1. Canadian Oil Sands: Opportunities and Challenges November 3, 2010

2. 2 OVERVIEW Oil Sands Introduction Recovery Techniques – Mining – In Situ Oil Sands Projects and Spending Economic Fundamentals Oil Sands Challenges Legal

3. 3 ALBERTA’S OIL SANDS What are Oil Sands? –A mixture of sand and other rock material containing deposits of bitumen (a heavy crude oil; API gravity typically <10) –At room temperature, bitumen is near solid state and must be converted to upgraded crude (typically API gravity of between 30 to 40)

4. 4 Alberta’s Oil Sands Deposits

5. 5 Crude Bitumen In-Place Volumes and Reserves Initial Volume In-Place 1,629 Billion Barrels Initial Established Reserves 178 Billion Barrels 113 Mineable 35 Mineable

6. 6 RECOVERABLE OIL RESERVES

7. 7 CANADIAN PRODUCTION GROWTH

8. 8 US IMPORTS

9. 9 RECOVERY TECHNIQUES Two main types of recovery methods: In situ (meaning “in place”) Surface mining & extraction

10. 10 BITUMEN PRODUCTION TECHNOLOGY CURVE Knowledge Time SAGD NEW MINING

11. 11 MCMURRAY FORMATION OUTCROP

12. 12 STEAM ASSISTED GRAVITY DRAINAGE From EnCana Website

13. 13 SURFACE MINING & EXTRACTION Overlying muskeg must be drained before oil sands can be mined; often carried out in winter Trucks & Shovels used to expose top of oil sands and prepare site for mining Oil sands formations are typically 40 to 60 meters thick and sit on top of limestone beds Over time, different techniques have been developed to mine oil sands

14. 14 OPPORTUNITIES Oil sands account for about half of global oil reserves for private investment (CAPP) Oil sands production in 2008 was 1.3 million barrels per day. Expected to grow to 3.3 million barrels per day by 2025 (CAPP) Oil sands development is expected to contribute over $1.7 trillion to North America’s economy over the next 25 years (Canadian Energy Research Institute)

15. 15 ATTRACTIVE ECONOMIC FUNDAMENTALS Factors making oil sands investments appealing: Mining projects are characterized by: –massive resources (measured in Billions of bbls rather than millions of bbls) –essentially “no” exploration risk; –non-declining production profiles; and –extremely long reserve life (typically 40 to 50 years). In-Situ projects are characterized by: –massive resources (measured in Billions of bbls rather than millions of bbls); –low exploration risk (increased production risk relative to mining); and –extremely long reserve life (typically 40 to 50 years). Both Mining and In-Situ have an attractive royalty regime.

16. 16 PROJECT ECONOMICS “A new mine requires a crude price of roughly $80 (US) a barrel... SAGD needs $65.” Peter Ogden National Bank Financial The Globe and Mail September 21, 2010

17. 17 OIL SANDS ROYALTIES Oil sands projects are subject to a royalty payable on gross revenues ranging from 1% to 9% (depending on the price of oil) After project payout, the oil sands royalty becomes the greater of the gross revenue royalty described above and a net revenue royalty ranging from 25% to 40% Both oil sands royalty rates hit their maximum at oil prices of $120/bbl

18. 18 CANADIAN CORPORATE TAX RATES 201020112012 Federal 18%17%15% Alberta 10%10%10%

19. 19 OIL SANDS CHALLENGES Challenges: Use of land Use of water Use of natural gas Infrastructure requirements Workforce availability Access to markets Costs Greenhouse gas emissions Research and development is aimed at: Sustainable resource development in an environmentally responsible manner Reducing costs

20. 20 LEGAL MATTERS Corporate acquisitions by foreign companies require approval from Canada’s Minister of Industry, under the Investment Canada Act, based on whether transaction is of “net benefit” to Canada The purchase terms are negotiated between the buyer and seller with the Government of Canada very rarely offering incentives for the purchaser Government to government linkages are not common practice Recent trend for foreign companies to invest in Canadian companies through equity investments or joint ventures as opposed to outright acquisitions

21. 21 QUESTIONS ?