Canada’s Oil Sands

June 2008

Industry Capital Spending Cdn $billions

Northern Canada

‘05 `06 `07E `08F

$0.5 $0.4 $0.5 $0.5

Oil Sands

‘05 `06 `07E `08F

$10 $14 $17 $20

WCSB

‘05 `06 07E `08F $33 $36 $31 $29

East Coast Offshore

‘05 `06 `07 `08F

$2 $2 $1 $1

Note: Spending in Canada excludes spending associated with mergers & acquisitions

Oil & Gas Investment Spending:2006: $53 billion (actual)2007: $50 billion (estimate)2008: $50 billion (forecast)

Oil Sands – Resistance to flow

Source: Imperial Oil

0

1

10

100

1,000

10,000

100,000

1,000,000

Vis

cosit

y @

Room

Tem

pera

ture

(cP

)

Water

Olive

Oil

Pancake

Syrup

Honey

Ketchup

Cold Lake

Bitumen

Peanut

Butter

Atha-

basca

Bitumen

Light

Crude

Oil

Global Crude Oil Reserves by Country

Source: Oil & Gas Journal Dec. 2007

21

3641

60

8792

102115

138

179

264

0

50

100

150

200

250

300

Saudi

Arabia

Canada Iran Iraq Kuwait Abu Dhabi Venezuela Russia Libya Nigeria United

States

bil

lio

n b

arr

els

Canada, with 173 billion barrels in oil sands reserves, ranks 2nd only to Saudi Arabia in global oil reserves

Oil Sands Production Technologies

Mining – oil sands less than 200 feet deep

Source: Canadian Centre for Energy Information

In situ – oil sands more than 200 feet deep Cyclic Steam Process

Steam Assisted Gravity Drainage

(SAGD)

Oil Sands – Mining and In Situ

Oil Sands Reserves Oil Sands Land Use

Mining

20%

In Situ

80%

In Situ

97.5%

Mining 2.5%

Oil Sands Projects in Three Deposits

PeaceRiver

Athabasca

ColdLake

Edmonton

Calgary

Ft. McMurray

In Situ Projects

Mining Projects

Muskeg River

Albian

Christina Lake

Cold LakeWolf Lake/Primrose

Hilda Lake

Cold Lake

Tucker Lake

Peace River

Peace

River Fort

McMurray

Fort Hills

Horizon

Joslyn Creek

Syncrude

SuncorMacKay River

Firebag

Hangingstone

Long Lake

Surmont

Foster

Creek

Jackfish

Kearl

Lake

Jackpine

Sunrise

Northern

Lights

Whitesands

Seal

(Blackrock)

