms to negotiate

By Scott Haggett

CALGARY, Alberta, Nov 2 (Reuters) - Alberta Premier Ed Stelmach said on Friday that oil sands producers Syncrude Canada Ltd and Suncor Energy Inc (SU.TO) should agree to renegotiate royalty rates with the province to comply with changes to Alberta's royalty scheme announced last week.

Though the two firms' contracts do not expire until the end of 2015, Stelmach said he expects both to agree to new, higher royalty terms.

"I'm sure, at the end of the day, those companies will realize it is in the best interests of their shareholders ... to sit down with the government and look at the two agreements and discuss how we can reach a solution," Stelmach told reporters.

He said Alberta had agreed in the past to reopen the contracts setting out royalty rates when oil prices were low.

Syncrude and Suncor are the No.1 and No. 2 oil sands producers.

Under the current royalty terms, the province takes 1 percent from oil sands producers until project costs are recouped, and 25 percent of profits after payout.

The new terms, set to begin at the start of 2009, would see rates rise to between 1 and 9 percent while project costs are being returned, and to between 25 and 40 percent afterward, depending on oil prices.

Marcel Coutu, chief executive of Canadian Oil Sands Trust (COS_u.TO), the largest shareholder in the Syncrude joint venture, said last week he expected the government to "honor the contractual commitment it made to the Syncrude owners."

($1=$0.93 Canadian)