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Alberta Oil Sands Market Update Strategic Partners: February, 2009 Presentation Overview Ontario Oil Sands Initiative Global Oil Market Update Canadian Oil Market Update Manufacturing Crude Oil Oil Sands Capital Projects Update 5 Things to Help You Win in the Oil Sands

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slide1

Alberta Oil Sands Market Update

Strategic Partners:

February, 2009

presentation overview
Presentation Overview
  • Ontario Oil Sands Initiative
  • Global Oil Market Update
  • Canadian Oil Market Update
  • Manufacturing Crude Oil
  • Oil Sands Capital Projects Update
  • 5 Things to Help You Win in the Oil Sands
ontario oil sands initiative
Ontario Oil Sands Initiative
  • Canadian Manufacturers & Exporters (CME)
  • Ontario Government
    • Ministry of Economic Development (MED)
    • Ministry of Small Business & Consumer Services (MSBCS)
    • Ministry of Northern Development & Mining (MNDM)
  • Maximize the economic benefit for Ontario’s Manufacturers
global flow of oil
Global Flow of Oil

BP Statistical Review of World Energy June 2008

major producers and consumers

OPEC Member

No Resource

Daily Production

Thousands of barrels

Daily Consumption

Major Producers and Consumers

MAJOR PRODUCERS

MAJOR CONSUMERS

BP Statistical Review of World Energy June 2008

per capita crude consumption

OPEC Member

No Resource

Per Capita Crude Consumption

BP Statistical Review of World Energy June 2008

crude consumption since 2000

OPEC Member

No Resource

Crude Consumption Since 2000

BP Statistical Review of World Energy June 2008

crude oil price history
Crude Oil Price History

$ 145.16 USD July 14, 2008

$ 29.89 December 1, 2003

$ 30.28 December 23, 2008

WTI; Source US EIA, February, 2009

current crude market conditions
Current Crude Market Conditions
  • February 09: ~ $ 40 per barrel
    • Global credit markets crisis
    • US & OECD are in recession
    • Potential global recession
  • Production – Winter 2009
    • ~ 85 million bbd
      • OPEC – 30 million bbd
        • Decreased production by 1.5 million bbd on Nov. 1
        • Production capacity ~ 35.7 million bbd -- ~ 39.7 million bbd by 2010
      • Rest of the world - 55 mb/d
us production and consumption
US Production and Consumption

CONSUMPTION

2007: 20, 860 k bbd

Peak – 1970: 11, 297 k bbd

PRODUCTION

Source: US Energy Information Administration

global crude oil outlook
Global Crude Oil Outlook
  • SHORT TERM
    • Demand growth will be weak
    • Price of oil will continue to be undervalued
  • LONG TERM
    • Conventional oil reserves are decreasing
    • The price of oil will rebound and continue to climb
    • US policy for secure oil will ensure demand for Canadian crude
    • Non-conventional production will continue to grow
canadian oil production forecast
Canadian Oil Production Forecast

4.5 – 5 million bbd

Actual Forecast

2.7 million bbd

Eastern Canada

Western Canada

Source: CAPP Canadian Crude Oil Forecast, June, 2008

2007 canadian crude production
2007 Canadian Crude Production

Thousands of barrels per day

Total – 2, 595 k bbd

Source: CAPP Canadian Crude Oil Forecast, June 2008

western canadian oil production
Western Canadian Oil Production

Actual Forecast

Infrastructure planning

4.5 M bbd

In-Situ

2.1 M bbd

Mining

Conventional Heavy

Conventional Light

Pentanes

Source: CAPP Canadian Crude Oil Forecast, June, 2008

alberta conventional oil gas
Alberta - Conventional Oil & Gas

Actual Forecast

Source: CAPP Canadian Crude Oil Forecast, June, 2008; CAPP 2009 Outlook, Nov, 2008

alberta non conventional oil
2nd largest proven reserve in the world

Alberta oil sand reserves

Athabasca

Peace River

Cold lake

141, 000 km2 of land

20% of the entire province

Larger than the state of Florida

180 billion barrels of proven crude bitumen

315 billion barrels ultimately recoverable

1.7 trillion barrels in place (P10)

Alberta - Non-Conventional Oil
oil sands what is it
Oil Sands – What is it?
  • Mixture of bitumen and sand
  • Bitumen - C2000 polymer
    • Thick, heavy tar
      • Won’t change state (boil)
      • Flows like vegetable shortening
    • Filled with “sour” impurities
      • NOx
      • SOx
manufacturing crude oil22
Manufacturing Crude Oil
  • This crude oil is manufactured
    • Mining
    • Extraction
    • Upgrading

