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The Canadian Oil Sands Woodrow Wilson Forum

The Canadian Oil Sands Woodrow Wilson Forum. October 17, 2005. Canada’s Oil and Gas Industry in the North American Energy Economy. Canada is the world’s 3rd largest natural gas producer Canada is the world’s 9th largest crude oil producer

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The Canadian Oil Sands Woodrow Wilson Forum

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  1. The Canadian Oil SandsWoodrow Wilson Forum October 17, 2005

  2. Canada’s Oil and Gas Industryin the North American Energy Economy • Canada is the world’s 3rd largest natural gas producer • Canada is the world’s 9th largest crude oil producer • and moving up the list quickly with oil sands production increasing • Industry Overview • 500,000 jobs • C$35 Billion capital investment • C$20 Billion in payments to federal and provincial governments • #1 private sector investor in Canada • Canada is the largest supplier of energy to the United States #1 #1

  3. U.S. Natural Gas Imports from Canada Canada’s exports dropped in 2003 due to a 1.7 bcf/day reduction in US demand 16.5% 16.8% 15.6% 16.2% 16.9%* Source: U.S. DOE/EIA Canadian Share of US Consumption * Estimated full-year.

  4. U.S. Imports of Crude Oil and Petroleum Products by Country of Origin Petroleum Products Crude Oil #1 Canada, is the largest (#1) supplier of crude oil and of crude oil and petroleum products to the US. Source: EIA, 2004

  5. Industry Capital Spending Cdn $billions The oil & gas industry will invest over $39 billion in capital in Canada in 2006 Northern Canada ‘03 ‘04 ’05F ’06F $0.3 $0.3 $0.5 $0.5 International ‘03 ‘04 ‘05F ’06F $5.5 $10.4 $5.0 $6.8 Oil Sands ‘03 ‘04 ‘05F ’06F $5.0 $6.2 $8.5 $8.8 WCSB ‘03 ‘04 ‘05F ’06F $21.4 $24.5 $27.0 $29.0 East Coast Offshore ‘03 ‘04 ‘05F ‘$06F $2.2 $1.9 $1.0 $0.7 Note: Spending in Canada excludes spending associated with mergers & acquisitions International are acquisitions net of divestures.

  6. Canadian Crude Oil Production by Region

  7. Canadian Natural Gas Production by Region

  8. Canadian Oil Sands History • 1875 Canada Geological Survey registers oil sands • 1915 shipments to Edmonton for paving • 1938 Abasand commercial production - 2,500 barrels destroyed by fire in 1941 - not rebuilt • 1950’s separation technology centrifugal force • Strong interest results in dozens of exploration leases sold by the government • 1964 Esso starts Cold Lake; GCOS construction • 1967 first GCOS (Suncor) production - 32,000 b/d • 1978 first Syncrude production - 109,000 b/d • 1993 truck and shovel technology adopted • key to revitalizing the development outlook • 2004 oil sands production reaches 1 million barrels per day

  9. Includes 175 billion barrels of oil sands reserves Global Crude Oil Reserves by Country Canada, with 175 billion barrels in Oil Sands reserves, ranks 2nd only to Saudi Arabia in global oil reserves Source: Oil & Gas Journal Dec. 2004

  10. Athabasca Ft. McMurray Peace River Cold Lake Edmonton Calgary LEGEND Denotes SURFACE MINEABLE AREA Oil Sands Projects in Three Deposits Oil sands production now exceeds one million barrels per day US$28 billion built from 1996-2004 Close to US$36 billion in new oil sands projects expected in 2005-2010 Encana Synenco Value Creation (CNRL) Bristol (CNRL) Centennial (Conoco) Petro-Canada Imperial Shell CNRL Syncrude EM Encana Deer Creek Shell Husky Suncor Syncrude Imperial Petro-Canada Cdn Coastal (Devon) Suncor Petro- Cda Exxon Mobil Encana Fort McMurray

  11. 3,000 Husky 2,500 Nexen/Opti Conoco 2,000 Petro-Canada CNRL Thousand Barrels Per Day 1,500 Encana Albian Imperial/Exxon 1,000 Syncrude Suncor 500 All Projects 0 2003 2005 2007 2009 2011 2013 2015 Total Oil Sands Project Production: 2003-2015

  12. SAGD Process Oil Production Steam Injection Steam Chamber Steam Injection Oil Production Reservoir Source: Petro-Canada Oil Sands Production Technologies Mining & Upgrading Cyclic Steam Process Recoverable resource = 65 billion barrels Source: Syncrude Source: Imperial Oil In-situ Recoverable resource = 250 billion barrels Source: Shell Canada

  13. Oil Sands Supply Costs by Recovery Typeincludes capital, operating, royalty, taxes and return Light Oil Heavy Oil * Surface mining, extraction & upgrading Source: NEB - based on C$2003 converted @ US$0.80/C$

  14. Actual Forecast Canadian Oil ProductionConventional, Oil Sands and Offshore Oil Sands Growth: 2004 = 1 million b/d 2015 = 2.7 million b/d Offshore Oil Sands WCSB Conventional Oil Source: CAPP

  15. Environmental Stewardship • Air • Monitoring programs • Reducing emissions • Water • Reduce, recycle and reuse • More efficient, 90+% recycle • Land • Reclamation and remediation • Directional drilling from single site to reduce impact

  16. Canada’s Oil SandsChallenges to achieve this potential • Continuing to Lower Costs • Alternatives to natural gas for fuel – free it up for other markets • Workforce and Infrastructure • Ensuring adequate workforces – trades, technical, professional • Roads, Housing and Municipal services • Access to Markets – Pipelines/Refineries • Need new pipelines • Decisions needed now for pipelines in 4-5 years • Need new refineries, expansions and modifications • For many conventional refineries, oil sands is either heavier (bitumen blend) or lighter (upgraded crude) than their current feedstock

  17. Natural Gas Use in Oil Sands DecliningNatural Gas Consumed per Barrel of Oil Sands Production Source: Historical data from EUB

  18. Canadian and U.S. Crude Oil Pipeline Alternatives ENBRIDGE GATEWAY Fort McMurray Asia California Anacortes Growing oil sands production will require new pipeline capacity to existing and expanded markets Edmonton Hardisty Burnaby Anacortes Montreal Superior TCPL KEYSTONE Portland Casper Salt Lake City San Francisco Sarnia Midwest Chicago California Patoka Potential Pipeline Expansion Routes Wood River Spearhead Los Angeles Cushing Extensions to New Markets USGC Houston St. James

  19. SEC Bitumen Reserves Disclosurefor Financial Reporting Calculated Field Price, % of WTI --- 2004 Average Bitumen Price at Cold Lake = 50% of WTI Month Data Source : Purvin & Gertz

  20. Topics for Discussion? • How can Canada and the US overcome the new constraints to oil sands growth? – workforce, infrastructure, rising costs • How and where to convert oil sands into petroleum products? • What can be done from the US to help with the workforce shortages? • Where will oil sands production be consumed? • If in North America, where? • What about offshore markets? • What needs to change in North America as the oil slate shifts to heavier oil? • Can US gasification technology free up natural gas for other North American markets? • How does this fit in a world of CO2 reductions?

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