Approximately 92% of our 2007 capital program in Canada was invested in these growth initiatives, with the remainder in our conventional assets.

Conventional Assets
Our Canadian conventional assets include heavy oil production in east-central Alberta and west-central Saskatchewan, and natural gas near Calgary and in southern Alberta and Saskatchewan. We operate most of our producing properties and hold almost one million net acres of undeveloped land across western Canada. These assets provide predictable production volumes and earnings while we advance the initiatives for future growth:

In 2007, we produced 36,800 boe/d before royalties (29,700 after royalties) in Canada, which was approximately 14% of our total production including Syncrude. At year end 2007, Canadian proved reserves (including bitumen and excluding Syncrude) of 386 mmboe before royalties (334 after royalties) were approximately 36% of our total proved oil and gas and Syncrude reserves.

Fiscal Terms
In Canada, we pay two types of royalties to federal and provincial governments on production from lands where they own the petroleum and natural gas rights. The first type is a gross royalty (Gross Royalty) system whereby we pay royalties ranging from 5% to 40% depending upon drilling date, production rate and product sales price. The second type of royalty (NPI) applies to our oil sands projects, which includes a 1% royalty on gross revenue prior to the recovery of capital costs. After achieving payout on these costs, the royalty converts to the greater of 1% of gross revenues or 25% of net profits.

During 2007, the Alberta government announced a new royalty framework effective January 1, 2009 that includes proposed increases to Alberta’s royalty rates, although it has yet to be passed into legislation. Under the new framework, the upper limit of the Gross Royalty system is expected to increase to 50%, depending on production rate and product sales price. The new framework will also increase the royalty rates for the NPI royalty system that applies to oil sands projects. The new royalty rates for oil sands projects will range from 1% to 9% of gross revenue for projects that are pre-payout of capital costs, and from 25% to 40% of net profit for projects that are post-payout. These royalty rates will vary depending on WTI (US$55/bbl to US$120/bbl).

In addition to royalties, some provinces impose taxes on production from lands where they do not own the mineral rights. The Saskatchewan government assesses a resource surcharge on gross Saskatchewan resource sales that are subject to crown royalties, ranging from 1.75% to 3.3%. In 2008, the rates will reduce slightly to 1.7% and 3.0%. In Alberta, we are subject to a freehold mineral tax of approximately 4%.

Profits earned in Canada from resource properties are subject to federal and provincial income taxes. In late 2007, the federal government reduced the federal corporate income tax rate from 22% in 2007 to 15% by 2012. Provincial income tax rates vary from approximately 10% to 16%.