March 11 (Bloomberg) -- Oil-sands producers will ask the Canadian government to delay new greenhouse-gas rules to give scientists time to figure out how to halt their emissions.

``We'll be talking to the government about their timeline for this,'' Pierre Alvarez, president of the Canadian Association of Petroleum Producers, said yesterday in a telephone interview. ``This is going to take a bunch of work.''

Oil-mining operations in western Canada's tar-soaked swamps and valleys that begin operations after 2012 will have to store carbon emissions rather than releasing them into the atmosphere, Canadian Environment Minister John Baird said yesterday. Exxon Mobil Corp., BP Plc and ConocoPhillips are among the members of Alvarez's trade group.

Canada's oil sands hold about 177 billion barrels of oil that can be recovered using current technology, equivalent to all the reserves of Iran and Libya combined. Oil prices more than tripled in the past five years as worldwide demand, led by China and India, expanded faster than supplies.

Before the new carbon rules were announced, oil and gas companies had already decided to cut spending in Canada by 3.1 percent this year to $27.7 billion, according to a team of Citigroup Global Markets Inc. analysts led by Geoff Kieburtz. That compares with estimated increases of 6.5 percent for the U.S. and 12 percent outside North America.

Investment Impact

Alvarez declined to say whether the carbon rules will discourage investment in new oil-sands projects. Baird, the environment minister, said the regulations will be completed next year.

Carbon dioxide, or CO2, is a so-called greenhouse gas linked to climate change. U.S. oil futures rose above $100 a barrel for the first time in January, making high-cost developments like oil sands more attractive, and touched an all- time high today at $109.72.

``If oil stays anywhere near its present levels, the CO2 costs probably would not make it uneconomic,'' said Gene Pisasale, who helps oversee about $25 billion in investments, including about 1.8 million ConocoPhillips shares, at PNC Wealth Management in Baltimore.

Companies including Royal Dutch Shell Plc, Saudi Aramco and Marathon Oil Corp. have $15 billion in refinery expansions planned from Michigan to Texas to process more crude from Canada's oil sands. Canadian supplies are needed to replace dwindling output from Texas, Oklahoma, Louisiana and Mexico, John Hofmeister, Shell's U.S. chairman, said in September.

Carbon Capture

Total SA's C$15 billion plan to pump 250,000 barrels a day from the oil sands by 2020 will incorporate carbon-capture equipment, Michael Borrell, president of the Paris-based company's Canadian unit, said yesterday.

``Part of our engineering is to look at the alternatives to reducing energy intensities and for capturing carbon dioxide if that's one of the things that we need to try to do,'' Borrell said in a meeting with reporters at an energy conference in Edmonton, Alberta.

Pius Rolheiser, a Calgary-based spokesman for Imperial Oil Ltd., said the company hasn't had an opportunity to analyze whether the new carbon rules will deter or delay investment. He referred inquiries to the Association of Petroleum Producers.

For Exxon Mobil, which owns about 70 percent of Imperial, Canadian oil sands and heavy crude account for around 20 percent of the company's 50 billion barrels of undeveloped fields worldwide, according to a presentation Senior Vice President Mark Albers delivered to analysts last week in New York.

Imperial plans to begin output at its C$8 billion ($8.05 billion) Kearl oil-sands project in Alberta in late 2010 or later, Rolheiser said. Kearl is expected to produce 300,000 barrels a day for at least 30 years.

To contact the reporter on this story: Joe Carroll in Chicago at jcarroll8@bloomberg.net.

Last Updated: March 11, 2008 12:06 EDT