1. Future Global Trends – Resource security: How Sovereign Wealth Funds will benefit

2. A simple observation The world does not run on money it runs on energy Money is just a permit to buy energy To enhance sovereign wealth The yield must exceed the increase in energy values 2 Investment Funds Conference Doha 26/27 November 2007

3. Where are oil and energy prices going? Investment Funds Conference Doha 26/27 November 2007 3

4. The CIBC answer Assessed the likely supply shortfall and the oil price needed to reduce demand 2006 1mn b/d and $61/barrel 2007 2.8mn b/d and $70/barrel 2008 4.8mn b/d and $80/barrel 2009 6.7mn b/d and $90/barrel 2010 8.9mn b/d and $101/barrel Investment Funds Conference Doha 26/27 November 2007 4

5. The challenge: All economies need plentiful energy to function Food needs energy to produce, harvest and supply to consumers Metals and minerals need energy to refine, transport and supply Water needs energy to transport Oil is the dominant energy it prices all the others – future availability is now in question All energy prices are set to rise 5 Investment Funds Conference Doha 26/27 November 2007

6. Filling the gap produced by peaking oil supplies The value of all energies will rise Are these investment opportunities for Sovereign Wealth Funds? In Near Oil – tar sands, heavy oil, shale In Gas supply and gas supply infrastructure In Coal supply and coal supply infrastructure 6 Investment Funds Conference Doha 26/27 November 2007

7. If all energy prices are rising Sovereign wealth funds will see massive and escalating flows of additional funds All aspects of energy production will produce high returns But will other areas such as key metals and minerals be even more rewarding? Do rising energy and raw material costs threaten global growth? Can the risks of economic slowdown be hedged? 7 Investment Funds Conference Doha 26/27 November 2007

8. New Epoch

9. Runaway inflation in energy and metals since end 2002 -- a historic turning point? Oil -- $24 to $90 or 275% Gas in US -- $4 to $7 or 75% LNG in Japan -- $4.3 to $9 or 109% Coal in Europe -- $35 to $100 or 185% Uranium oxide -- $10 to $100 or 900% Nickel 630%, Zinc 497%, Lead 705% Cobalt 331%, Titanium 600%, Vanadium 2000% 8 Investment Funds Conference Doha 26/27 November 2007

10. 2002/2003 -- A historic discontinuity? From the 1880s the real value of most raw materials declined until 2002/2003. Oil declined in real terms from 1880 until 1970 and from 1980 to 2002 During this period the world was short of manufacturing capacity but long on potential raw material supply. The pricing power was with the manufacturers Today there is plenty (an excess?) of manufacturing capacity but energy and raw materials are supply constrained and prices are advancing steadily. The pricing power is now with the energy and raw material producers 9 Investment Funds Conference Doha 26/27 November 2007

11. Supply security and import dependence (2006) CountryOil importsGas importsCoal imports Japan99.9% 99.4% EU 2584.5%41%44% India69%20%7% USA67%14%Exports 5% Total OECD60%25%13% China49%None LNG soonStarted 2007 RussiaExports 72%Exports 30%Exports 22% 10 Investment Funds Conference Doha 26/27 November 2007

12. Gas to Boom

13. Why is gas so undervalued? In all the OECD countries coal use rose in 2006 And OECD gas use fell in 2006 At the margin electricity generators were turning on coal plants at the expense of gas plants Coal was more cost competitive in 2006 Is this sustainable? 11 Investment Funds Conference Doha 26/27 November 2007

14. Low gas prices are unsustainable Imminent falls in Canadian production Potential declines in Russian gas supply without major investment Emerging constraints on coal supply leading to coal price inflation Gas powered generating plants are quicker and cheaper to built Gas is more environmentally acceptable Carbon costs are starting to rise So is gas generation a profitable investment? 12 Investment Funds Conference Doha 26/27 November 2007

15. Reasons that gas prices will rise Limited number of coal producers Rapid inflation in coal prices Bottlenecks for coal loading in Australia and South Africa Gas is more flexible than coal (more uses) On a calorific equivalence to fuel oil gas prices would be $13 million Btu Carbon values will rise as will restrictions on coal usage 13 Investment Funds Conference Doha 26/27 November 2007

16. Just 8 Large coal producers (2006) Top 4 have 80% of reserves (reserves in million tonnes, Prodn/conspt in mtoe) CountryReservesProductionConsumptionExports China114500/12.6%1212/39.4%1191Imports 2007 USA246643/27.1%595/19.3%56728 or 4.7% India92445/10.2%209/6.8%238-29 or -12.2% Australia78500/8.8%203/6.6%51152 or 74.8% South Africa48750/5.4%144/4.7%9450 or 34.7% Russia157010/17.3%144/4.7%11331 or 21.5% Indonesia4968/0.5%120/3.9%2892 or 76.7% Poland14000/1.5%67/2.2%589 or 13.4% 14Investment Funds Conference Doha 26/27 November 2007

17. LNG capacity to 2015 is very tight Because of failure to sanction investment on lack of guaranteed offtake Yet all around the world countries are planning to import LNG for environmental and security of supply reasons Russian gas supply is constrained to 2013 Canadian gas supply is set to fall Another investment opportunity? 15 Investment Funds Conference Doha 26/27 November 2007

18. Conclusion Sovereign Wealth Funds will increase massively The balance of power has swung from the manufacturers to the energy and raw material producers There are huge investment opportunities in energy and raw material production A new balance of advantage is emerging Few currently recognise the significance of this long term change THANK YOU FOR YOUR ATTENTION Investment Funds Conference Doha 26/27 November 2007