Athabasca – Mining

Operator Project Existing or initial bpd

Potential bpd

Albian/Shell Muskeg/Jackpine 155,000 570,000

Suncor Main Operations 300,000 550,000

Syncrude Main Operations 300,000 600,000

CNRL Horizon (2008) 135,000 577,000

Imperial Kearl (2010) 100,000 300,000

Petro-Canada Fort Hills (2011) 165,000 190,000

Total E&P Joslyn Mine (2013) 50,000 200,000

Athabasca – In Situ Thermal

ConocoPhillips Surmont 25,000 100,000

Encana/ConocoPhillips Christina/Foster 50,000 400,000

JACOS Hangingstone (pilot) 10,000 60,000

OPTI/Nexen Long Lake/South 72,000 428,000

Petro-Canada MacKay River 33,000 73,000

Suncor Firebag 95,000 367,000

Total E&P Joslyn Creek 12,000 42,000

Devon Jackfish (2008) 35,000 70,000

Husky/BP Sunrise (2012) 50,000 200,000

Statoil Kai Kos Dehseh -2008 10,000 240,000

Cold Lake – In Situ Thermal

Shell Hilda Lake 10,000 20,000

CNRL Primrose/Wolf Lake 88,000 150,000

Imperial Cold Lake 140,000 170,000

Husky Tucker 30,000 40,000

Peace River – In Situ Thermal

Shell Peace River 12,000 100,000

Oil Sands Capital Costs IncreasesGlobal Cost Increases Not Just Local

0

20,000

40,000

60,000

80,000

100,000

120,000

Suncor -

Millennium

Albian Syncrude -

Aurora 2 &

UE 1*

Nexen-

OPTI

CNRL -

Horizon

Shell -

Muskeg &

Scotford

PCA/UTS

Fort Hills

Cap

ital

$ p

er

bb

l/d

ay

(up

gra

ded

)

ProductionStart Date 2001 2003 2006 2008 2008 20112010

*Syncrude includes base plant quality improvements and power

Capital Cost of 100,000 bbl/day project$3.3 billion $10-11 billion

Construction Workforce Outlook – Nov. 2007

Source: Construction Owners Association of Alberta (COAA) Nov 2007

Northwest

Syncrude

Suncor

CNRL

Albian

Fort Hills

PetroCanada

Nexen/OPTI

Imperial Oil

Total

Northwest

Environmental Challenges and Progress

• Environmental issues are at the top of minds and agendas

• The oil sands hears the challenges and needs to continue to demonstrate progress

• Key issues include:

Air – greenhouse gas emissions

Fresh (potable) water use

Land use and reclamation

Environmental Stewardship - Air

• Continuing to reduce GHG emissions

oil sands energy intensity reduced by 45% since 1990

Increasing energy efficiency

Starting CO2 capture, sequestration and EOR

• Oil Sands accounts for:

4% of GHG emissions in Canada

0.1% of global energy related GHG

United States22%

China20%

Europe17%

Eurasia9%

Japan4%

India4%

Canada2%

Australia1%

Other21%

Global Energy Related Emissions By Country

United States

China

Europe

Eurasia

Japan

India

Canada

Australia

Other

Oil & Gas ex OS

19%Oil Sands

4%

Electricity and Heat

Generation18%

Other Industry14%

Transportation27%

Agriculture

8%

Buildings6%

Solvent

& Waste4%

Canada's GHG Emissions By Sector Oil & Gas ex OS

Oil Sands

Electricity and Heat Generation

Other Industry

Transportation

Agriculture

Buildings

Solvent & Waste

Canada’s Greenhouse Gas PoliciesProvincial and Federal

• Alberta Government Legislation passed

Effective July 1, 2007

Requires immediate 12% reduction in emission intensity for large emitters

Compliance:• Physical Reductions

• $15/tonne CO2 levy into Technology Fund

• Offsets

• BC Government Carbon tax on end use

consumption

• Federal Government Takes effect in 2010

Reductions of 18% in emission intensity and 2% per year thereafter

Coal power and oil sands have higher targets

• Natural gas, then carbon capture equivalency

Full Cycle GHG Emissions by Crude Type

Source: T.J. McCann & Associates

Environmental Stewardship - Land

• Different impacts for mining and in situ

Mining requires longer time

• Ongoing and end of mine

In situ similar to conventional drilling – smaller surface footprint than mining

• Reclamation and remediation mandated

Reclamation plan must be filed and approved by regulator

Funding of liability required

Environmental Stewardship - Water

• Reduce, recycle and reuse

• Source of water by priority:

Recycle (85-90%+)

Non-potable (saline, brackish)

Fresh or groundwater

• Mining – Athabasca River

Currently use 1% of Athabasca river flow – could grow to 2%

Water management plan in place for low flow periods

• In situ

Existing have high recycle and moving to non-potable sources

New are drawing solely from non-potable or “saline” aquifers

CNRL Primrose/Wolf Lake Insitu Project

Oil Sands Production TechnologiesAlternatives to Natural Gas

THAITM (Toe-to-Heel Air Injection)Petrobank Whitesands Project

OrCrude Process - Nexen/OPTI Longlake

Multiphase Superfine Atomized Residue - Quadrise Suncor 3rd Upgrader - Coke Gasification