Synthetic “Sweet” Crude Oil

  • 2 T of oil sand = 1 barrel of oil
manufacturing crude oil mining
Manufacturing Crude Oil - Mining
  • Surface Mining
    • 18% of resource
    • Within 75 m of surface
  • In Situ
    • 82% of resource
manufacturing crude oil mining24
Traditional mining techniques

18% of oil sand is recoverable through open pit mining

Truck & shovel

Manufacturing Crude Oil - Mining
manufacturing crude oil mining25
Truck - Caterpillar 797

100+ in service

500 metric tons when empty

400 metric tons per load

Tires replaced once per year

Reused as cattle feeders

Manufacturing Crude Oil - Mining

Shovel – 100 metric ton capacity

manufacturing crude oil in situ
Manufacturing Crude Oil – in situ
  • 80% of the reserve must be recovered using in situ mining techniques
    • Latin for “in place”
  • Bitumen is removed while most of the sand is left behind
    • Partial separation occurs during this process
    • Bitumen/Sand slurry is hydrotransported to the extraction plant
in situ mining techniques
In Situ Mining Techniques
  • Steam Assisted Gravity Drainage (SAGD)
  • Cyclic Steam Stimulation (CSS)
  • Vapor Extraction Process (VAPEX)
  • Cold Flow
  • Toe to Heel Air Injection
manufacturing crude oil sagd
Manufacturing Crude Oil - SAGD
  • Steam Assisted Gravity Drainage
    • in situ technology that uses horizontal drilling
    • Steam is injected into the oil sand
      • Produced from natural gas
      • Viscosity of the bitumen is decreased
    • Hot bitumen flows down toward producing wells & is pumped to surface
  • Expensive, water & energy intensive
manufacturing crude oil extraction
Bitumen/sand/water slurry

Dumped into tanks with hot water

Separated into 3 layers

Top - Bitumen froth

Impure

Boundary layer

Further treated

Bottom – Sand

Bitumen froth is diluted with naphtha and sent through centrifuges to remove remaining minerals and water

Manufacturing Crude Oil – Extraction
manufacturing crude oil upgrading
Naptha is removed and recycled

Bitumen is broken into smaller chain lengths

Coker

Cracker (LC Finer)

Distillation & Hydrogenation

The sour crude is ‘sweetened’ by replacing NOx & SOx with H+ atoms in hydrotreaters

Distillate streams are blended to make the final product

Manufacturing Crude Oil - Upgrading
crude where does it all end up
Crude - Where does it all end up?

1 BARREL = 42 US GALLONS

tailings ponds
By-product of the oil sand processing

Millions of m3 of sandy, toxic waste water

High salt and acid concentrations

6 bbl tailings : 1 bbl bitumen

Tailings Ponds
integrated sco operations
Integrated SCO Operations
  • Mining and upgrading at same location in Athabasca
    • Suncor (1967) – 260, 000 bbd
    • Syncrude (1978) – 350, 000 bbd
      • World’s largest open pit mine
  • Mining and upgrading in different locations
    • Albian Sands & Scotford - (2003) – 155, 000 bbd
      • Joint Venture – Major holder – Shell Canada
        • Oil Sands is surface mined and extracted in Athabasca region
        • Bitumen is diluted and transported to Scotford upgrading refinery outside Edmonton
sco production
SCO Production
  • Athabasca Upgraders
    • CNRL - Horizon P1 – 135, 000 bbd
      • Commissioning scheduled Q4 08
    • Opti Canada – Long Lake – 72, 000 bbd
      • Commissioning scheduled Q4 08
in situ bitumen operations
In-situ Bitumen Operations
  • Athabasca Region
    • MEG Energy - Christina Lake – 3, 000 bbd
    • Nexen - Long Lake – 72, 000 bbd
    • Suncor - Firebag – 73, 000 bbd
    • Total E&P – Joslyn – 12, 000 bbd
    • Petrobank – Whitesands – 1, 000 bbd
  • Cold Lake Region
    • BR Oil Sands (Shell) - Orion – 10, 000 bbd
    • CNRL – 88, 000 bbd
    • Cenovus Energy - Foster Creek – 30, 000 bbd
    • Imperial Oil – 140, 000 bbd
in situ bitumen operations37
In-situ Bitumen Operations
  • Peace River / Wabasca
    • Shell - Cadotte Lake – 12, 500
    • CNRL – Pelican – 35, 000
    • Encana – Pelican – 35, 000
alberta oil sands capital investment
Alberta Oil Sands - Capital Investment
  • $ 317 Billion expected from 2008 to 2030
    • $ 80 Billion in next 4 years
  • More than $ 3 trillion in economic activity for Canada
    • Employment
    • New investment opportunities
    • Additional public sector revenue
  • $ 1 invested in oil sands = $ 6 Economic activity for Canada
oil sands expenditure forecast
Oil Sands Expenditure Forecast

