Oil Sands: An Industry Overview

Presented by: Jacob Irving, Executive Director OSDGPresented to: Fort McMurray Rotary ClubDate: January 28, 2009

2

Athabasca Deposit Region – Status of Proposed Oil Sands Projects Under Construction/Approved/Application (Jan. 2009)

Projects – Under Construction Status Est. Start Up Barrels/day

Devon Jackfish Insitu Ph. 2 Construction 2011 35,000

EnCana Christina Lk. Insitu Ph. 1C Construction 2010 40,000

MEG Energy Christina Lk. Insitu Ph. 2A Construction 2009 22,000

Suncor Firebag insitu Ph. 3 Construction 2009 62,500

Shell Jackpine Mine Ph. 1A Construction 2010 100,000

Statoil Hydro Leismer Demo Insitu Construction 2009 10,000

Projects- ERCB Approval Status Est. Start Up Barrels/day

Shell Jackpine Mine Ph. 1B Approved 2012 - 2014 200,000

Shell Muskeg River Mine Exp. & debottleneck Approved TBD 115,000

Petro-Canada Fort Hills Mine Ph. 1 and debottleneck Approved TBD (was 2011) 191,000

Imperial Kearl Lake Mine Ph. 1,2,3 Approved 2010, 2012, 2018 300,000

Husky Sunrise insitu Ph. 1 - 4 Approved 2012 - 2018 200,000

Connacher Gret Divide Pod 2 (Algar) Approved 2009 10,000

ConocoPhillips Surmont Ph. 2 Approved 2013 83,000

EnCana Christina Lake Insitu Ph. 1D Approved 2011 40,000

Petro-Canada Meadow Cr. Insitu Ph. 1 & 2 Approved TBD 80,000

Petro-Canada McKay River insitu Ph. 2 Approved 2012 40,000

Under Application Under Application Under Application Under Application

Shell Jackpine Min Ph. 2 EnCana Borealis Insitu Ph. 1 CNRL Kirby insitu Ph. 1 MEG Christina Lake insitu Ph. 2B-3B

Shell Pierre River Mine Suncor Firebag Insiut Ph.4-6 EnCana Foster Cr. insitu 1F Nexen/Opti Long Lake south Ph. 1&2

Total Northern Lights Mine Suncor Debottleneck Ph.3-6 Enerplus Kirby insitu Ph. 1 Petrobank May River insitu Ph. 1

Total Joslyn Mine Ph. 1 & 2 Sunshine Oilsands Harper CSS Husky McMullen pilot Ph. 1 Serrano Blackrod insitu pilot

Suncor Voyageur Mine Ph. 1 Total Joslyn Insitu Ph. 3A Korea National Black Gold Ph.1 Statoil Hydro Kai Kos Dehseh

Athabasca Oil Sands MacKay insitu Pilot

Value Creation Terre de Grace insitu pilot

Laracina Saleski insitu pilot Laracina Germain insitu pilot

Total potential bitumen production for projects currently:• Under construction – 269,500 bpd• Under ERCB approval – 1,259,000 bpd• Under regulatory application – 1,600,000 bpd

Data source: Strategy West Jan. 2009

3

0

1,000

2,000

3,000

4,000

5,000

6,000

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

'00

0 B

arr

els

Pe

r D

ay

Bitumen from In Situ Bitumen from Mining 2007 Bitumen Production Forecast

2008 Oil Sands Bitumen Production Forecast1

1Bitumen forecast for all Alberta oil sands projects – all announced caseSource: CAPP and Nichols Applied Management

• Continues to grow to 5M bbl/day, consistent with past forecasts

Insitu

Mining

44

Despite setbacks, oil sands production expected to increase1

1Bitumen forecast for all Alberta oil sands projects – original estimate (January 2008) and adjusted estimate per public announcements (December 2008)

Source: CAPP and Nichols Applied Management

Actual Bitumen Production

Adjusted Estimated Bitumen Production (Dec 08)

Original Estimated Bitumen Production (Jan 08)

5

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

50,000

$M

illio

ns

Cd

n

Operating Expenditures Study 2008 UpgradersMines InsituOther Projects Historical - 2007 Forecast

Combined Oil Sands Industry Expenditure Forecast1

Construction Capital

Operating Costs

2007 20121996 –

2007 Spent2008 – 2012

Forecast

Construction Capital

$18 B $22 B $63 B $126 B

Operating Costs

$11 B $20 B $39 B $79 B

TOTAL $29 B $42 B $102 B $205 B

• 2008 capex and opex spending double that of 2006 • 2008 capex forecast higher than 2007 forecast

12008 construction capital expenditure forecast for all Alberta oil sands projects, including related pipeline, upgrader and co-generation projects – all announced case. 2008 operating expenditure study.

Source: Construction Capital: CAPP and Nichols Applied Management, Operating Expenditure – Nichols Study

Actual Forecast

66

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

7

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Cum

ulati

ve N

ew O

pera

tion

s Jo

bs

Forecast of New Permanent Operations Jobs in the Wood Buffalo Region - continues to track previous projections

1Source: Nichols Applied ManagementNote: 2007 data subject to verification

• Paralleling growth in bitumen production and driving urban population growth • Excludes the over 27,000 current construction workforce• For every permanent operations job: 3 jobs created locally, and 6 nationally1

Actual Forecast

1998 - 6,600 people directly employed by oil sands2007 - Over 5,000 new jobs, nearly double 1998 jobs2012 - 13,700 new jobs, triple 1998 jobs

Cumulative growth, new permanent operations jobs only - does not include construction jobs

