1. Oil Shale Development Economics October 17, 2007 Khosrow Biglarbigi Hitesh Mohan INTEK, INC. INTEK 27 th Oil Shale Symposium The Colorado Energy Research Institute & The Colorado School of Mines October 15 – 17, 2007

2. 2 Economic Discussion Part I - Project Economics –Project costs –Economic price –Cash flow Part II – A new oil shale industry –Potential size –Economic hurdles/solutions –Benefits on U.S. economy $

3. 3 National Oil Shale Model Resource Screen Resource Economic Options Production Reserves Revenues & Costs Technology Surface U/G MIS In-Situ Economics

4. 4 Resource Base Analyzed Industry nominated tracts 79 Billion Barrels of resource in place Detailed geologic & petrophysical data Western Oil Shale

5. 5 43 Modified In-Situ Technologies Considered 1 2 Surface Mining / Surface Retort Underground Mining / Surface Retort True In-Situ

6. 6 Project Costs 0.00 5.00 10.00 15.00 20.00 25.00 30.00 35.00 40.00 19811984199419981999200120032005 Production Cost, 2004 US $ 0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1 Alberta Oil Sands Production, MMBbl/Day Production Costs: Oil & Gas Journal, July 14, 2003, V. 101.27 Production Volumes: Canadian Association of Petroleum Producers, Historical Statistics O & M Costs 0.00 5.00 10.00 15.00 20.00 25.00 30.00 35.00 40.00 19811984199419981999200120032005 Production Cost, 2004 US $ 0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1 Alberta Oil Sands Production, MMBbl/Day Production Costs: Oil & Gas Journal, July 14, 2003, V. 101.27 Production Volumes: Canadian Association of Petroleum Producers, Historical Statistics O & M Costs Canadian Oil Sands First Generation Projects *Inclusive of mining, retort, & upgrading * *

7. 7 However, the Capital Costs are Increasing (Source: CAPP, March 2007)* *Presented at the 2007 EIA conference, Washington. D.C.

8. 8 Economic Price for Oil Shale Technology Generic Projects (Price: $/Bbl) True In-Situ Surface Mining Underground Mining Modified In-Situ $35.00 $43.00 $52.00 $57.00 0 10 20 30 40 50 60 70 2004 Dollars Rate of Return – 15%

9. 9 Breakdown of Economic Price for Generic Surface Project $43/Bbl Cost of Capital $8 Operating Costs $17 Risk Premium $4 Transfer Payments $6 Taxes $8

10. 10 Cashflow of a Generic Oil Shale Project -1000 -800 -600 -400 -200 0 200 400 600 800 1000 1200 510152025303540 After Tax Before Tax Year Cumulative Discounted After Tax Cashflow (MM$) Room for Government Action

11. 11 Impact of Incentives on Generic Cashflow -1000 -800 -600 -400 -200 0 200 400 600 800 1000 1200 510152025303540 After Tax Before Tax Year Cumulative Discounted After Tax Cashflow (MM$) $10/Bbl Production Credit $5/Bbl Production Credit 15% investment Credit 10% Investment Credit Accelerated Depreciation

12. 12 Projected Production Potential (BOE) (Shale Oil in the U.S.) Base Tax Incentives RD&D Measured Accelerated

13. 13 Savings to U.S. Consumers (Cumulative) $200 to $900 Billion

14. 14 Contribution to GDP (Cumulative) Up to $1.2 Trillion

15. 15 New Jobs Up to 250,000

16. 16 Savings on Foreign Imports Up to $325 Billion

17. 17 Direct Local, State, And Federal Revenues Will Increase by $25 to $85 Billion by 2035 (Cumulative)

18. 18 For More Information http://www.unconventionalfuels.org

19. 19 Appendix

20. 20 Potential Influence of Oil Shale Development Oil Shale Direct and Indirect Jobs Effects on Consumer Spending Drilling Rigs Skilled Labor Steel Pipes Power Heaters World Demand OPEC World Supply Local, State, Federal Treasuries Contribution to GDP Reduces Imports Reduces Call on OPEC Impact on National Economy Shale Oil Production Oil Shale Development Oil Shale Investments Change In Oil Price

21. 21 Favorable Fuel Prices Will Increase Consumer Discretionary Spending, Non-Petroleum Jobs, And GDP Oil Price Fuel Price Non Petroleum Contribution to GDP Non Petroleum Driven Jobs Consumer Discretionary Spending Industrial Energy Spending