Canadian Oil and Natural Gas IPAA Midyear Meeting Greg Stringham June 16, 2005.

Canadian Oil and Natural Gas

IPAA Midyear Meeting

Greg StringhamJune 16, 2005

Canada’s Oil and Gas Industryin the North American Energy Economy

• Canada is the world’s 3rd largest natural gas producer

• Canada is the world’s 9th largest crude oil producer and moving up the list quickly

with oil sands production increasing

• Industry Overview 500,000 jobs C$35 Billion capital investment C$20 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

2004Canadian Natural

Gas

Canadian Petroleum

Ranking of importers to U.S.

Share of U.S. consumption

15% 10%

Share of U.S. imports

85% 16%

#1 #1

Top 10 Natural Gas Producers in 2004

0 5 10 15 20 25

Saudi Arabia

Indonesia

Iran

Norway

Netherlands

Algeria

United Kingdom

Canada

United States

Russia

Trillion Cubic FeetSource: Oil & Gas Journal

Top 10 Crude Oil Producers in 2004

0 2 4 6 8 10

UAE

Canada 2004

Venezuela

Norway

Mexico

China

Iran

USA

Russia

Saudi Arabia

Million Barrels per Day

Source: EIA & CAPP

Oil sands growth will move Canada from #9 to #5 in the world by 2015

Top 10 Crude Oil Producers in 2004

0 2 4 6 8 10

UAE

Venezuela

Norway

Mexico

China

Canada 2015

Iran

USA

Russia

Saudi Arabia

Million Barrels per Day

Source: EIA & CAPP

Oil sands growth will move Canada from #9 to #5 in the world by 2015

0

500

1 000

1 500

2 000

2 500

Canada Mexico SaudiArabia

Venezuela Nigeria Iraq Algeria United Kingdom

Angola Russia Norway Kuwait

thou

sand

bar

rels

per

day

U.S. Imports of Crude Oil and Petroleum Products by Country of Origin

Petroleum Products

Crude Oil#1

Source: EIA

Canada, is the largest (#1) supplier of crude oil and of crude oil and petroleum products to the US.

Industry Structure of the Upstream Sector Based on Oil and Gas Production (boe)

Intermediates15%

Juniors21%

Majors64%

Intermediates8%

Juniors11%

RoyaltyTrusts15%

Majors66%

1997 2004

Majors - > 100,000 b/dIntermediates - < 100,000 >15,000 b/dJuniors - < 15,000 b/d

Total Wells Drilled in Canada

0

4,000

8,000

12,000

16,000

20,000

24,000

28,000

Dry/Susp.

Gas

Oil

1990’s Avg = 10,000 Wells

2000’s Avg = 19,800 Wells

Forecast2005 = 23,000

Canada’s Natural Gas in the Integrated North American

Market

Canadian and U.S. Natural Gas Pipelines

TransCanada TransmissionMainline

TQ&M

Westcoast

KernRiver

NorthwestNorthernBorder

TransCanada Alberta (NGTL)

NGPL

ANR

ANREl Paso

PG&E

SoCal

PGT

TexasEastern

Panhandle

Algonquin

Transcontinental

ANG/Foothills

NGPL

Northwest Foothills

El Paso

Transwestern

Trailblazer

M&NE

CNG

Iroquois PNGTS

Alliance

LakesGreat

Western Canadian Gas ResourcesConventional and New Sources

Northern Canada, 70 Tcf

Coalbed Methane, 167 Tcf

WCSB Conventional

Gas Resources REMAINING,

144 Tcf

WCSB Conventional

Gas - PRODUCED to date, 146 Tcf

Source: Alberta Energy & Utilities Board/National Energy Board, CERI

Western Canada Natural Gas Production

14

15

16

17

18

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

bill

ion c

ubic

feet

per

day

Source: FirstEnergy Capital

2003

20042005

Production increased by more than 200 mmcf/d in the first quarter 2005 over last year

2000 2001 2002

<30 mmcf/d

30-50 mmcf/d

>50 mmcf/d

2003

Top Natural Gas Wells Drilled2000 - 2003

Talisman Monkman:Dec 2004: 66 mmcf/d

Shell/Mancal Tay River:Dec 2004: 30 mmcf/d test

Sources: First Energy, Talisman, Shell

0

3

6

9

12

15

18

bill

ion

cu

bic

fe

et

pe

r d

ay

1970 72 74 76 78 80 82 84 86 88 90 92 94 96 98 2000 '02 '04E

Exports to U.S.

Canadian Demand

Canadian Natural GasCanadian Demand and Exports to US

Source: CAPP Statistical Handbook

Canadian Natural Gas Productive Capacity – CERI Alternate Case

Source: Canadian Energy Research Institute

0

1

2

3

4

5

6

7

8

9

10

2002 2005 2008 2011 2014 2017 2020

Pro

duct

ive

capac

ity

(Tcf

per

yea

r)

BC Offshore

Nova Scotia

Natural gas from

coal/CBM

North

Newfoundland

Western CanadaSedimentary Basin

CanadianCrude Oil and Oil Sands

Global Crude Oil Reserves by Country

Source: Oil & Gas Journal Dec. 2004

223539

6077

9299

115126

179

259

0

50

100

150

200

250

300

SaudiArabia

Canada Iran Iraq Kuwait Abu Dhabi Venezuela Russia Libya Nigeria UnitedStates

billion b

arre

ls

Includes 1

75 billion barre

ls

of oil s

ands rese

rves

Canada, with 175 billion barrels in Oil Sands reserves, ranks 2nd only to Saudi Arabia in global oil reserves

