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Alberta Oil Sands Market Update

February, 2009

Presentation OverviewPresentation 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 InitiativeOntario 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 Oil Market UpdateGlobal Oil Market Update

Global Flow of OilGlobal Flow of Oil

BP Statistical Review of World Energy June 2008

Major Producers and ConsumersMajor Producers and Consumers

MA

JOR

PR

OD

UC

ERS

MA

JOR

CO

NSU

MER

S

Daily Production

Daily ConsumptionThousands of barrels


OPEC Member

No Resource

Per Capita Crude ConsumptionPer Capita Crude Consumption


OPEC Member

No Resource

Crude Consumption Since 2000Crude Consumption Since 2000


OPEC Member

No Resource

Current and Future Crude DemandCurrent and Future Crude Demand

120 m bbd

CANADIAN CRUDE 5 m bbd

Crude Oil Price HistoryCrude Oil Price History

$0

$20

$40

$60

$80

$100

$120

$140

$160

Jan-

90

Jan-

91

Jan-

92

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93

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96

Jan-

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Jan-

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Jan-

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00

Jan-

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Jan-

09

WTI; Source US EIA, February, 2009

$ 145.16 USD July 14, 2008

$ 30.28 December 23, 2008

$ 29.89 December 1, 2003

Current Crude Market ConditionsCurrent 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 ConsumptionUS Production and Consumption

Source: US Energy Information Administration

CONSUMPTION

PRODUCTION

Peak – 1970: 11, 297 k bbd

2007: 20, 860 k bbd

Global Crude Oil OutlookGlobal 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 Market UpdateCanadian Oil Market Update

Canadian Oil Production ForecastCanadian Oil Production Forecast

Western Canada

Eastern Canada

Actual Forecast

Source: CAPP Canadian Crude Oil Forecast, June, 2008

2.7 million bbd

4.5 – 5 million bbd

2007 Canadian Crude Production2007 Canadian Crude ProductionThousands of barrels per day

Total – 2, 595 k bbdSource: CAPP Canadian Crude Oil Forecast, June 2008

Western Canadian Oil ProductionWestern Canadian Oil Production

Actual Forecast

In-Situ

Mining

Infrastructure planning

Conventional Heavy

Conventional LightPentanes

2.1 M bbd

4.5 M bbd

Source: CAPP Canadian Crude Oil Forecast, June, 2008

Alberta - Conventional Oil & GasAlberta - Conventional Oil & Gas

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

Actual Forecast

Alberta - Non-Conventional OilAlberta - 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)

Manufacturing Crude OilManufacturing Crude 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 OilManufacturing 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 - MiningManufacturing Crude Oil - Mining

Surface Mining 18% of resource Within 75 m of surface

In Situ 82% of resource


Traditional mining techniques 18% of oil sand is

recoverable through open pit mining Truck & shovel


Truck - Caterpillar 797 100+ in service 500 metric tons when empty 400 metric tons per loadTires replaced once per year Reused as cattle feeders

Shovel – 100 metric ton capacity

Manufacturing Crude Oil – Manufacturing Crude Oil – in situin 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 TechniquesIn 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 - SAGDManufacturing 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 - SAGDManufacturing Crude Oil - SAGD

Manufacturing Crude Oil – ExtractionManufacturing 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 - UpgradingManufacturing 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

Crude - Where does it all end up?Crude - Where does it all end up?

1 BARREL = 42 US GALLONS

Tailings PondsTailings 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

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 ProductionSCO 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 OperationsIn-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 OperationsIn-situ Bitumen Operations

Peace River / Wabasca Shell - Cadotte Lake – 12, 500 CNRL – Pelican – 35, 000 Encana – Pelican – 35, 000

Oil Sands Capital Projects UpdateOil Sands Capital Projects Update

Alberta Oil Sands - Capital InvestmentAlberta 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 ForecastOil Sands Expenditure Forecast

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

Actual Forecast

45

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

Combined oil sands expenditures: historical and estimated1

Actual Operating Expenditures

Actual Construction Capital Expenditures

Adjusted Estimated Construction Capital Expenditures (Dec 08)

Adjusted Estimated Operating Expenditures (Dec 08)

Original Estimated Operating Expenditures (Jan 08)

Original Estimated Construction Capital Expenditures (Jan 08)

Cap ex: $15.3 Billion

Op ex: $18.2 Billion

Oil Sands Capital ProjectsOil 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 UpgradersIndustrial 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 Capital spending in the short termshort 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

What is required?What is required?

Instrumentation Analyzers Flow instruments Pressure instruments Level instruments Temperature instruments


Valves Solenoids Safety valves Regulating valves

What is required?What is required? Fabricated Metal

Structural steel Heat exchangers Piping Orifice plates Reactors Tanks Distillation columns Pressure vessels


Electrical Equipment Pumps Motors Steam turbines Compressors


Services Machining Industrial automation Energy Environmental and control technologies Engineering and project management Maintenance and supply services

Oil Sands Development FactorsOil Sands Development Factors

Labour and Capital Costs

Oil Transport Infrastructure

Operating Costs

The Environment

Crude Oil

Market

Global Energy Demand

Technology & Innovation

Investment Climate

5 Things to Help You Win in the 5 Things to Help You Win in the Oil SandsOil Sands

1. Become an Oil Sands Expert1. 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 Strategy2. 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 Plan3. 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 Wins4. 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 Alone5. 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

THANK YOUTHANK YOU

[email protected]@cme-mec.camec.ca

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