1. Working with Unconventional Oil Producers I-Can Innovation School Rick Tofani VP New Ventures (acting) October 20 th, 2011

2. AITF’s Vision and Mission Vision: AITF is recognized as Canada’s leader in generating prosperity by accelerating innovation and entrepreneurship. Mandate: Our business is to help build globally competitive commerce in Alberta.

3. Edmonton Devon  600 employees  100,000 m 2 of bench and pilot-scale facilities  Industry driven contract research programs  1,000+ industry clients per year  Funding programs focused on talent development  Six regional innovation networks  ‘Bringing Technology to Market’ funding programs  $160 million annual budget Vegreville Alberta Innovates – Technology Futures

4.  Mandate: Tech Futures' business is to build globally competitive commerce in Alberta through  Facilitating the commercial use of new technologies  Developing new knowledge-based industry clusters  Encouraging an entrepreneurial culture in Alberta  Tech Futures offers  Technical R&D support and advisory services  Innovation and talent development programs  Regionally accessible commercialization support

5. Alberta Innovates – Technology Futures

6. Funding Programs  Post Secondary Investments – funding programs for research chairs (research intensive institutions) and research and commercialization centers ($25 million)  New Ventures – a number funding programs for industry (6), university TTO’s & college applied research offices, technology development advisors (TDAs) and NGOs ($35 million)

8. Heavy Oil and Oil Sands (HOOS) The HOOS group at Tech Futures is currently working in the following sub-program areas: Recovery technologies Surface separation technologies Production technologies Quantitative imaging centre Analytical laboratory support

9. ……all in collaboration with other stakeholders such as Canadian and international industry, government, universities and colleges ($100 million/year) AITF A/R and Commercialization Program Model

10. Our business is to help build globally competitive commerce in Alberta. Innovation Bridges the Gap Traditional ARC FocusIndustry Focus AITF’s Focus Now Commercial Product Discovery

11. Oil Sands and Heavy Oil Focus!

12. Oil Sands Statistics (2009) Capital investment: – $13.5 billion ($20.7 in 2008) – $104 billion of infrastructure built from 1999–2009 – $40 billion expected by then end of 2012 Provincial Royalties: $2.2B Proven Reserves at Year End: – 169.9 billion barrels – 80% by In situ, 20% by mining Industry Revenues: $23.3B Employment: 136,200 (direct) Production: – 1.5 million bbl/d (741,000 bbl/d in 2002) Mining: 55% In-situ: 45% – Oil sands production will grow 3.5 million bbl/d by 2015 4.0 million bbl/d by 2020 For more information go to: www.energy.alberta.ca/OilSands/791.asp

13. Nature of Resource Source: ERCB ST98-2010

14. ARC founded Bitumen Production Time Bitumount Suncor Syncrude Cold Lake SAGD technology 192119451965197519852000 Rise of Oil Sands

15. Government R&D $ vs Production 2009 New Projects Online

16. Stakeholder Challenges/Opportunities Canadian Association of Petroleum Producers (CAPP) Costs continue to increase – Capital is global, not just regional – One of the major operating costs is fuel (natural gas) Labour availability Infrastructure – Private: pipelines, upgraders, refineries (new markets), etc. – Public: roads, housing, education, health care, etc. Environmental Protection – Air, water, land, wildlife New markets – Diluent supply and upgrading Government Policy – royalty, value-added & environmental Alberta Innovates – Energy & Environment Solutions (AIEES) Challenges – technology innovation Natural gas substitution – Rising cost and future availability of natural gas in 2008 but 2011? – Steam generation – Hydrogen for upgrading Improved recovery processes – Significant portion of resource not currently economic Air emissions, land & water management – Land disturbance / reclamation costs – Manage water demands High GHG emissions add significant risks

17. OLD Conveyor & Tumblers (80°C) Vertical Wells Dragline & Bucketwheel Coal fired Power Plant NEW SAGD Horizontal Wells Truck & Shovel Low Energy Extraction 25 - 50° C Hydrotransport Co-Gen Power Plants Energy Efficiency 45% Reduction in C0 2 per barrel (1990 vs 2008 technology) Oil Sands: Improved Efficiency

18. Hybrid Solvent Electrical Energy Lower Energy Extraction Hydrotransport Polygeneration Oil Sands: Future Near zero emissions of sulphur, nitrogen oxides, particulates, mercury, trace elements and organics 40-50% reduction in CO 2 emissions by efficiency improvements, near 100% reduction with carbon management and storage Limited net water use Maximized solid waste usage and value added products Full and effective site remediation & reclamation Low thermal signatures

