Canadas Oil Sands Addressing Concerns & Debunking Myths Pierre - PowerPoint PPT Presentation

Canada’s Oil Sands Addressing Concerns & Debunking Myths Pierre Alvarez November 2007

Canadian Association of Petroleum Producers • 150 producer member companies who produce more than 95 per cent of Canada’s natural gas and crude oil � Explore for, develop and produce natural gas, natural gas liquids, crude oil, synthetic crude oil, bitumen and sulphur throughout Canada • 130 associate members provide a wide range of services that support the upstream crude oil and natural gas industry

Canada’s Oil and Gas I ndustry in the North American Energy Economy Canada is the world’s 3rd • largest natural gas producer Canadian Canadian 2006 Natural Gas Petroleum Canada is the world’s 7th • largest crude oil producer Ranking of importers to – and moving up the list quickly #1 #1 U.S. with oil sands production increasing Share of U.S. 16% 11% consumption Canada is the largest supplier • of energy to the United States Share of U.S. 86% 16% imports Canada is the fifth largest • energy producer in the world Canadian energy production • has increased by over 80% since 1980

U.S. I mports of Crude Oil and Petroleum Products by Country of Origin Petroleum Products #1 Crude Oil 2 500 Canada is the largest supplier of crude oil and of crude oil and thousand barrels per day 2 000 petroleum products to the US. 1 500 1 000 500 0 Canada Mexico Saudi VenezuelaNigeria Algeria Iraq Angola Russia Virgin Ecuador Unit ed Norw ay Arabia Islands Kingdom Source: EI A, Jan-Dec 2006

Canadian Oil & Gas in California Source of California Supply Natural Gas Crude Oil Saudi Ecuador I raq Canada Arabia 8% Canada 7% 1% 10% 20% Brazil 4% Other I mports Other 9% Domestic Supply 24% Domestic California supply 37% 80%

Global Crude Oil Reserves by Country I ncludes 174 billion barrels of oil sands reserves 300 260 Canada, with 174 billion barrels in oil sands reserves, ranks 2 nd only to 250 Saudi Arabia in global oil reserves 200 179 billion barrels 136 150 115 99 92 100 80 60 41 36 50 22 0 Saudi Canada Iran Iraq Kuwait Abu Dhabi Venezuela Russia Libya Nigeria United Arabia States Source: Oil & Gas Journal Dec. 2006

Oil Sands – Resistance to flow 1 000 000 Atha- 100 000 basca Peanut Bitumen Butter Cold Viscosity @ Room Temperature (cP) Lake 10 000 Bitumen Honey Ketchup 1 000 Pancake Syrup 100 Olive Oil 10 Light Crude Oil 1 Water 0 Source: Imperial Oil

Top Ten Myths about the Oil Sands 1. The oil sands are easy to produce and massively profitable 2. The oil sands are subsidised 3. Oil sands use dated & dirty technology 4. Oil sands will consume all of North America’s natural gas 5. Environmental guidelines for the oil sands are non existent 6. Oil sands cause the majority of Canada’s air pollution 7. Oil sands will use all of Canada’s water 8. Oil sands mines can never be reclaimed 9. Oil sands can meet the future supply of US demand 10.Oil sands is already a major oil supplier to California

Myth # 1 The oil sands are easy to produce and massively profitable Capital Cost of 100,000 bbl/ day project $3.3 billion $10-11 billion Capital $ per bbl/day (upgraded) 120 000 100 000 80 000 60 000 40 000 20 000 0 Suncor - Albian Syncrude - Nexen-OPTI CNRL - Shell - PCA/UTS Millennium Aurora 2 & Horizon Muskeg & Fort Hills UE 1* Scotford Production 2001 2003 2006 2007 2008 2011 Start Date 2010 * Syncrude includes base plant quality improvements and power

Myth # 2 The oil sands are subsidised Oil sand projects operate in an open market on the same basis as all other industries � Government ownership in 1970’s has been sold � Capital cost tax deferral program has been discontinued � Same tax treatment as all corporations 21% Federal + 10% Provincial • � Recent royalty review has proposed even higher oil sands royalty rates Up to 40% royalty (in addition to tax) • Effective July 1 st 2007 oilsands production pays large � final emitter levy

Myth # 3 Oil Sands use dated & dirty technology 20% less than 50 m deep Mining & Upgrading Recoverable reserves = 35 billion barrels Source: Shell Canada Source: Syncrude Cyclic Steam Process 80% more than 50 m deep Steam Assisted I n-situ Gravity Drainage Recoverable reserves (SAGD) = 140 billion barrels Source: Imperial Oil

Myth # 4 Oil sands will consume all of North America’s natural gas P urchased Natural Gas Consumed in the oil sands 20 Oil sands gas demand 18 Alberta natural gas production 16 14 12 Bcf/ day 10 8 6 4 2 0 2006 2008 2010 2012 2014 2016 Source: Alberta Energy & Utilities Board Reserves & Supply/Demand Outlook 2007

