PTAC CO2 Conference: November 8, 2010

1. Carbon Capture & Storage A Canadian Clean Energy Opportunity PTAC CO2 Conference: November 8, 2010

2. ICO2N: Accelerating CCS in Alberta for 2015 2

3. ICO2N: Forefront of CCS in Canada • Wide range of industry participants • 16 members including 5 based in Canada, and 11 based internationally • Oilsands, Coal power generators, gas processors, and pipeline operators • CCS policy leadership in Canada • Source of unbiased thoughtful CCS expertise for 5 years • Leader in CCS policy input to governments: • CCS economics - Long term liability • Ownership of reduction credits - CCS Quantification • Risk valuation methodology • Grounded analysis • ICO2N’s integrated CCS economic model employed by both governments • Leading key industry projects and analyses: • Capture technology assessment - Alberta CO2 Purity Study • Safety of surface operations - Integration of RFP Projects 3

4. Evolution of Canadian CCS Dialogue Today • Focusing on CCS Deployment • Support for 4 Alberta Demo Projects for 2015: • Funding of ~$3B (Federal/Provincial) for initial demo’s • Specific technical studies (safety, purity) • Policy framing • Help develop regulatory process in Alberta • Scope a broadly defined risk assessment to address safety and stakeholder concerns • Leveraging initial deployment towards large-scale infrastructure Early years: 2005 - 2009 • Getting CCS on the Agenda • Internal analysis of CCS deployment • Technology • Economics • Policy • Basic CCS education and advocacy • Advocacy on the scale of the potential reduction • Size of the initial financial gap facing first-mover projects • CCS Learnings and Next Phases • Adopt critical learnings from existing projects around the world • Continued advocacy on broadened incentives for next phase of projects • Long-term, large-scale deployment and an Integrated system approach 4

5. ICO2N’s 2011 Focus 5

6. ICO2N Vision for a CO2 Network 6

7. ICO2N has completed the first phase of this work, and has determined that CO2 pipelines can be safely deployed if they are designed, constructed and regulated in the same manner as other hydrocarbon infrastructure in the Province. F-1.5 Rupture Maximum Hazard Distance Radius Leak Maximum Hazard Distance Radius D-10 D-5 F-1.5 Maximum arc of Ground Plume 19% Leading Technical Evaluations – CO2 Hazard Distance for Pipelines

8. Alberta CO2 Purity Project Coordinators Susie Dwyer, PTAC Kali Taylor, ICO2N Chair Robert Craig, ICO2N Broad range of CCS industry expertise

9. Project Genesis • Q4 2009: $2B Alberta RFP proponents selected • $1 B contribution from Ottawa • 4 projects underway in 2015 timeframe • Industry and regulators initiate important ground work: • Capture, pipeline and engineering feed design • Evaluate sequestration / EOR locations • Commercial contracts being negotiated • Regulatory policy and governance being developed This work is not informed by purity standards • Multi-faceted project team developed to undertake Project:

10. Funding Commitment and Timeline FUNDING TIMELINE • Funding Agreement executed • Project Launch August 2010 • Stage I will be complete in Dec. 2010 • Stage II to follow in 12 months • Budget of $500,000 for phases I and II • $250,000 provided by industry • $50,000 provided by Alberta Energy • Additional funding sought (GCCSI, NRCan and CMC) • High leveraging of participants’ funding dollars • PTAC is managing Agreement and providing project administration • The ACCP is a critical component of accelerating CCS in Alberta

11. Alberta’s CCS Demo Projects

12. A 400 km CO2 Pipeline Example Economics of Network CO2 Pipeline Economies of Scale: coordinated design and pre-building is significantly more cost effective than phased in CCS solutions. 12

