Canadian Oil Sands Canadian Oil Sands 3 0 400 300 200 100 (Billion M ) Canadacanada’’Ss Oiloil Sandssands

Home , Cold Lake (Alberta), Fort McMurray, Long Lake (oil sands), Oil sands, OPEC

CanadianCanadian OilOil Sands:Sands: DevelopmentDevelopment andand FutureFuture OutlookOutlook

National Academies Workshop on Trends in Oil Supply/Demand and Peaking of Conventional Oil Production

Oct 20-21, 2005

Eddy Isaacs Managing Director Alberta Energy Research Institute

WWW.AERI.AB.CA Gas Hydrate Deep Gas Shale Gas Tight Gas CBM gas

(2005) (2005) Increased Costs Conventional 0il & Advanced Technology Market Price Sensitivity Environmental Concerns

Etherington Etherington n

Heavy Oil e Extra Heavy um t i (2002) & B (2002) & bbls 952 billion

Holditch Holditch Oil Shale bbls 900 billion USGS

Conventional vs. Unconventional Resources Conventional vs. Unconventional Resources discovered 5.6 Trillion bbls

Modified from Modified from Non-conventional oil

conventional Oil conventional Oil - - Non-OPEC

ency, World Energy Outlook (2002) Energy Outlook ency, World Contribute? Contribute? Oil Production Oil Production - - as a major new source OPEC Non-conventional oil emerges World World 1980 1990 2000 2010 2020 2030

How Much will Non How Much will Non 0

80 60 40 20

120 100 mb/d

Courtesy: International Energy Ag Courtesy:

Fort Fort McMurray McMurray Cold Lake Cold Lake Calgary Calgary Edmonton Edmonton Athabasca Athabasca Athabasca Athabasca Wabasca Wabasca Alberta, Canada Peace River Peace Peace River Peace Peace River Peace River

Huge Resources Huge Resources

– – Conventional Heavy Oil Bitumen

Wightman (1997) Canadian vs. World Oil Resources Canada World Canadian Oil Sands Canadian Oil Sands 3 0 400 300 200 100 (billion m ) CanadaCanada’’ss OilOil SandsSands

Three locations: • Peace River • Athabasca • Cold Lake

Reserves (2003 - EUB)

(Billion Barrels) Oil Sands Conv. Oil-in-place 1,629 62 Est. Reserves 175 2 Rem. Ult. Pot’l 310 5 Insitu Insitu Mineable Mineable Initial Established Canadian Oil Sands Canadian Canadian Oil Sands Canadian

Initial In-Place

United States United

0 Nigeria a

800 600 400 200 y

1,800 1,600 1,400 1,200 1,000

Lib Billion barrels Billion

Russia

ezuela

Abu Dhabi Abu

Kuwait

Ira

Proven World Oil Reserves Proven World Oil Reserves Ira

ada

n Ca 0

300 250 200 150 100 Arabia di u

billion barrels billion Source: Oil & Gas J, December 2004 Sa Source: Oil & Gas J, December 2004 TheThe NatureNature ofof thethe OilOil SandsSands ResourceResource

Production 2003 Production, Reserves 2004 Technology bbls/day Mining 19% 610,959 In Situ 81% 386,164356,164 Quartz or Mineral Clay - - thick ~10 nm Bitumen Fines Cluster

Oil Sands Oil Sands

What is special? What is special? Sand Grain Bitumen Water s s ’ ’ to Synthetic Crude Oil to Synthetic Crude Oil

“ “ To Bitumen To Bitumen Technology Oil Technology Oil “ “

Continuous Innovation Since the 1930 Continuous Innovation Since the 1930 From Oil Sands From Oil Sands 400 300

Mining Mining Cold Lake Cold Athabasca 200

Surface Surface

– – Temperature (C) 100 Surface Mining 0 1 10 100 1,000 10,000 100,000

1,000,000

Producing Bitumen Producing Bitumen 10,000,000 Viscosity (cP) Viscosity Innovation in Mining Technology From Draglines to Shovel & Truck Operations

