British Columbia - A Leading Canadian Oil and Gas Province Once again, we’re happy to be here representing British Columbia here at the AAPG Annual Convention. Investors have recognized Canada as a new “energy superpower” and the province of British Columbia is a big part of that. 2009 AAPG Annual Convention and Exhibition International Pavilion Theatre Prospect Promotion Session June 9, 2009 Denver, Colorado Christopher Adams AScT BC Ministry of Energy, Mines and Petroleum Resources Resource Development and Geoscience Branch

Map of Canada Vancouver Victoria British Columbia Canada Canada Canada’s Pacific Gateway - British Columbia is the western-most province in Canada. 3rd largest province in Canada with a population of around 4.4 million (www.bctats.gov.bc.ca) Vancouver is the largest city. The provincial capital is the city of Victoria located at the southern tip of Vancouver Island. The BC Ministry of Energy, Mines and Petroleum Resources is located here. British Columbia Canada United States Mexico United States Mexico

B.C.’s Oil and Gas Connectivity British Columbia is a reliable and environmentally responsible energy supplier Well connected to North American markets 2nd largest provider of natural gas in Canada 4th largest oil producer BC is well connected to North American natural gas markets and is a key corridor for several proposed pipelines. We are a secure, stable and reliable energy producer. Total Oil and Gas Revenue: $2.14 billion (2006) $2.36 billion (2007) $4 billion (2008)

Oil and Gas Resource Map Commercial oil and gas production occurs in northeast British Columbia within the Western Canada Sedimentary Basin (55° to 60 °N) Well developed infrastructure with extensive road and pipeline network Other areas in province contain significant quantities of sedimentary rock that may yield future production in (e.g. interior basins, coalbed gas areas) WCSB extends into the northeast section of the province. large undeveloped reserves, established infrastructure, ready service sector in the northeast oil and gas development strategy includes a competitive taxation and royalty structure the province works very closely with industry and stakeholders to ensure responsible development

Oil & Gas Production and Reserves Raw Natural Gas Production over 1.1 Tcf Crude Oil Production over 8.5 million barrels 2007 Reserve Numbers Natural Gas (remaining marketable reserves) 14 Tcf with a reserve to production ratio of 16.4 years Oil (remaining established reserves) 124 million barrels with an R/P ratio of 12.9 years Raw natural gas production in BC was 1.1 Tcf in 2008, roughly 3 Bcf per day. Our crude oil production was 8.5 million barrels in 2008. Reserve Numbers: Natural Gas (remaining marketable reserves) 14 Tcf with a reserve to production ratio of 16.4 years Oil (remaining established reserves) 124 million barrels with an R/P ratio of 12.9 years

As I mentioned earlier, the northeast section of the province is the only area where reserves are recognized. This particular chart demonstrates the success that exploration and production companies have had in converting BC’s undiscovered natural gas resources into established reserves. BC’s remaining raw gas reserves have increased steadily since 1997 and, of course, the consistent nature of the R/P ratio is a key measure of sustainability.

Petroleum and Natural Gas Rights 90% of petroleum and natural gas rights are owned and administered by the Crown Dispositions, by public tender, are held monthly Parcel postings based on industry requests Variable tenure options available (permit, drilling licence, lease) Petroleum Titles Online at: www.ptonline.gov.bc.ca BC MEMPR is responsible for: issuing rights, administering rights, collecting and accounting for related oil and gas revenues. Dispositions, by public tender, are made once each month. Parcel postings are based on industry requests and variable tenure options are available such as a permit, drilling licence or lease. Permits - carry an obligation to conduct exploration Drilling Licences - convey the exclusive right for permission to drill oil and gas wells in a defined area Leases - allow production in addition to providing exclusive drilling rights. Tenure details posted at: www.ptonline.gov.bc.ca

Record! 2008 was an exceptional year for PNG rights in the province with a record $2.66 billion in bonus totals. In fact, since 2001, there have been several record bonus totals established from the sale of PNG rights. Producer interest in shale gas potential (Horn River, Cordova Embayment, Upper Montney Play Region) has played a significant part in the surge, particularly in 2007 and 2008. Just as a side note, for the first time ever BC’s land sale bonus totals for 2008 were higher than totals collected in Alberta (more than double, in fact)

TOTAL BONUSES IN 2008 = $2.66 BILLION Distribution of 2008 Land Sale Bonuses in British Columbia Shale Gas Regions Dominate! In 2008, shale gas regions dominated in terms of land sale activity. 90% of BC's PNG rights were sold in the Horn River Basin, Cordova Embayment and the Montney Play Region. TOTAL BONUSES IN 2008 = $2.66 BILLION Shale Gas Regions = 90%

Gas prone province. Over 80% of wells drilled are given a gas status Gas prone province! Over 80% of wells drilled are given a gas status. There is drilling for oil (between 5% and 10% of all wells) We saw a record number of wells drilled in 2005 (1,429). As you can see, 919 wells were drilled last year. We’ve seen consistent drilling growth since 1995. And, we’ve also seen summer drilling increase in the province by almost 200% between 2002 and 2008 - BC’s Summer Drilling Royalty Program and improved road access are a couple of reasons behind that.