19. SAG-D Steam Assisted Gravity Drainage

20. AACI Research Program  AITF Core Industry Research Program "To develop significantly improved, economically viable and environmentally sustainable in-situ recovery technologies for heavy oil and bitumen through research evaluation and technology partnerships"

21. AACI Research Program  Focused:  In situ recovery of heavy oil and bitumen  Reservoir and near wellbore phenomena  Stable program currently in 28th year  Industry driven & directed  19 industry members  1 government member  1 vote / member  70+ staff at one time  ~ $ 3.8 million / year

22. AACI Members: 2010/11 Alberta Innovates – Energy & Environmental Solutions Alberta Innovates - Technology Futures BP Petroleum Canadian Natural Resources Chevron Computer Modelling Group ConocoPhillips Devon Canada ENI Husky Oil NOTE: $140k/member AITF investment, $1.1 m/yr Imperial Oil Resources JACOS Marathon Oil Canada Nexen Oilsands Quest Inc. Repsol YPF Schlumberger Shell International Statoil Suncor Total

23. RD&D Delivery Mechanisms Value proposition well defined!  Good technology roadmap defined and evergreened  Need strong implementation strategy (5 year windows) Champion(s) in place and passionate! Adequately funded – but not too much! Collaboration open to all stakeholders  Finding the win-win (i.e., AITF/Idaho National Lab) Pre-competitive vs competitive research Strong program design in place (the technical business case):  Representatives of government/producers focus on program direction and decision making  Foundation of program is the relationship  Trust and confidentiality critical  Flexible business/contractual mechanisms  Understanding of IP ownership, management and use rights  Effective RD&D program management and administration

24. AITF Working Arrangements Flexible mechanisms for short- & long-term benefit:  Joint government-industry research projects & consortia  Contract R&D  Occupancy and service agreements Medium to large-scale demonstration projects Intellectual property management, licensing & commercialization support (Recently lost mgmnt contract - $1m/year for IP) Support to industry:  Help link, both technically and personally, to the appropriate Alberta based energy operator  Provide technical support to adapt technology to the Alberta situation and environment  Helps to focus activity in the Alberta energy industry and dramatically reduce their risk in developing business opportunities Collaborative work with academia, government and research institutes, and industry

25. AACI Leadership Structure Policy & Program Committee Program Manager Ideation Leader Project Leaders Evaluation Leader Project Leaders Technology Development Leaders Project Leaders IP Leader IP Creators & Improvers Field Application Leaders Project Leaders Program Administrator Technical Committee

26. AACI Technologies Current technologies being researched:  Expanding Solvent SAGD (& Declining Pressure ES-SAGD)  Steam Butane Hybrid (SBH) Process  Multi-Stage Combustion Assisted Gravity Drainage (MS-CAGD) Process  Cyclic Solvent Injection (CSI)  Steam Assisted Gravity Drainage (SAGD)  Waterflooding

27. AACI Program Structure IP Stage Program Support Area Program Management, Capital Amortization, Misc. Supporting Projects Program Support Area Program Management, Capital Amortization, Misc. Supporting Projects Ideation Incubator Stage Field Support Stage Commercial recovery processes research & field piloting support Field Support Stage Commercial recovery processes research & field piloting support Idea understandable & reasonable Idea likely achievable & commercial Idea developed as far as reasonable AACI Program Structure and Flow Chart Development Stage Evaluation Stage

28. Tripartite Strategy Laboratory - Scaled - Field scale - Mechanistic Numerical Simulation - High level users - Model development Field - Data - Testing - Pilot support Uncertainty Reduction Process Development

29. AACI Research Program Membership Benefits  Access to research results from all years of program  Prompt disclosure by all is practiced  Maintains R&D capacity/skills to support all industry  Free License for use of technology developed during membership  Publication and promotional rights – upon approval  One vote on Policy and Program Committee  One vote on Technical Committee  Unlimited attendance at workshops and conferences  Direct communication between researchers and engineering and field staff throughout the year

30. Learnings & Benefits  Learning Never Stops and there’s always new issues, priorities or obstacles!  Partners go, new partners come in, people and therefore ideas perceptions change (regularly).  Need to over communicate and focus.  Over $1 billion per year in Royalties to the GoA from SAGD operations, but its really about the outcomes..Building the oilsands industry. SAGD & others enables  OSTECH/OS-PORT – next generation technology portal and technology assessment and therefore ongoing new opportunities for the AITF (AACI) Program.  Building a “technology test mine” in Fort McMurray…is required to test technology at pilot stages.

31. Defining Innovation Never forget the most important element of innovation ! http://www.youtube.com/watch?v=C7nqzi4VrW8

32.  Questions and Comments from Others !

33. Contact Information Rick Tofani Vice President New Ventures (acting) 403.210.5203 rick.tofani@albertainnovates.ca