1970 2000 400 tonne Ore Trucks 400 tonne Ore Trucks Slurry Hydrotransport – Remote Mine (Separation during flow) Froth Froth Treatment Treatment Vessel Vessel Primary Primary Separation Separation ) 2 Extraction Extraction (lots of H Upgrading Upgrading Tumblers Tumblers Sand Sand Oil Sand Slurry Oil Sand Slurry Oil Oil System System Mining Mining Extraction to Produce Bitumen Mining Extraction to Produce Bitumen Mining Feed System Feed System Truck & Shovel Truck & Shovel Hydrotransport Hydrotransport & Conveyor Systems & Conveyor Systems Draglines, Bucketwheels Draglines, Bucketwheels MiningMining ProjectsProjects –– WhoWho isis playingplaying thethe game?game?

1980 2000 2005+

Suncor Suncor Suncor Syncrude Syncrude Syncrude Albian/Shell CNRL Imperial Synenco Fort Hills

Not an all inclusive list 400 300 Cold Lake Cold Athabasca

In Situ In Situ In Situ

– – 200 Temperature (C) 100 Surface Mining 0 1 10

Producing Bitumen Producing Bitumen 100 1,000 10,000 100,000

1,000,000

10,000,000 Viscosity (cP) Viscosity Radiant Radiant

– –

Section Section

Transporting Steam Generators Transporting Steam Generators Courtesy of Mark E. Doig Burner Flame Burner Flame

– –

Steam Generator Steam Generator Courtesy of Mark E. Doig CentralCentral PlantPlant UnderUnder ConstructionConstruction

Courtesy of Mark E. Doig In Situ Production Technology In Situ Production Technology

Cyclic Steam Stimulation Process Cyclic Steam Stimulation Process Imperial Oil Cold Lake - Cyclic Steam Project 125,000 bbl/day

Disturbance Disturbance

Drilling Technology Minimizes Land Drilling Technology Minimizes Land Steam Flow Steam Oil Flow Slots

- - Steam Chamber horizontal drilling horizontal Moderate pressure steam (500 psi) 50% - 70% oil in place recovery - - - Courtesy Neil Edmunds, EnCana Courtesy

Schematic Schematic Steam Injector Steam EAST

Steam Assisted Gravity Drainage (SAGD) Steam Assisted Gravity Drainage (SAGD) SAGD Facility Oil Producer Oil Oil Sand Formation (°C) Temperature Producer Injector

(SAGD Process) (SAGD Process)

Gravity Drainage Concept Gravity Drainage Concept

berta Research Council Steam Chamber Development

Courtesy: David Law, Al SteamSteam AssistedAssisted GravityGravity DrainageDrainage WellsWells

Source: Suncor InIn SituSitu ProjectsProjects –– WhoWho isis playingplaying thethe game?game?

1980 2000 2005+

Imperial Imperial Imperial JACOS AEC EnCana Deer Creek CNRL Numerous CNRL OPTI/Nexen Shell Experimental Shell BlackRock PanCdn Projects Suncor ConocoPhillips Numac PetroCanada Husky Northstar MEG/CNPC Devon Murphy Total

Not an all inclusive list Today Today

- - Coking CNRL Husky Suncor Syncrude

1940 1940

– – 2 Steam H Gasification Deasphalting Thermal Cracking Hydrogen Addition Hydrogen

Upgrading Technology Upgrading Technology Visbreaking Opti-Nexen Shell/Albian

After Murray Gray, University of Alberta Synthetic Crude Oil – desirable features

Conventional Synthetic Light Sweet Crude Sweet Blend LPG Lower S Sulfur 150 - 300 Naphtha Sulfur 2 wppm wppm More Distillate Sulfur 0.028 wt% Sulfur 0.16 wt% Lower S Distillates Aromatics 34% LV Aromatics 20-25% LV More VGO Sulfur 0.4 - 0.6 wt% VGO Sulfur 0.29 wt% Lower S No Sulfur 1.4 - 1.8 wt% Residual Sulfur 1.4 - 1.8 wt% Residue 2013 2023