Resource Numbers Conventional Gas Resource Potential - Undiscovered all basins 93 Tcf Unconventional Gas Resource Potential 300 Tcf of tight gas 250 Tcf of shale gas 100 Tcf of coalbed gas Unconventional Gas: Undiscovered conventional resource potential for all basin in British Columbia is 93 Tcf. Tight gas is currently being targeted in basin centered resource play developments. Industry interest in shale gas is high - several exploration projects are underway Provincial government is facilitating the development of coalbed gas – over 90 wells drilled to date

Active Established Plays Complex and Rich Geology Jean Marie Mississippian Triassic Cretaceous Deep Basin Gas – sweet spots Fort St. John Region Selective Foothills Active Established Plays Over the last decade, the Upper Devonian Jean Marie has become major target for operators. Jean Marie carbonate shelf has been developed by horizontal drilling over large areas north of Fort Nelson in the Greater Sierra region. Triassic-aged targets are the most prevalent in the lower half of NEBC’s oil and gas region (37 – 40%). These include targets in the Pardonet/Baldonnel, Charlie Lake, Halfway, Doig and Montney. The Deep Basin region offers thick sequences of stacked, regionally extensive, gas-saturated, clastic reservoirs. Traditionally, exploration has focused on identifying stratigraphic sweet spots that feature conventional reservoir quality in the Lower Cretaceous. Considerable resource potential exists in the tight gas component of the region such as the Cretaceous Cadomin in the Cutbank Ridge area. The Fort St. John region continues to be the hub of activity and production for the province. The region has a variety of geological settings offering good quality oil and gas prospects with stacked, multi-zone potential. On the western side of the region, Laramide-induced folding and structural trapping provides opportunity for Debolt, Halfway, Charlie Lake, Baldonnel, and various Cretaceous sands The Southern Foothills region has seen prolific production from fractured Triassic Baldonnel, Halfway and Charlie Lake formations. New highly productive wells tap deeper Pennsylvanian to Permian Stoddart Belloy sections along the western margin of the Foothills.

Complex and Rich Geology Regional Hydrothermal Dolomite (HTD) Slave Point, Wabamun, Debolt Shallow Gas Spirit River/Notikewin Deep Basin – Tight Gas Cadomin/Cutbank Ridge Northern Foothills Triassic & Debolt Cypress/Chowade/Muskwa-Kechika Liard Basin Nahanni/Mattson Active Emerging Plays Fault-associated hydrothermal dolomite reservoirs are a key component of Devonian exploration potential in NEBC. We see this in the Slave Point, Wabamun, Debolt - Hydrothermal dolomitization is defined as dolomitization under shallow burial depths by saline water at temperature and pressure greater than the ambient temperature and pressure of the host limestone. Shallow Gas - Spirit River/Notikewin Play Lowstand Notikewin sands – We see hundreds of new gas wells in zones above the traditional producing horizon north of Peace River Block. Deep Basin The tight gas component of the Deep Basin offers a huge potential resource that is now being exploited. Development of the Cadomin was initiated in 2004 and production continues to come on stream today. Northern Foothills - Cypress/Chowade areas – exploration and development of the Triassic Baldonnel, Charlie Lake and Halfway and the Mississippian Debolt. Potential exists for large thrust fault and anticline structures as well as deeper reef and bank edge developments. The Muskwa-Kechika area falls within the BC Foothills structural trend. Muskwa-Kechika Management Plan – October 1997. New tenures will not be issued without preparation of a pre-tenure plan. Oil and gas exploration and development is prohibited in all protected areas within the Muskwa-Kechika Area. Liard Basin and Fold Belt Region - Potential hydrocarbon objectives can occur in the Devonian Dunedin/Nahanni Formation, the Mississippian Banff, Debolt, and Mattson formations, and the Cretaceous Chinkeh and Scatter formations. The Nahanni holds significant potential in dolomitized reservoirs in the structural belt. The Debolt, Mattson, Kindle, Fantasque, and possibly the Triassic Grayling and Toad formations are potential objectives in structural closures on the Bovie Lake structure on the margin of the basin.

