Norway purchases Canadian oil sands company

April 30, 2007 Statoil ASA (Statoil), a Norwegian state-owned oil company, entered into an agreement Friday to purchase all outstanding common shares of the privately held Canadian firm, North American Oil Sands Corporation (NAOSC). The deal is reported to be worth CAD2.2 billion in an all-cash transaction.

NAOSC is an Alberta-based oil company founded in 2001. It manages 1,110 square kilometres of oil sands leases located in northern Alberta. It is estimated that the NOASC oil sands hold approximately 2.2 billion barrels of oil reserves. The company is planning to develop an extraction project and an upgrading facility. When the project is completed, NAOSC expects it to produce over 200,000 barrels of bitumen per day. The upgrading facility would then process the bitumen into synthetic crude oil.

The NAOSC board of directors has approved the bid from Statoil unanimously, and has recommended that its shareholders accept the offer. One of the largest shareholders of NAOSC currently is Paramount Resources Ltd. (TSX:POU). Paramount announced Friday that it had entered into a lock-up agreement with Statoil, which calls for Paramount to sell its 30.9% interest in NAOSC to Statoil ASA for a cash deal worth approximately $682 million.

"We are impressed by the performance and competence held by the employees in NAOSC,” said Helge Lund, chief executive of Statoil. “Combined with Statoil’s experience and commitment to prudent operations, we are well-positioned to develop the resources in a sustainable manner, creating value for Statoil and its shareholders."

Statoil suggests that the development plans for the NAOSC oil sands includes an application of Steam Assisted Gravity Drainage (SAGD) technology, which, according to the company, leaves a smaller environmental footprint than strip mining. Statoil admits, however, that heavy oil production, such as is required in the oil sands, is "energy intensive and challenging in an environmental perspective." The company said it intends to capture the carbon dioxide (CO2) emissions from its oil sands production and store it underground.

Under new environmental regulations announced Thursday by Canadian Environment Minister John Baird, companies that can't meet new intensity targets for CO2 emission reductions will be able to purchase offset credits or contribute to a technology fund, at an initial cost of $15 per tonne of emissions. New plants would have three years before they were obligated to begin reducing their emissions.

However, Julia Langer, director of the World Wildlife Fund's global threats program, told the Globe and Mail that the initial exemptions for new plants and the technology fund contributions would undermine the government's new environmental plan. "This is a regulatory plan that is geared to business as usual for the tar sands sector," said Langer.

The Statoil-NAOSC transaction is expected to close by the end of the second quarter of 2007.