13. Designed for present & future volumes Routing linked to first stage projects and optimized for longer term source/sink matching Allows multiple CO2 sources and markets If a facility has an outage, alternatives are available Reduced Infrastructure reduces environmental footprint Minimizes surface impact and environmental consideration Greater Safety and Stakeholder confidence Fewer pipelines and sequestration sites improves safety and focuses monitoring efforts Open Access / Public Utility Model for Pipeline and Storage Need to ensure fair toll pricing for all shippers Leverages public investment, diffuse criticism of government selecting winners Important Elements of a CCS Network 13

14. Thank You

15. CCS Costs 15

16. Modeling: Supply and Demand 16

17. ICO2N Policy Messaging 17

18. Intergovernmental Panel on Climate Change: “The IPCC has identified CCS as the most promising technology for the rapid reduction of global emissions – by up to 55% by 2100.” US Energy Secretary Stephen Chu (Oct. 12, 2009): “I believe we must make it our goal to advance carbon capture and storage technology to the point where widespread, affordable deployment can begin in 8-10 years.” “It will require an aggressive global effort, harnessing the scientific talent and resources of government as well as industry” Investment: G8 – 20 projects underway by 2020 Statoil’s Sleipner project in Norway – operating since 1996 BP & Statoil’s In Salah project in Algeria – operating since 2004 Considerable government focus on demonstration projects CCS: A Global Endeavour 18

19. A Strategic Investment for Canada 19 Source:NRTEE ‘Achieving 2050: A Carbon Pricing Policy for Canada”, 2009

20. A Case for Partnership Conceptual Portrayal of CCS Economics Provincial and Federal leadership is needed in overcoming this gap Costs declining over time Economic gap in transition period EOR sales (avg.) Industry’s Contribution Through CO2 reduction obligation 20

21. Long-term Vision of CCS Across Canada • Western Canadian Sedimentary Basin • >10,000 MtCO2 of storage potential in oil and gas reservoirs alone Atlantic Region • Studies underway into coal and Deep geologic reservoir storage SW Ontario • Work to delineate storage potential in Hamilton to Sarnia corridor required 21

22. ICO2N in 2011 22

23. ICO2N 2011 Activities • Policy and Regulation design input:Helping Alberta set the stage for CCS projects, includes work on items such as long-term liability, risk valuation etc. • CCS Policy Support: Ensuring that support for CCS remains strong and that government includes CCS in their long-range climate change policy • ICO2N Economic Input:Working to share economic conclusions and modeling capabilities with both levels of government • Public Education/Awareness:Communications work in collaboration with others to ensure CCS is accepted • International Engagement:Ensuring work is coordinated with international efforts • Integration of initial projects:Analysis on how RFP winning projects can be integrated • Purity Specification Project:Leading a multi-stakeholder study to develop CO2 purity and contaminants standards This work will advance knowledge in key areas in advance of the first four RFP projects 23

24. Thank You For more information: www.ico2n.com ICO2N report on CCS:Carbon Capture and Storage: A Canadian Clean Energy Opportunity Contact: Eric Beynon ebeynon@ico2n.com Robert Craig rcraig@ico2n.com

25. CO2 Capture and Storage Overview 25

26. The ICO2N Group addresses challenges and solutions to how large-scale CCS can be deployed in Canada Through policy development work, CCS technical studies, input on the formation of CCS regulations and stakeholder engagement, ICO2N will provide industry’s guidance to how CCS can be implemented efficiently during the next decade ICO2N Mandate 26

27. ICO2N’s Value Proposition • Impact • Opportunity to help set direction and priorities for CCS deployment • CCS Knowledge • Access to existing ICO2N knowledge base • ICO2N’s 17 companies provide a deep pool of experience and expertise • Leverage of staff time on subject matter • Brand • Unparalleled access to information, communication and interaction with peers, governments and stakeholders • Value for Financial Contribution • Access to a broad range of initiatives • Leverage financial contribution at a 25:1 ratio (Tier II) • Management • Strong four year record of managing the consortium and strict overall budget control • Strong project management skills, network of on-demand consultants