Shale Gas in British Columbia Industry interest in shale gas is high in northeast BC – testing of several units ongoing; production has just begun Two studies released on Devonian and Triassic Shale Gas Potential – copies available at our booth (International Pavilion #2241) New net profit royalty scheme is applicable to shale gas Many prospective shale gas horizons with good TOC, thermal maturity and moderate porosity: 1. Lower Mississippian and Upper Devonian horizons in the Besa River, Exshaw, Fort Simpson/Muskwa. Other Devonian shales in the Horn River Basin and Cordova Embayment 2. Triassic Doig play at Groundbirch (within Montney play trend) 3. Upper Montney play in the Swan, Bissette and Dawson areas (within Montney play trend)

Emerging Shale Gas Plays Horn River Basin North of Fort Nelson Potential in Devonian strata - primary targets are Muskwa/Evie Large active producers including EnCana, Apache, Devon, EOG, Nexen, ExxonMobil Canada - all active with experimental scheme approvals and drilling. OGIP 250 to 500 Tcf Montney Play Trend Unconventional tight gas/shale distributed over an area extending from north central Alberta to the northwest of Fort St. John in British Columbia Primary focus is on the Upper and Lower Montney using horizontal drilling techniques Active producers include Arc Energy Trust, Murphy Oil, EnCana, Duvernay Oil Corp. OGIP 35 to 250 Tcf Hot New Shale Gas Plays: HRB & Montney Recoverable resource numbers are a sliding scale depending on advances in technology (horizontal drilling and hydraulic fracturing play a key role in unlocking these resources) Horn River Basin - North of Fort Nelson Potential in Devonian strata - primary targets are Muskwa/Evie. Large active producers include EnCana, Apache, Devon, EOG, Nexen, ExxonMobil Canada - all active with experimental scheme approvals and drilling. OGIP 250 to 500 Tcf. Montney Play Trend - Unconventional tight gas/shale play is distributed over an area extending from north central Alberta to the northwest of Fort St. John in British Columbia Primary focus is on the Upper and Lower Montney using horizontal drilling techniques Active producers include Arc Energy Trust, Murphy Oil, EnCana, Duvernay Oil Corp. OGIP 35 to 250 Tcf

PNG Rights Sales in Shale Gas Plays Excellent indication of companies assembling exploration acreage in these areas. Dramatic increase in petroleum and natural gas rights sales in both the Horn River and the Montney since 2005. Well over the $1 billion mark in 2008 for both plays.

B.C. Government Support Lower royalties Reduced regulations Improved road access High quality geoscience information Full access to drill core and cuttings for all wells Favourable royalty regime (no immediate plans to change royalty structure) Have worked hard to streamline regulations in the province and provide a stable regulatory framework. Road access has improved measurably, particularly in the far northern regions of the province. High quality geoscience information publicly available. Core Facility is in Charlie Lake, BC - provides a central storage warehouse and research examination facility for core recovered from drilling operations.

Royalty Incentives Existing royalty reductions for deep gas, marginal plays (e.g. small or shallow pools), coalbed gas, summer drilling New net profit royalty - small royalty on production before payout of capital investment Infrastructure Royalty Credit Program for roads and pipelines A number of targeted royalty programs are in place: Summer Royalty Program - Marginal Royalty Program - Deep Royalty Program - Coalbed Gas Royalty Program The Net Profit Royalty Program consists of a small gross royalty levied on production before payout of the capital investment, and thereafter a higher royalty rate applied to the net or gross revenue. This program applies to unconventional reservoirs that cannot be produced at economic flow rates, or that require assistance from massive stimulation treatments or special recovery processes. Intention is to stimulate development of high-risk projects such as shale gas, coalbed gas, tight gas, enhanced gas or oil recovery, remote gas and hydrates. The Infrastructure Royalty Credit Program helps facilitate an increase in oil and gas exploration and production in under-developed areas of the province. It also extends the drilling season in providing year-round access.

Infrastructure Since 2004, over $315 million in royalty credits allocated to oil and gas companies. Since 2004, the province has invested more than $176 million in public road improvements resulting in 72 new road-based projects and 53 new pipeline projects. A couple of examples of dedicated infrastructure programs, which are in place to support further exploration and development activity.

State of Oil and Gas Industry in B.C. Capital Spending by Industry in 2007 $5.5 Billion Public Road Improvements since 2004 $176 Million Total Sales Value of Oil & Gas Production in 2008 Over $8.6 Billion Oil and gas investment profile in the province is strong…

Visit us on line at www.em.gov.bc.ca Information on British Columbia’s oil and gas industry is available in this brochure. More details at our booth: Check out “British Columbia Oil and Gas 2009 Yours to Explore” We’re at booth 2241 here in the International Pavilion Booth IP 2241 Visit us on line at www.em.gov.bc.ca