Oil Sands Supply and Investment Outlook. China-Canada Energy Cooperation Conference

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1 Relevant Independent Objective Oil Sands Supply and Investment Outlook China-Canada Energy Cooperation Conference Bob Dunbar Senior Director, Research Canadian Energy Research Institute University of Alberta November 26, 24 Presentation Outline Oil Sands Overview Reserves Current production Outlook Economics Supply projections Capital spending expectations Energy Needs Conclusions Canadian Energy Research Institute 1

Oil Sands Areas Source:EUB Alberta s Reserves 23 and Supply/Demand Outlook 24-213 Initial volume in place (bitumen): 1,629 x 1 9 barrels Initial established reserves: 178 x 1 9 barrels Cumulative

2 Oil Sands Areas Source:EUB Alberta s Reserves 23 and Supply/Demand Outlook Initial volume in place (bitumen): 1,629 x 1 9 barrels Initial established reserves: 178 x 1 9 barrels Cumulative production: 4 x 1 9 barrels Remaining established reserves: 174 x 1 9 barrels Alberta and Saudi Oil Reserves Billion Barrels AB Conventional Oil AB Bitumen Saudi Conventional Oil Source:EUB Alberta s Reserves 23 and Supply/Demand Outlook ; BP Statistical Review of World Energy, June 24 Canadian Energy Research Institute 2

Resources and Reserves Mineable Resources/Reserves < 75m depth to top of oil sands formation Athabasca only 7% of OBIP; 2% of initial established reserves; 7% of

CL and PR 93% of OBIP; 8% of initial established reserves; 3% of cumulative production Canada s Oil Sands Industry Alberta s Oil Sands provided 35% of Canada s crude

3 Resources and Reserves Mineable Resources/Reserves < 75m depth to top of oil sands formation Athabasca only 7% of OBIP; 2% of initial established reserves; 7% of cumulative production Source:EUB Alberta s Reserves 23 and Supply/Demand Outlook In Situ Resources/Reserves > 75m depth to top of oil sands formation Athabasca, CL and PR 93% of OBIP; 8% of initial established reserves; 3% of cumulative production Canada s Oil Sands Industry Alberta s Oil Sands provided 35% of Canada s crude oil production in Synthetic Bitumen Light Heavy Condensate Source: National Energy Board Source: National Energy Board Canadian Energy Research Institute 3

4 CERI s Oil Sands Supply Outlook Oil Sands Supply Outlook Potential Supply and Costs of Crude Bitumen and Synthetic Crude Oil in Canada, CERI Study No. 18 Released March 3, 24 Oil Sands Economics Internal Rate of Return (Nominal) 3% 25% 2% 15% 1% 5% % $2 $21 $22 $23 $24 $25 Approximate OPEC Price-Band $26 $27 $28 $29 $3 WTI at Cushing (US$/b, 23) $31 $32 3Mb/d CSS 3Mb/d SAGD 1Mb/d MineExtr 1Mb/d MineExtUpgr Source: CERI Study No. 18 Canadian Energy Research Institute 4

5 Oil Sands Supply Cost vs. Natural Gas Price WTI at Cushing (US$/b, 23) $29 $28 $27 $26 $25 $24 $23 $22 $21 $2 US$6.79/MMBtu Nov 23, 24 3Mb/d CSS 3Mb/d SAGD 1Mb/d MineExtr 1Mb/d MineExtUpgr $1 $2 $3 $4 $5 $6 $7 NYMEX Gas Price (US$/MMBtu, 23) Source: CERI Study No. 18 Unconstrained Bitumen Supply Projection 4,5 4, Gross Crude Bitumen Production - Mb/d 3,5 3, 2,5 2, 1,5 1, Mining In Situ Primary Source: CERI Study No. 18 Canadian Energy Research Institute 5

6 Oil Sands Expenditures Initial Capital (C$ 23) Athabasca SAGD Cold lake CSS Athabasca Mining & Extraction Athabasca Mining, Extraction & Upgrading $12,1 per b/d $19,1 per b/d $18, per b/d $36, per b/d Operating Costs (C$ 23)* Athabasca SAGD Cold lake CSS Athabasca Mining & Extraction Athabasca Mining, Extraction & Upgrading $7.9 per barrel $7.63 per barrel $6.23 per barrel $12.95 per barrel * Natural gas C$4.74/GJ, Electricity C$4/MWh Unconstrained Capital Expenditures ($Millions, 23) 1, 9, 8, 7, 6, 5, 4, 3, 2, 1, Sustaining New In Situ New M&E New Upgrading Canadian Energy Research Institute 6

