Oilsands Quest Inc.

ALBERTA — Syncrude, operator of Canada's second-oldest oil sands producer north of Fort McMurray, reached agreement with the Province of Alberta on its pre-existing option to convert to a bitumen-based royalty. Beginning Jan. 1, 2009, Syncrude will pay royalties based on bitumen product, less its associated operating and capital costs. The move away from a royalty calculated on fully upgraded synthetic crude oil brings Syncrude in line with other oil sands operations.

As part of this conversion, the province will recapture previous royalty deductible upgrader growth capital (UGC) expenses of about $5 billion related to the value associated with the expansion of the upgrading facility. This UGC is downstream of the bitumen production facilities and no longer associated with the royalty base. The royalty deductions previously received by Syncrude's owners on the UGC will be collected by the Alberta government over a 25-year period, effectively providing the province with an additional $1.25 billion plus interest in Crown royalties.

Syncrude says the new royalty terms offer fiscal certainty until Jan. 1, 2016, on matters such as bitumen valuation methodology, no prospect of additional Alberta royalties, and various royalty-in-kind barrels. The agreement also confirms that the company's current leases are all considered as a single mining project for royalty purposes.

Syncrude is a joint venture of several energy companies. Learn more at www.Syncrude.ca.

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