Oil Sands Production Technologies Alternatives to Natural Gas THAI TM (Toe-to-Heel Air I njection) OrCrude Process - Nexen/ OPTI Longlake Petrobank Whitesands Project Suncor 3 rd Upgrader - Coke Gasification Multiphase Superfine Atomized Residue - DeerCreek WASTE WATER OXYGEN PETROLEUM COKE GASIFIER CO 2 CAPTURE & SYNTHETIC SEQUESTER GAS (CO, H 2 , CO 2 ) HYDROGEN FUEL BOILERS HYDROTREATORS STEAM & ELECTRICITY

Natural gas intensity is declining Natural Gas use in Oil Sands 0.70 0.60 Thousand cubic feet per barrel 0.50 0.40 0.30 0.20 0.10 0.00 1994 - 1997 1998 - 2000 2001 - 2003 New Technologies

Myth # 5 Environmental guidelines for the oil sands are non existent • Most stringent environmental protection laws in the world are in place • Must complete pre-development EI A • Must file and update and fund reclamation • Must continually monitor and report • Must reduce GHG emissions intensity • Limits on water use – 80-90% recycle rates

Myth # 6 Oil sands cause the majority of Canada’s air pollution Oil sands only account for 4% of GHG emissions Solvent & Waste 4% Buildings Oil & Gas ex OS 6% 19% Agriculture 8% Oil Sands 4% Transportation Electricity and 27% Heat Generation 18% Other industry 14%

Myth # 7 Oil sands will use all of Canada’s water – Total Oil & Gas industry • Accounts for 7.2% of water allocated in Alberta • Actual use by industry is only 1/ 3 of allocated amount – Oil Sands water use • Allocated 1% of Athabasca River flow • Actual use is much lower • 80-90% water recycle • I n situ shifting to use of saline water – Emerging technologies are reduce industry’s water consumption per-barrel

Myth # 8 Oil Sands land can never be reclaimed Oil Sands Land Use • Reclamation and • remediation mandated � Plans filed prior to development � Funding of liability required I n situ development • � 80% of the resource � Directional drilling from single site to reduce impact � Use of saline water

Myth # 9 Oil sands can meet the future supply of US demand U.S. Crude Oil & Refined Product Consumption 3 0 2 5 2 0 m illio n b a rre ls/ d a y 1 5 1 0 5 0 2 0 0 5 2 0 1 0 2 0 1 5 2 0 2 0 2 0 2 5 2 0 3 0 U.S. DOE/EIA Annual Energy Outlook February 2007 & CAPP

I EA estimates of Global Demand and Oil Sands Supply in 2030 Oil Sands Supply 3% Global Demand 97% Global Demand in 2030: 116 million barrels/ day Oil Sands production: 3-4 million barrels/ day

Myth # 10 The Oil sands is already a major oil supplier to California Sources of California crude oil Saudi I raq Ecuador Arabia Canada 7% 8% 10% 1% Brazil 4% Other I mports 9% Other Domestic 24% California supply 37%

Crude Oil Supply Sources to California Refineries 2 100 1 800 Foreign 1 500 thousand barrels/ day 1 200 Alaska 900 600 California 300 0 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 Source: California Energy Commission

Canadian Oil Production Conventional, Oil Sands and Offshore Actual Forecast 5 500 Oil Sands Production: 5 000 Offshore 2005 = 1.0 million b/ d 4 500 thousand barrels per day 2015 = 3.0-3.4 mm b/ d 4 000 Moderate 2020 = 3.8-4.4 mm b/ d 3 500 Growth Case 3 000 2 500 2 000 Oil Sands 1 500 1 000 500 Western Canadian Conventional Oil 0 1980 1985 1990 1995 2000 2005 2010 2015 2020 Source: CAPP

Canadian and U.S. Crude Oil Pipeline Alternatives ENBRIDGE GATEWAY Fort McMurray • Asia Growing oil sands production will • California Edmonton require new pipeline capacity to • Anacortes Hardisty Burnaby existing and expanded markets Anacortes Montreal Superior TRANSCANADA KEYSTONE Portland Casper Salt Lake City San Francisco Sarnia Midwest Chicago ALTEX ENERGY d California a Patoka e Wood Potential h r a River Los Angeles e Pipeline Expansion p S Routes Cushing Extensions to New Markets USGC Houston St. James

• Additional information

Global Energy-Related Emissions 2005 Europe 17% Eurasia 9% Japan 4% India 4% China Canada 20% 2% Australia 1% Other 21% United States 22%

Global Coal + Oil Sands CO 2 Emissions 2005 Total 11,387 m tonnes CO 2 Canada Oil Sands, 30 Rest of World, 1233 Canada Coal, 153 Australia, 232 Japan, 417 China, 4341 Eurasia, 694 India, 791 Europe, 1356 United States, 2142