Actual Forecast

Source: OSDG Forecast, Aug 08 & CAPP 2009 Outlook, Nov 08

slide41

Combined oil sands expenditures: historical and estimated1

Cap ex: $15.3 Billion

Op ex: $18.2 Billion

Actual Construction Capital Expenditures

Original Estimated Construction Capital Expenditures (Jan 08)

Actual Operating Expenditures

Original Estimated Operating Expenditures (Jan 08)

Adjusted Estimated Construction Capital Expenditures (Dec 08)

Adjusted Estimated Operating Expenditures (Dec 08)

12008 construction capital expenditure estimate for all Alberta oil sands projects, including related pipeline, upgrader and co-generation projects – original estimates (Jan 2008) and adjusted (December 2008) per public announcements.

Source: Construction Capital: CAPP and Nichols Applied Management, Operating Expenditure – Nichols Study

45

oil sands capital projects
Oil Sands Capital Projects
  • Percentage of total capital spent on equipment
    • Mining projects
      • Equipment represents ~ 30% of capital costs
    • In Situ projects
      • Equipment represents ~ 20% of capital costs
    • Upgraders
      • Equipment represents ~ 70% of capital costs
industrial heartland upgraders
Industrial Heartland Upgraders
  • Shell Scotford Upgrader – 155, 000 bbd
  • BA Energy Heartland Upgrader – Delayed
  • North West Upgrading – Under Construction
  • Petro-Canada Fort Hills Upgrader – Delayed
  • StatOil Hydro – Delayed
  • Syneco Energy Northern Lights – Delayed
  • Total E&P – Delayed
  • Value Creation – Delayed
capital spending in the short term
Syncrude

Suncor

Imperial Oil

Total E&P

Husky

Nexan

CNRL

Baytex Energy Trust

Koch Industries

North Peace Energy

Opti Canada Inc.

Royal Dutch Shell

Capital spending in the short term?
what is required
What is required?
  • Instrumentation
    • Analyzers
    • Flow instruments
    • Pressure instruments
    • Level instruments
    • Temperature instruments
what is required46
What is required?
  • Valves
    • Solenoids
    • Safety valves
    • Regulating valves
what is required47
What is required?
  • Fabricated Metal
    • Structural steel
    • Heat exchangers
    • Piping
    • Orifice plates
    • Reactors
    • Tanks
    • Distillation columns
    • Pressure vessels
what is required48
What is required?
  • Electrical Equipment
    • Pumps
    • Motors
    • Steam turbines
    • Compressors
what is required49
What is required?
  • Services
    • Machining
    • Industrial automation
    • Energy
    • Environmental and control technologies
    • Engineering and project management
    • Maintenance and supply services
oil sands development factors
Oil Sands Development Factors

Operating Costs

The Environment

Labour and Capital Costs

Oil Transport Infrastructure

Crude Oil Market

Technology & Innovation

Investment Climate

Global Energy Demand

1 become an oil sands expert
1. Become an Oil Sands Expert
  • Oil Sands Review Magazine
  • Alberta Oil Magazine
  • The Energy News
  • Canadian Association of Petroleum Producers The Oil Sands Developers Group
  • Alberta-Canada.com
  • icosmo.ca
  • Local Alberta News Sources
2 develop an effective market strategy
2. Develop an Effective Market Strategy
  • Understand:
    • The opportunity for your business
    • Where you fit
    • Your customer
    • Your competition
    • How to win contracts
3 develop a strong marketing plan
3. Develop a Strong Marketing Plan
  • A professional, suite of active, targeted tools will give you an edge over your competition:
    • Oil Sands Webpage
    • All-line brochure
    • Oil sands brochure
    • Tradeshow tools
    • Buyer Kit
    • Communications tools
4 active sales execution wins
4. Active Sales Execution Wins
  • Attend & Exhibit at Trade Shows
    • National Buyer Seller Forum
    • Oil Sands Tradeshow & Conference
    • Global Petroleum Show
    • Go Expo
  • Take Regular Business Trips
  • Utilize Representatives
5 you don t need to go it alone
5. You Don’t Need to go it Alone
  • MED Oil Sands Team & Directory
  • MSBCS Advisors & Resources
  • Economic Development Organizations
  • CME
  • Form Consortia
  • Learn from others