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Strategic Partners:

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

MikeCarlo
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Strategic Partners:

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  1. Alberta Oil Sands Market Update Strategic Partners: February, 2009

  2. 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

  3. 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

  4. Global Oil Market Update

  5. Global Flow of Oil BP Statistical Review of World Energy June 2008

  6. 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

  7. OPEC Member No Resource Per Capita Crude Consumption BP Statistical Review of World Energy June 2008

  8. OPEC Member No Resource Crude Consumption Since 2000 BP Statistical Review of World Energy June 2008

  9. CANADIAN CRUDE Current and Future Crude Demand 120 m bbd 5 m bbd

  10. 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

  11. 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

  12. US Production and Consumption CONSUMPTION 2007: 20, 860 k bbd Peak – 1970: 11, 297 k bbd PRODUCTION Source: US Energy Information Administration

  13. 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

  14. Canadian Oil Market Update

  15. 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

  16. 2007 Canadian Crude Production Thousands of barrels per day Total – 2, 595 k bbd Source: CAPP Canadian Crude Oil Forecast, June 2008

  17. 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

  18. Alberta - Conventional Oil & Gas Actual Forecast Source: CAPP Canadian Crude Oil Forecast, June, 2008; CAPP 2009 Outlook, Nov, 2008

  19. 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

  20. Manufacturing Crude Oil

  21. 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

  22. Manufacturing Crude Oil • This crude oil is manufactured • Mining • Extraction • Upgrading Synthetic “Sweet” Crude Oil • 2 T of oil sand = 1 barrel of oil

  23. Manufacturing Crude Oil - Mining • Surface Mining • 18% of resource • Within 75 m of surface • In Situ • 82% of resource

  24. Traditional mining techniques 18% of oil sand is recoverable through open pit mining Truck & shovel Manufacturing Crude Oil - Mining

  25. 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

  26. 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

  27. In Situ Mining Techniques • Steam Assisted Gravity Drainage (SAGD) • Cyclic Steam Stimulation (CSS) • Vapor Extraction Process (VAPEX) • Cold Flow • Toe to Heel Air Injection

  28. 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

  29. Manufacturing Crude Oil - SAGD

  30. 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

  31. 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

  32. Crude - Where does it all end up? 1 BARREL = 42 US GALLONS

  33. 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

  34. 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

  35. 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

  36. 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

  37. In-situ Bitumen Operations • Peace River / Wabasca • Shell - Cadotte Lake – 12, 500 • CNRL – Pelican – 35, 000 • Encana – Pelican – 35, 000

  38. Oil Sands Capital Projects Update

  39. 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

  40. Oil Sands Expenditure Forecast Actual Forecast Source: OSDG Forecast, Aug 08 & CAPP 2009 Outlook, Nov 08

  41. 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

  42. 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

  43. 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

  44. 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?

  45. What is required? • Instrumentation • Analyzers • Flow instruments • Pressure instruments • Level instruments • Temperature instruments

  46. What is required? • Valves • Solenoids • Safety valves • Regulating valves

  47. What is required? • Fabricated Metal • Structural steel • Heat exchangers • Piping • Orifice plates • Reactors • Tanks • Distillation columns • Pressure vessels

  48. What is required? • Electrical Equipment • Pumps • Motors • Steam turbines • Compressors

  49. What is required? • Services • Machining • Industrial automation • Energy • Environmental and control technologies • Engineering and project management • Maintenance and supply services

  50. 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

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