28. ICO2N Structure ICO2N Steering Committee • Communications • Education • Media Engagement • Public Acceptance • Technical • Safety Work • CO2 Purity Work • Capture Cost Analysis • Integration of RFP projects • Policy & Economics • CCS Economic Analysis • Education for policy makers • CCS Policy and incentives • CCS Regulations 28

29. A Strategic Investment for Alberta Greenhouse Gas Reduction Highlighting Greener Energy Production Reductions Source: 2008 Alberta Climate Change Strategy 29

30. Path to Deployment Discover & Develop phase CCS is here !! 105 Demonstration phase 90 The demonstration phase The demonstration phase is essential and may need is essential and may need Deployment phase direct support. direct support. 75 Technology cost % Full Commercialisation 60 45 30 1 10 100 1000 Number of installations / Products

31. Conceptual CCS Economics (With a range of site specific factors) • Costs of CCS system components are variable and site specific. Key drivers are: • Pipeline – Distance of transport and pipeline size • Capture – Facility specifics and chosen capture technology • EOR – Productivity of EOR field • Compliance – Strictness of government regulations • Tax Savings – Individual corporate finances and economic loss associated with respective CCS operation CCS COSTS GAP COMPENSATION $140 Uncertainty Range Uncertainty $120 $100 Funding Gap Capture Operating Cost $80 Uncertainty Range $/ tonne levelized over 30 year project life Uncertainty Range $60 Uncertainty EOR Revenue Uncertainty Range $40 Capture Capital Cost $20 Avoided Compliance Transport & Storage Cost Corp. Tax savings 31

32. CO2 Reduction Options – Volume Comparison of Canadian GHG reduction options undertaken by The Delphi Group 32

33. CO2 Reduction Options – Cost 33

34. Built to handle present & future volumes Routing optimized for longer term source/sink matching Allows multiple CO2 sources with reduced EOR/storage locations If a facility (capture or storage) closes for maintenance, alternatives are available Focus on minimum number of storage sites, for validation and liability benefit Environmental Responsibility Minimizes surface impact and environmental consideration Fewer local residents impacted by pipeline development Open Access / Public Utility Model for Pipeline and Storage Need to ensure fair toll pricing for all shippers Leverages public investment, diffuse criticism of government selecting winners Longer term plan and demonstration projects must fit together Alignment and linkage to long term infrastructure should be part of first projects Important Elements of a CCS Network ICO2N is advocating for the most efficient way to deploy CCS 34

35. Federal government ~$1.3 billion for CCS through various funding programs Clean Energy Dialogue with the United States Alberta government $2B towards deployment of 4 projects by 2015: Shell Scotford Upgrader TransAlta Pioneer Enhance Pipeline Swan Hills Synfuels Saskatchewan and British Columbia Encana EOR/Storage project in Weyburn – operating since 2002 SaskPower coal fired electricity generation Spectra Energy gas plant Canada is a World Leader 35

36. Strong CCS Projects Underway 36

37. Alberta’s CCS Demo Projects Sept 2010

38. Learning Curve improvement– slow and uncertain Flue Gas Desulphurization Source: Rubin et al et al, Estimating Future Costs of CO2 Capture Systimes Using Historical Experience Curves

39. Learning Curve Improvement for CCS Reduction of CO2 Capture Costs Based on Expected Learning Rates Data provided for this chart is based upon a technical study done by the IEA on estimating the future trends in the cost of CO2 capture technologies. Pre/post/oxyfuel combustion technologies for CO2 capture were reviewed and an estimated range of learning curves (13%-40%) were presented. We have used a midpoint of 25% to demonstrate potential reduction of CO2 capture costs and have includedthe low rate for comparison.

40. Application at Alberta’s Oil Sands Source: Cambridge Energy Research Associates (CERA). The use of this material/graphic was authorized in advance by CERA. No reuse or redistribution of CERA information is permitted without written permission by CERA. For more information on CERA please visit www.cera.com, or call Jim Meitl at 403-770-4522 or email at jmeitl@cera.com 40