OXYGEN WASTE WATER PETROLEUM COKE

SYNTHETIC

GAS

(CO, H2, CO2)

GASIFIER

CO2 CAPTURE &

SEQUESTER

HYDROGEN

HYDROTREATORSBOILERS

STEAM & ELECTRICITY

FUEL

Oil Sands & WCSB Conventional Oil Production2008 Moderate Growth Case

0

1,000

2,000

3,000

4,000

5,000

6,000

2002 2004 2006 2008 2010 2012 2014 2016 2018 2020

Th

ou

sa

nd

Ba

rre

ls P

er

Da

y

Actual Forecast

Conventional Oil

Oil Sands In

Production and Under

Construction

Oil Sands Future

Potential

2007 Forecast

Oil Sands Production2007 = 1.2 million b/d2012 = 2.0 million b/d2017 = 3.0 million b/d2020 = 3.5 million b/d

PADD V

PADD IIIPADD I

PADD IV

PADD II

PADD: Petroleum Administration for Defense District

CAPP Refiner Survey and Market Outlook

[ Jan 2008 Total Refining Capacity – All Crude ]

2015 Potential Demand for W. Can crude

2007 Actual Demand for W. Can crude

0

500

1,000

1,500

2,000

2,500

3,000

3,500

2007 2008 2009 2010 2011 2012 2013 2014 2015

Light Sweet Synthetic

Heavy

Conventional Medium Sour

Conventional Light Sweet

71

??

63

59

2,378

Thousand Barrels per Day

[2,646]

??

122 1,098

[3,622]

[7,990]

[1,627]

[598]

286

280

720

578

371

247

[613]

[385]

CAPP Pipeline Expansions and Proposals

1 Kinder Morgan TMX 1A Expansion

2 Kinder Morgan TMX 1B Expansion

3 TransCanada Keystone

4 TransCanada Keystone Cushing Ext.

5A Enbridge AB Clipper

5B Enbridge Line 4 Extension

6 Minnesota Pipeline Expansion

7A Enbridge Southern Access Expansion

7B Enbridge Southern Access Ext.

8 Enbridge Line 5 Expansion

9 Enbridge Line 6B Expansion

10 Enbridge Line 6C Expansion

11 Enbridge Line 9 Re-reversal

12 Portland Pipeline Reversal

13 Sunoco – to Philadelphia

14 Enbridge Pioneer (Opt 2)

15 Enbridge Eastern PADD II

16 Enbridge Pioneer (Opt 1)

17 ExxonMobil Mustang Expansion

18 Enbridge Spearhead Expansion (N/S)

19 Sunoco - to US Gulf Coast

20 ExxonMobil/Enbridge Texas Access

21 ExxonMobil/Enbridge Pegasus Exp.

22 Centurion Pipeline Reversal

23 TEPPCO/KM Chinook-Maple Leaf

24 BP No. 1

25 TransCanada Keystone XL

26 Altex Energy

27 Kinder Morgan TMX2 Expansion

28 Kinder Morgan TMX3 Expansion

29 TransCanada Alberta-California

30 Enbridge Northern Gateway

31 Kinder Morgan Northern Leg

32 Enbridge Gateway Condensate Import

33 Enbridge Southern Lights

34 Capline/Chicap

35 Enbridge N. Dakota

36 Enbridge Light Sour Line

Oil Sands – Challenges/Solutions

• Demonstrate environmentally responsible development

Greenhouse gas emissions – reduction, capture and storage

Water – minimize fresh water use, increase recycle and non-potable water use

Land – demonstrate reclamation for mining and tailings ponds

• Manage costs – capital, operating and labour

• Adequate Infrastructure – public and industry

• Expand existing and open new markets

Pipelines, value added upgrading, refineries

• Innovate and implement new technology

• Communicate - listen and respond

Actions speak louder than words