Oil Sands Projects in Three Deposits

• Oil sands production now exceeds one million barrels per day

• US$28 billion built from 1996-2004

• Close to US$36 billion in new oil sands projects expected in 2005-2010

Peace River

Athabasca

ColdLake

Edmonton

Calgary

Ft. McMurray

Value Creation(CNRL)

Deer Creek

SyncrudeSuncor

Petro-Cda

Shell

Encana

Encana

Petro-Cda

Suncor

Imperial

ExxonMobil

Devon

True North

Encana

Bristol(CNRL)

Cdn Coastal(Devon)

Synenco

Husky

LEGEND

Denotes SURFACE

MINEABLEAREA

Fort McMurray

Shell

CNRL

Centennial(Conoco) Imperial

Syncrude EM

Oil Sands Production Technologies

Oil ProductionSAGD Process

Steam Injection

ReservoirOil Production

SteamChamber

Steam Injection

Source: PetroCanada

Mining & Upgrading In-situ

Oil Sands Production now exceeds 1 million barrels per day

Recoverable resource – 65 billion barrels Recoverable resource – 250 billion barrels

Oil Sands Production – Mining and UpgradingVideo – Courtesy of Shell Canada Ltd.

0 5 10 15 20 25

Cold Production

Mining

SAGD

Cyclic Steam

Integrated SCO*

US$/barrel

Oil Sands Supply Costs by Recovery Type

Source: NEB. Based on C$2003 converted @ US$0.80/C$.

* Surface mining, extraction & upgrading

Light Oil

Heavy Oil

Canadian Oil ProductionConventional, Oil Sands and Offshore

0

500

1 000

1 500

2 000

2 500

3 000

3 500

4 000

thousa

nd b

arr

els

per

day

1980 1985 1990 1995 2000 2005 2010 2015

WCSB Conventional Oil

Oil Sands

Offshore

Source: CAPP

Actual Forecast

Oil Sands Growth: 2004 = 1 million b/d2015 = 2.7 million b/d

Natural Gas Use in Oil Sands DecliningNatural Gas Consumed per Barrel of Oil Sands Production

0.00

0.10

0.20

0.30

0.40

0.50

0.60

0.70

1994 - 1997 1998 - 2000 2001 -2003 NewTechnologies

thousa

nd c

ubic

fee

t per

bar

rel

Source: Historical data from EUB

Oil Sands Production TechnologiesAlternatives to Natural Gas

Toe-to-Heel Air Injection – Whitesands Project OrCrude Process - Nexen/OPTI Longlake

Multiphase Superfine Atomized Residue - DeerCreekSuncor 3rd Upgrader - Coke Gasification

OXYGEN WASTE WATER PETROLEUM COKE

SYNTHETIC GAS

(CO, H2, CO2)

GASIFIER

CO2 CAPTURE &SEQUESTER

HYDROGEN

HYDROTREATORSBOILERS

STEAM & ELECTRICITY

FUEL

Canadian and U.S. Crude Oil Pipelines

Mexico

ReginaCromer

Enbridge (NW )Enbridge (NW )

Norman Wells

EnbridgeEnbridge

LakeheadLakehead

PlattePlatte

CaplineCapline

Trans Mountain

Trans Mountain

PlainsPlains

TexacoTexaco

ButteButte

ShellShellKochKoch

EnbridgeEnbridge

Rocky Mtn.Rocky Mtn.

BPBP

RangelandRangeland

ExpressExpress PortlandPortland

WinkWink

Chicago

St. James

Wood River

Hardisty

Sarnia

Burnaby

Cutbank

Patoka

GretnaMontreal

Portland

Salt Lake City

CushingCushing

Guernsey

Midland

Los Angeles

Houston

Clearbrook

Anacortes

Mandan

Minneapolis

ShellShell

Zama

Edmonton

Billings

Canada is already well connected by pipeline to oil markets in Canada and the United States.

Canadian and U.S. Crude Oil Pipeline Alternatives

Sarnia

Fort McMurray

Chicago

Houston

Los Angeles

Patoka

Montreal

Burnaby

St. James

PortlandSalt Lake City

Superior

Hardisty

Edmonton

Anacortes

San Francisco

Casper

PotentialPipeline Expansion

Routes

• Asia• California

• Anacortes

California

USGC

ENBRIDGE GATEWAY

TCPL KEYSTONE

WoodRiver

Cushing

Spea

rhea

d

Extensions toNew Markets

Growing oil sands production will require new pipeline capacity to existing and expanded markets

Midwest

Potential Tanker Markets for Canadian Oil Sands Production

Prince Rupert/Kitimat

Los Angeles

Jose/La Cruz

3,840

ChinaPersian

Gulf

Japan

Taiwan

~ 8,600 N Miles

~ 4,500 N Miles

Prince Rupert/Kitimat

Jose/La Cruz

Los Angeles

Japan

Taiwan

Target Markets

~ 5,400 N Miles

1,400 N

Miles

Far East U.S West Coast

• •••

Japan

Taiwan

Korea

•

•

SantaCruz

• •

1,790

Competitive travel distances for Canadian supply to both markets

Source: Enbridge Pipelines