The Canadian Oil Sands Woodrow Wilson Forum

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The Canadian Oil SandsWoodrow Wilson Forum

• October 17, 2005

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Canadas Oil and Gas Industryin the North
American Energy Economy

• Canada is the worlds 3rd largest natural gas
  producer
• Canada is the worlds 9th largest crude oil
  producer
• and moving up the list quickly with oil sands
  production increasing
• Industry Overview
• 500,000 jobs
• C35 Billion capital investment
• C20 Billion in payments to federal and
  provincial governments
• 1 private sector investor in Canada
• Canada is the largest supplier of energy to the
  United States

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U.S. Natural Gas Imports from Canada
Canadas exports dropped in 2003 due to a 1.7
bcf/day reduction in US demand
16.5
16.8
15.6
16.2
16.9
Source U.S. DOE/EIA
Canadian Share of US Consumption
Estimated full-year.
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U.S. Imports of Crude Oil and Petroleum Products
by Country of Origin
Petroleum Products
Crude Oil
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Canada, is the largest (1) supplier of crude
oil and of crude oil and petroleum products to
the US.
Source EIA, 2004
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Industry Capital Spending Cdn billions
The oil gas industry will invest over 39
billion in capital in Canada in 2006
Northern Canada 03 04 05F 06F 0.3
0.3 0.5 0.5
International 03 04 05F 06F 5.5
10.4 5.0 6.8
Oil Sands 03 04 05F 06F 5.0 6.2
8.5 8.8
WCSB 03 04 05F 06F 21.4
24.5 27.0 29.0
East Coast Offshore 03 04 05F
06F 2.2 1.9 1.0 0.7
Note Spending in Canada excludes spending
associated with mergers acquisitions Internatio
nal are acquisitions net of divestures.
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Canadian Crude Oil Production by Region
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Canadian Natural Gas Production by Region
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Canadian Oil Sands History

• 1875 Canada Geological Survey registers oil sands
• 1915 shipments to Edmonton for paving
• 1938 Abasand commercial production - 2,500
  barrels
• destroyed by fire in 1941 - not rebuilt
• 1950s separation technology centrifugal force
• Strong interest results in dozens of
  exploration leases sold by the government
• 1964 Esso starts Cold Lake GCOS construction
• 1967 first GCOS (Suncor) production - 32,000 b/d
• 1978 first Syncrude production - 109,000 b/d
• 1993 truck and shovel technology adopted
• key to revitalizing the development outlook
• 2004 oil sands production reaches
• 1 million barrels per day

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Global Crude Oil Reserves by Country
Canada, with 175 billion barrels in Oil Sands
reserves, ranks 2nd only to Saudi Arabia in
global oil reserves
Source Oil Gas Journal Dec. 2004
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Oil Sands Projects in Three Deposits

• Oil sands production now exceeds one million
  barrels per day
• US28 billion built from 1996-2004
• Close to US36 billion in new oil sands projects
  expected in 2005-2010

Encana
Synenco
Value Creation (CNRL)
Bristol (CNRL)
Centennial (Conoco)
Petro-Canada
Imperial
Shell
CNRL
Syncrude
EM
Deer Creek
Encana
Shell
Husky
Suncor
Syncrude
Imperial
Petro-Canada
Cdn Coastal (Devon)
Petro- Cda
Suncor
Encana
Exxon Mobil
Fort McMurray
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Total Oil Sands Project Production 2003-2015
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Oil Sands Production Technologies
Mining Upgrading
Cyclic Steam Process
Recoverable resource 65 billion barrels
Source Syncrude
Source Imperial Oil
In-situ
Recoverable resource 250 billion barrels
Source Shell Canada
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Oil Sands Supply Costs by Recovery Typeincludes
capital, operating, royalty, taxes and return
Light Oil
Heavy Oil
Surface mining, extraction upgrading
Source NEB - based on C2003 converted _at_
US0.80/C
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Canadian Oil ProductionConventional, Oil Sands
and Offshore
Oil Sands Growth 2004 1 million b/d 2015
2.7 million b/d
Offshore
Oil Sands
WCSB Conventional Oil
Source CAPP
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Environmental Stewardship

• Air
• Monitoring programs
• Reducing emissions
• Water
• Reduce, recycle and reuse
• More efficient, 90 recycle
• Land
• Reclamation and remediation
• Directional drilling from single site to reduce
  impact

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Canadas Oil SandsChallenges to achieve this
potential

• Continuing to Lower Costs
• Alternatives to natural gas for fuel free it up
  for other markets
• Workforce and Infrastructure
• Ensuring adequate workforces trades, technical,
  professional
• Roads, Housing and Municipal services
• Access to Markets Pipelines/Refineries
• Need new pipelines
• Decisions needed now for pipelines in 4-5 years
• Need new refineries, expansions and modifications
• For many conventional refineries, oil sands is
  either heavier (bitumen blend) or lighter
  (upgraded crude) than their current feedstock

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Natural Gas Use in Oil Sands DecliningNatural
Gas Consumed per Barrel of Oil Sands Production
Source Historical data from EUB
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Canadian and U.S. Crude Oil Pipeline Alternatives
ENBRIDGE GATEWAY
Fort McMurray

• Asia
• California
• Anacortes

Growing oil sands production will require new
pipeline capacity to existing and expanded markets
Edmonton
Hardisty
Burnaby
Anacortes
Montreal
Superior
TCPL KEYSTONE
Portland
Casper
Salt Lake City
San Francisco
Sarnia
Midwest
Chicago
California
Patoka
Potential Pipeline Expansion Routes
Wood River
Spearhead
Los Angeles
Cushing
Extensions to New Markets
USGC
Houston
St. James
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SEC Bitumen Reserves Disclosurefor Financial
Reporting
Calculated Field Price, of WTI
--- 2004 Average Bitumen Price at Cold Lake 50
of WTI
Month
Data Source Purvin Gertz
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Topics for Discussion?

• How can Canada and the US overcome the new
  constraints to oil sands growth? workforce,
  infrastructure, rising costs
• How and where to convert oil sands into petroleum
  products?
• What can be done from the US to help with the
  workforce shortages?
• Where will oil sands production be consumed?
• If in North America, where?
• What about offshore markets?
• What needs to change in North America as the oil
  slate shifts to heavier oil?
• Can US gasification technology free up natural
  gas for other North American markets?
• How does this fit in a world of CO2 reductions?

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