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The gloom cast by the Kyoto Protocol over the oil sands has lifted, analysts said yesterday, as the high-emissions megaprojects received their second major vote of confidence this week.

As Suncor Energy Inc. pegged Kyoto-related costs at 20 to 27 cents a barrel of oil and dismissed it as immaterial, analysts said fears the climate change treaty could derail investment are dissipating.

"It does demonstrate that the Kyoto scare is behind the industry, and it's almost back to business as usual," said Wilf Gobert, an analyst with Peters & Co. in Calgary.

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Suncor, in its fourth-quarter guidance released yesterday, committed to invest $711-million to develop and maintain its oil sands.

That followed an announcement Monday from French oil giant TotalFinaElf SA that, undeterred by Kyoto concerns, it has bought a 43.5-per-cent stake in a $1-billion oil sands project.

Analysts said the two incidents signify a rapid improvement in the momentum of oil sands projects, which had taken a decided downturn in recent months as companies such as TrueNorth Energy LP, Canadian Natural Resources Ltd. and Husky Energy Inc. announced delays or cutbacks to investments, blaming Kyoto.

"You'll see people starting to put the capital back in the business once the costs are better defined and more limited," said Amir Arif, an analyst with Friedman Billings Ramsay in Arlington, Va., who had highlighted to U.S. investors some of the Kyoto-related concerns about Canadian oil sands operators.

But Pierre Alvarez, head of the Canadian Association of Petroleum Producers, which has lobbied Ottawa intensely to mitigate the potential impact of Kyoto on the oil and gas industry, cautioned that it's too soon to dismiss the Kyoto threat entirely.

"It's a start, but there is a lot of work to be done," he said.

Tom Ebbern, an analyst with TriStone Capital in Calgary, said recent commitments from the federal government -- including capping the cost of carbon credits to offset emissions at $15 a tonne of carbon dioxide -- have made a big difference.

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"It's not nearly as ominous as it was previously," he said.

Mr. Gobert said the clearing of Kyoto clouds has already injected some energy into the stocks of oil sands operators, although he cautioned recent rises probably have more to do with higher oil prices.

"There was some selling pressure as a result of Kyoto," he said.

"Now the problem is, do you want to go long based on $31 or $32 oil?"

Despite stiff opposition, Ottawa ratified the Kyoto treaty last month, committing the country to reducing its greenhouse gas emissions to 6 per cent below 1990 levels on average in the 2008-to-2012 period.

Mr. Gobert said Suncor's upbeat guidance was probably aimed at bolstering market confidence.

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"Obviously, there's a message to the stock market to forget Kyoto as a threat."

That doesn't mean all oil sands projects will get the green light, TriStone's Mr. Ebbern cautioned. He said that with the lifting of the Kyoto threat, operators will now focus on the other major issues facing the multibillion-dollar ventures, such as cost and timing.

Negotiations with Ottawa over how the Kyoto burden is to be allocated have also just started. While Ottawa committed Canada's major industrial operations to greenhouse gas reductions of 55 megatonnes by 2010, it has not decided what proportion will be borne by each industry. The biggest emitters are found among the oil and gas, power, chemicals, manufacturing, and pulp and paper industries.

Suncor estimated total capital spending for the year at $1.05-billion, up from $850-million last year. Of the $340-million not allocated toward oil sands investments, $145-million will be spent on marketing and refining investments, $160-million will go to natural gas development, and $35-million will be targeted at technology upgrades and renewable energy.

"Our capital spending plan illustrates that Suncor remains keenly focused on well-managed and predictable oil sands growth," said Rick George, the company's president and chief executive officer.

For the fourth quarter of 2002, the company estimated production would be 225,000 barrels of oil a day, in line with previous guidance. Costs are expected to rise to $12.50 to $13 a barrel, up from its estimate last October of $12 to $12.50, a jump it attributed to higher natural gas costs.

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