8

36,961

56,735

47,843

66,137

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000

100,000

19992000

20012002

20032004

20052006

20072008

20092010

20112012

Po

pu

lati

on

of

Fo

rt M

cMu

rra

y/S

apre

e C

reek

Ft McMurray/Saprae Creek as per Census Forecast -Total Development Case

Actual Forecast

2007 Urban Population Forecast

• Excludes the over 27,000 workers currently in work camps and hotel/motels and anticipates an 8%/yr growth through 2010

OSDG’s population forecast process has been approved by a third party audit performed by Deloitte Touche

Average annual population increase of 9% over past 7 years with 8% expected through to 2010

Fort McMurray urban service area/Saprae Creek. Adjusted for 2007 RMWB census

Source: Nichols Applied Management

9

OSDG Members continue to invest significantly in the community• $12 million donated in 2007 within the RMWB and $11.5 million in 2006

including: $2.5 million to MacDonald Island recreation facility $2.5 million to Timberlea Athletic Park $750,000 donation to MRI campaign $200,000 to Leadership Wood Buffalo

• Ongoing support for key community service organizations including: United Way (Fort McMurray is per capita leader in Canada) Keyano College Northern Lights Regional Health Centre YMCA of Wood Buffalo Day Care

• More than $52 million donated over the past 10 years.

10

Aboriginal participation and opportunities in oil sands development are substantial

• Aboriginal Companies – value of contracts in 2007 - $606 million• Aboriginal Companies – value of contracts 1998 – 2007 - $2.6 billion• Aboriginal employees in permanent jobs in 2007 – 1,500+• Contributions to Aboriginal communities in 2007 - $3.6 million• Athabasca Tribal Council APCA funding 2007 - $1.6 million• Industry Relations Corporations funding 2007 - $8 million

11

Announced Infrastructure Funding 2005 – 2008 for Regional Municipality of Wood Buffalo

Item AmountMunicipality $157,000,000Water Treatment/Wastewater Grant, landfill, police facilities

Transportation $1,813,300,000Twinning Hwy 63, urban roads, Confederation Way and Thickwood Blvd interchanges, etc.

Affordable Housing $73,000,000

Schools $116,600,000Upgrades, new school for Northlands, 2 new high schools

Child Care $3,000,000Additional spaces, new facility

Keyano College $6,700,000Additional course space, faculty retention

Northern Lights Health Region $267,400,0003 clinics, helipad, staff accommodation, emergency medical, long-term care facility, redevelopment of ambulatory care, health and wellness centre

Land Release - 4,654 acresParcel D and F, North Parsons Creek, Saline Creek

TOTAL $2,437,000,000

12

Environment - Water

• Total Annual Net Water Allocation of the Athabasca River represents less than 3.2% of flow, compared to:

37% North Saskatchewan River (Edmonton) 60% Oldman River (Southern Alberta) 65% Bow River (Calgary)

• Oil sands industry net water allocation is 2.2% of flow• Industry has consistently used less than its allocated amount• There has been a decrease in the overall amount of water used in mining over the

past 30 years of oil sands development.• Saline/brackish water use in in-situ operations is the norm• Oil sands mining operations recycle more than 80% of the fresh water used.

Cooling tower evaporation accounts for 30% of any lost water which is returned to the hydrologic cycle.

• Intense sampling of water reveals no change in naturally occurring contaminants from oil sands development.

• Industry is constantly researching ways to further reduce water use. It makes sense from an environmental, social and business perspective.

13

Environment - Air

• The oil sands industry has reduced NOx and SO2 emissions on a per barrel basis since the beginning of oil sands production

• Air quality in the Fort McMurray Wood Buffalo region rated “good” or better nearly 90% of the time, consistently higher than major cities like Toronto, Montreal, Vancouver, Calgary and Edmonton

The Wood Buffalo Environmental Association (WBEA) operates 14 active and 14 passive air monitoring stations with real time air quality data available via the internet 24/7 http://www.wbea.org/content/view/56/111/

The Oil Sands currently account for 5% of Canada’s Greenhouse Gas (GHG) emissions or 0.1% of global emissions

Barring significant change, the Oil Sands could grow to 8% of Canada’s GHG emissions by 2015

From a full life cycle or Wells to Wheels perspective, production methods account for approximately 15% of the total carbon output from an Oil Sands barrel. The majority of the carbon is produced by end use combustion.

141414

Canada’s Oil Sands currently account for less than 5% of Canada’s GHG emissions or ~ 1/10th of 1% of global total

Environment - Greenhouse Gases (GHG)

Source: CAPP

151515

GHG emissions: “From Wells to Wheels”

0

1,000

2,000

3,000

4,000

5,000

6,000

Brent CanadianLight

Saudi Light* NorthAmericanImportCrude

Basket

Oil Sands Venezuela* NigerianForcados*

kg C

O2E

/100

0L fu

el

Combustion Transportation Refining Production

Oil Sands production vs. other sources (full cycle basis)

Source: T.J. McCann & Assoc. & OSDG - 2001

16

Wood Buffalo - Major Regional Challenges

• Uncertain economic climate• Environmental issues

Industry has consistently reduced water use, GHG, SO2 and NOx emissions on a per barrel basis

Industry is strongly monitored and regulated New technology is constantly researched and applied Industry needs to improve communication

• Aboriginal relations – maintain and increase opportunities• Demand on infrastructure i.e. housing, transportation, utilities,

health care• Skilled labour availability – recruitment and retention

1717

For more information contact:

The Oil Sands Developers Group613A – 8600 Franklin AvenueFort McMurray, AB T9H 4G8CanadaPh: 780-790-1999

E-mail: info@oilsandsdevelopers.ca

This presentation contains forward-looking information. Actual results could differ materially due to market conditions, changes in law or government policy, changes in operating conditions and costs, changes in project schedules, operating performance, demand for oil and gas, commercial negotiations or other technical and economic factors.

Disclaimer