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Financial Executives Institute Greenhouse Gas Emissions and Canadian Environmental Policy

Financial Executives Institute Greenhouse Gas Emissions and Canadian Environmental Policy. P. A. Smith Imperial Oil Limited Senior Vice President Finance and Administration January 8, 2008.

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Financial Executives Institute Greenhouse Gas Emissions and Canadian Environmental Policy

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  1. Financial Executives Institute Greenhouse Gas Emissions and Canadian Environmental Policy P. A. Smith Imperial Oil Limited Senior Vice President Finance and Administration January 8, 2008 This presentation includes forward-looking statements. Actual future conditions (including economic conditions, energy demand, and energy supply) could differ materially due to changes in technology, the development of new supply sources, political events, demographic changes, and other factors discussed herein (and in Item 1 of ExxonMobil’s latest report on Form 10-K). This material is not to be reproduced without the permission of Exxon Mobil Corporation.

  2. World is Not Short of Hydrocarbons • Hydrocarbon resource ~12 TBOE • Produced 3 TBOE Recoverable Resources TBOE Remaining Produced Source: ExxonMobil

  3. Energy Intensity Energy Demand BOE/2005$K GDP MBDOE -1.0% -1.6% 1.8% 1.3% Global Economics and Energy GDP Trillion 2005$ Average Growth / Yr. 1980 – 2005 2005 – 2030 2.9% 3.0%

  4. By Fuel By Sector - 2030 MBDOE Other Industry Res / Comm 1.7% Power Generation Chemicals 0.9% Other Heavy Manufacturing 1.7% Transportation Coal Gas 1.2% Oil World Energy Demand Average Growth / Yr. 2005 – 2030 1.3% ~ 324 MBDOE

  5. 1980 to 2005 OECD U.S. South Korea China Non-OECD 0 GDP per capita (2005$) Electricity Demand Linked to GDP 1000 kW hours per capita

  6. Non-OECD MBDOE 2.2% 3.5% 4.2% 1.8% 2.3% 0.0% Power Generation Demand OECD Average Growth / Yr. 2005 - 2030 MBDOE 0.9% 2.2% Renewables 1.5% Nuclear -0.4% Coal 1.9% Gas Oil -2.8%

  7. 1990 to 2005 U.S. OECD South Korea Non-OECD China GDP per capita (2005$) Light Duty Vehicle Penetration Linked to GDP Vehicles per 1000 people

  8. Global Transportation Demand OECD Non-OECD Average Growth / Yr. 2005 - 2030 MBDOE MBDOE 0.6% 3.1% 1.2% Other Transport 1.7% 3.6% Heavy Duty Vehicles 2.8% -0.5% Light Duty Vehicles 3.4%

  9. Global Industrial Demand OECD Non-OECD MBDOE MBDOE Average Growth / Yr. 2005 - 2030 0.0% 1.9% 0.8% 3.4% 0.1% Other 1.9% Chemicals 0.4% Heavy Manufacturing -0.4%

  10. Global Residential / Commercial Demand OECD Non-OECD Average Growth / Yr. 2005 - 2030 MBDOE MBDOE 0.1% 1.0% 1.8% 0.9% 0.4% Commercial Residential 0.0%

  11. Renewables Wind, Solar & Biofuels MBDOE MBDOE 1.5% 8.7% Wind, Solar & Biofuels 8.7% 2.0% Solar 9.9% Hydro/Geo 0.7% 10.5% Wind Biomass/Other 7.6% Biofuels World Energy Demand – Primary Energy Supplies Primary Energy Average Growth / Yr. 2005 - 2030 MBDOE 1.3% Renewables 1.5% 2.0% 0.9% Nuclear 1.7% Coal Gas 1.2% Oil

  12. OECD Non-OECD Average Growth / Yr. 2005 – 2030 MBDOE MBDOE 0.5% 2.0% Other Coal Other Demand by Fuel Coal Gas Gas Oil Oil Billion Tonnes CO2 Billion Tonnes CO2 0.1% 0.1% 1.9% 1.9% Energy Related CO2 Emissions Coal Coal Gas Gas Oil Oil World Energy & CO2 Emissions

  13. Global CO2 Emissions Energy Related CO2 Emissions Sensitivities Average Growth / Yr. 2005 – 2030 Billion Tonnes • Double biofuels growth through cellulosic ethanol • Double rate of improvement of new car efficiency • Replace ½ of coal growth with nuclear / CCS • Retire coal plants at 40 years and replace with nuclear / CCS 0.5%

  14. Greenhouse Gas Policy – Implications for Canada • Any meaningful action must be a global action • A risk based approach is required given potential costs and uncertainty • Meaningful change requires breakthrough technology • Policy should ensure any cost of carbon is uniform across the economy and predictable

  15. Alberta’s Enacted GHG Legislation • A challenging GHG regime on industry by world standards • Immediate 12 % reduction in emissions intensity from 2003-05 levels is not likely for many to achieve physically • However, use of intensity targets is the right approach – allows economic growth • The Alberta technology fund, with contributions fixed at $15 a tonne provides cost certainty AND support to technology development – the only realistic long term solution

  16. Canadian Federal proposed GHG regulation • Even more stringent than Alberta’s: • 18% intensity reduction required in 4 years and 2% each subsequent year • Restricted technology fund that phases out quickly • Intensity based targets, like Alberta’s, remain the right approach • Restricted technology fund provides no “safety valve” on the price of CO2 credits or needed market liquidity; open-ended access for industry to provincial funds needed for effective compliance

  17. A more effective approach to climate change risk • What would an effective climate change policy do? • Long term objective: reduce risks of serious impacts at reasonable costs to society • Near term: • Promote energy efficiency • Promote deployment of existing low-GHG technologies • Support R&D of new low-GHG technologies • What are we doing in Imperial? • Energy efficiency: 16% improvement in refinery energy efficiency since 1994; associated gas flaring reduced 42% since 2002 • Technology development: • Helping support Stanford University $250 M GCEP Program • $10 M to U of Alberta Imperial Oil Centre for oil sands Innovation

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