Temple Mountain Energy, Inc.Temple Mountain Energy, Inc.

The Business Aspects in Oil Sands The Business Aspects in Oil Sands Production in the USAProduction in the USA

Presented by Jim RunquistPresented by Jim RunquistFounder, CEO and Chairman of the BoardFounder, CEO and Chairman of the Board

Western U.S. Oil Sands ConferenceWestern U.S. Oil Sands ConferenceUtah Heavy Oil CenterUtah Heavy Oil Center

University of UtahUniversity of UtahSeptember 21September 21stst, 2006, 2006

Temple Mountain Energy, Inc.Temple Mountain Energy, Inc.

There are multiple business aspects that There are multiple business aspects that must be considered to efficiently and must be considered to efficiently and

profitably produce oil sands leases in the profitably produce oil sands leases in the USAUSA

Temple Mountain Energy, Inc.Temple Mountain Energy, Inc.

The World Economic Challenge:

What is the most important economic resource known?

• Energy production• Oil, natural gas and electricity are the biggest players

• China and India economic development (2/3rds of world)• Huge unexpected demands for these resources (now and future)• Especially oil• Fuels, asphalt, chemicals, plastics, pharmaceuticals, etc.

• High oil prices are here to stay• Easily found light crude oil is being depleted rapidly• Major sources require more and more difficult exploration• Other oil sources are marginal fields, heavy oil fields and oil sands

Temple Mountain Energy, Inc.Temple Mountain Energy, Inc.

Perceptions from the past about oil sand production:

• Can’t be done efficiently and profitably

• Rube Goldberg syndrome (Kluged together)

• Many have failed before

• Fluctuating price of oil will drive companies out

• Mining and oil production do not mix

Temple Mountain Energy, Inc.Temple Mountain Energy, Inc.

Canadian Success and FailureSuccess:

• High volume production now

• High oil prices

• Costs have been dropping

Failure:

• Very high capital cost overruns

• Very high energy usage and costs

• Environmental and reclamation costs

Temple Mountain Energy, Inc.Temple Mountain Energy, Inc.

Temple Mountain Energy, Inc.Temple Mountain Energy, Inc.

ROI and Reserves: The saturation, size, depth of oil sands

• USA has much smaller reserves than the massive Canadian Alberta reserves

• ROI: Since capital equipment is the largest cost driver, can the individual leases warrant this size of expenditures?

• What else must be considered?

• Multiple products/markets• Mineability• Processing• Energy usage• Transportation, sales, refining• Environmental and Reclamation

Temple Mountain Energy, Inc.Temple Mountain Energy, Inc.

Multiple product line potential of the leases

What other products can be produced?• Asphalt road stock• Resins• Aggregate• Sand

• Cement• Sand products

• Other minerals and precious metals

Temple Mountain Energy, Inc.

Surface mineable or inSurface mineable or in--situ productionsitu productionIs the property surface mineable?Is the property surface mineable?

Surface mineability is very economical and efficient Surface mineability is very economical and efficient if strip ratio is favorableif strip ratio is favorable

Over burden is an up front costOver burden is an up front cost

InIn--situ technologiessitu technologiesvery energy intensivevery energy intensive

CanadianCanadianUSAUSA

Temple Mountain Energy, Inc.

Canadian inCanadian in--situ technologies:situ technologies:SAGD:SAGD: EncanaEncana

Temple Mountain Energy, Inc.

USA inUSA in--situ technologies:situ technologies:Subsurface Drilling PlatformsSubsurface Drilling PlatformsElectric heating such as proposed in oil shaleElectric heating such as proposed in oil shale

Temple Mountain Energy, Inc.Temple Mountain Energy, Inc.

Oil Sands Processing Systems (cost per ton or barrel produced must be reduced)

• Processing must be modular• Processing ore must be energy efficient in these smaller

reserves to be profitable• Most systems require large amounts of energy to heat and

process the oil sands (removing oil from the sands)

The cost of bringing this energy requirement to the processing site and the actual energy costs to process can be prohibitive to startup

Costs to produce a barrel of bitumen oil must be in the $10 to $20 per barrel range to be economical ($40 BO price)

Temple Mountain Energy, Inc.Temple Mountain Energy, Inc.

Energy Requirements

Heat Requirement?

Natural gas

Electricity

Diesel Fuel

Water

Temple Mountain Energy, Inc.

Transportation, sales, and refining

• Transportation costs to get to market:• Trucking- pipelines – rail

• Sales: To whom and what are they willing to pay or even take?

• Refining: Local versus national market• Does the product meet their needs?• What must be done to meet their needs?• What are they willing to pay and how much can

they take?

• Need for more transportation and refining capacity!

Temple Mountain Energy, Inc.Temple Mountain Energy, Inc.

Local infrastructure and Labor pool

• Infrastructure• What is available locally?• Roads –pipelines- railroads• Earth moving equipment• Oil Services• Water supply• Chemical supply

• People• Expertise needed

• Availability

Temple Mountain Energy, Inc.Temple Mountain Energy, Inc.

Major Subcontracting, Partnering, etc.

• Today - to attain the previous slide’s resources,this may become more necessary

• Are they available locally, in state or nationally?

• Can reasonable business deals be made today?

Temple Mountain Energy, Inc.Temple Mountain Energy, Inc.

Local, State and National Politics

• Local Politics – Favorable but limited resources to help grow

• State Politics – Favorable to develop this resource for state and local benefits

• National Politics – Favorable in Washington DC

• Provides additional alternative to foreign oil

Temple Mountain Energy, Inc.Temple Mountain Energy, Inc.

Research and Development

• New Technologies that provide or enhance:

• Energy efficient processes

• Modular designed systems

• Technology enabled mining equipment

• Soil Remediation based systems

Temple Mountain Energy, Inc.Temple Mountain Energy, Inc.

University involvement

• New technology development

• Lessons learned from the past

• Focused understanding and solving specific problems

• Government research funding

• Future expert and employee development

Temple Mountain Energy, Inc.Temple Mountain Energy, Inc.

PS-3 Fluids

Clean sand

Environmental and Reclamation Concerns• Environmental and Reclamation concerns must

be addressed day one

• Costs can become astronomical if not addressed

• Design of total mining, processing, storage and transportation systems can be:

• Modeled and Implemented up front

• Based on environmental and reclamation systems

• Cost effective in a business model.

Temple Mountain Energy, Inc.Temple Mountain Energy, Inc.

Mine visualization and layout3D Fault block generation; Tunnel Cutting; Advanced Texture mapping; Mine Pit modeling; Interactive Geologic Hierarchy building; Visualizing and computing Overburden;

PS-3 Fluids

Clean sand

Temple Mountain Energy, Inc.Temple Mountain Energy, Inc.

Modeling Streamlines of groundwater flow around a mining pit Calculates & displays vector data as streamlines, stream-ribbons, scaled arrows or glyphs

PS-3 Fluids

Clean sand

Temple Mountain Energy, Inc.Temple Mountain Energy, Inc.

PS-3 Fluids

Clean sand

Finally:

Oil Sands Production as a Business Endeavor:

Can it be done?

Will it take time?

How important is it to all of us?