7 All Supply Projections 4,5 Gross Crude Bitumen Production - Mb/d 4, 3,5 3, 2,5 2, 1,5 1, Case 1: Unconstrained Case 2: Adjusted Case 3: High Case 4: Reference Case 5: Low Supply Outlook in 217 (million b/d) SCO Bitumen Total Unconstrained High (US$32/b) Reference (US$25/b) Low (US$18/b) Canadian Energy Research Institute 7

8 Average Capital Spending (C$ billions per year) Annual Average CAPEX (24-213) Unconstrained 6.2 High (US$32/b) 4.4 Reference (US$25/b) 3.1 Low (US$18/b) 1. Major Cold Lake CSS Projects Operating Imperial Cold Lake, Phases 1-13, 15 Mb/d (bitumen) CNRL Primrose/ Wolf Lake, 57 Mb/d (bitumen) Construction CNRL PAW Phase 1 and Phase 2 Expansions, 6 Mb/d (bitumen) Approved Blackrock Orion, 2 Mb/d (bitumen) Husky Tucker, 3 Mb/d (bitumen) Canadian Energy Research Institute 8

9 Major Athabasca SAGD Projects Operating EnCana Christina Lake, 1 Mb/d (bitumen) EnCana Foster Creek, 3 Mb/d (bitumen) JACOS Hangingstone, 1 Mb/d (bitumen) Petro-Canada Mackay River, 3 Mb/d (bitumen) Suncor Firebag Phase 1, 35 Mb/d (bitumen) Construction Suncor Firebag Phase 2, 35 Mb/d (bitumen) OPTI/Nexen Long Lake, 7 Mb/d (bitumen) ConocoPhillips Surmont Phase 1, 25 Mb/d (bitumen) Approved Suncor Firebag Phases 3-4, 7 Mb/d (bitumen) ConocoPhillips Surmont Phases 1-3, 75 Mb/d (bitumen) Petro-Canada Meadow Creek, 8 Mb/d (bitumen) Mining Projects Operating Suncor Mb/d (SCO) Syncrude - 26 Mb/d (SCO) AOSP (Muskeg River) Mb/d (bitumen) Under Construction Syncrude Stage 3-11 Mb/d (SCO) Approved True North (Fort Hills) - 19 Mb/d (bitumen) CNRL (Horizon) Mb/d (SCO) AOSP (Jackpine) - 2 Mb/d (bitumen) Others are in various stages of the regulatory process Canadian Energy Research Institute 9

10 Canadian Upgraders Integrated Upgraders Suncor Syncrude AOSP (Scotford) Standalone Upgraders Husky (Lloydminster) Federated Co-op (Regina) Standalone Upgrader Proposals BA Energy (Strathcona) Northwest Upgrading (Strathcona) Oil Sands External Natural Gas Requirements Cubic Feet per Barrel 1, External Gas Requirements In Situ Mining Upgrading Thermal in situ projects are very large energy consumers Gas use depends on recovery performance Gas use for upgrading is higher for production of higher quality synthetic crude oil Fuel Hydrogen Today Added Future Hydrogen Source: Oil Sands Technology Roadmap Canadian Energy Research Institute 1

11 Unconstrained Natural Gas Demand (million cf/d) 3, 2,5 2, 1,5 1, In Situ Mining & Extraction Upgrading Projected Western Canadian Natural Gas Production Bcf/d WCSB Conv CBM NWT Source: CERI Study No. 17 Source: CERI Study No. 17 Canadian Energy Research Institute 11

12 Implications The oil sands industry is competing for supply with other North American natural gas consumers Strong demand for North American natural gas and supply shortages will sustain current high natural gas prices High prices are providing incentives for: Further industry efficiency improvements Development of new recovery technologies Examination of alternative fuels CERI Oil Sands Supply Outlook - Conclusions Alberta s oil sands industry has a very robust future given a reasonable outlook for crude oil prices The industry needs crude oil prices of US$25/b (23 real, WTI at Cushing) to recover costs and earn an adequate return on investment The industry faces many challenges that must be overcome for sustained growth Many projects will proceed, others will not Canadian Energy Research Institute 12

Oil Sands Supply Outlook Potential Supply and Costs of Crude Bitumen and Synthetic Crude Oil in Canada,

Oil Sands Supply Outlook Potential Supply and Costs of Crude Bitumen and Synthetic Crude Oil in Canada, 2003-2017 Breakfast Seminar March 10, 2004 1 Agenda Introduction Study Conclusions Overview of Alberta