Status and Future Prospects, Low Scenario Low Medium Scenario High Scenario 2003 0

Oil Sands Hydrogen Demand Scenarios Oil Sands Hydrogen Demand Scenarios

4,000,000 3,000,000 2,000,000 1,000,000 Source: Canadian Hydrogen. Current Dalcor 2004 August & Intuit Strategies, Consultants Hydrogen (tonnes/year) Hydrogen Film and Film Materials Plastics Packaging Products Fibres and Fibres and Fertilizers Composite Composite Resins and Products Adhesives and and Adhesives Value added Fuels Clean Primary Businesses & Planes, Trains & Automobiles Petrochemicals Transportation

rsified Products,Broad Markets rsified Products,Broad Markets Homes Feedstocks Crude Oil Synthetic Plants Petrochemical Power Clean Power

What the Future may look like What the Future may look like 2 H Bitumen & NGLs Natural Gas Gasification

Integrated Energy Industry, Dive Integrated Energy Industry, Dive From Coke, Coal, steam Bitumen Residue Bitumen Hydrogen and steam Shell Process Gasification

Cost and Increase Product Value Cost and Increase Product Value

Situ Oil Sands Production and Upgrading to Reduce Situ Oil Sands Production and Upgrading to Reduce Situ - - OPTI – Nexen Long Lake Project

Integrating In Integrating In – – Natural Gas Prices, US$/Mcf Prices, Gas Natural

SAGD with an upgrader project SAGD with an upgrader project Gasification Capital Cost Payout Gasification Capital Cost Payout 0246810 8 4 0

16 12

Source: FirstEnergy Capital Payout, years Payout, Adjusted for 17% volume shrinkage 9 to 14 Supply 10 to 13 10 to 15 Supply 18 to 23 5 to 8 6 to 11 6 to 12 10 to 14 Cost per barrel (US$, 2003) Cost per barrel (US$, 2003) (US$, barrel per Cost Operating Operating Type Type Crude Crude Bitumen Bitumen Bitumen Synthetic

Oil Sands Production Costs Oil Sands Production Costs Method Method Production Production Source: National Energy Board of Canada Source: National Energy Board of Canada Mining/Upgrading Mining/Extraction Cyclic Steam Stimulation (CSS) Steam Assisted Gravity Drainage (SAGD) Oil Sands Production Potential Oil Sands Production Potential $US2O Billion under or approved construction $50 Billion additional announced ~ 70% of Canada’s production by 2020 • • • What About Transportation? What About Transportation? 1 are 1-5 New Markets Not Canadian Supplied Canadian Supplied Refineries Montreal Buffalo Toronto Canton Detroit Toledo 3 Catlettsburg Robinson (2007) 2 Lima (2005) Patoka Memphis New Orleans New Superior Chicago Lake Charles Tulsa Clearbrook Wood River Woodriver 4 Gretna Ardmore (2007) Port Arthur 1 St. Paul Mandan Cromer (2005) Houston Cushing Regina Freeport Texas City Sinclair Casper El Dorado El Coffeyville McPherson Kerrobert Ponca City Ponca Fort McMurray Borger/Sunray Big Spring Hardisty Corpus Christi Corpus Denver El Paso Billings Artesia Cheyenne Edmonton Salt Lake City Lake Salt 5 Great Falls (2010) Bakersfield Los Angeles San Francisco San Puget Sound Puget

Expanded Markets to Sustain Growth Expanded Markets to Sustain Growth Expanded Markets to Sustain Growth Expanded Markets to Sustain Growth 5b Gateway Project California Markets Capacity 400,000 bpd 5a

Enbridge: New Market Access Plan Far East Markets US West Coast & Far East US West Coast & Far East

- -

as the Middle East

similar distance to Asia

Sea transport from KitimatSea transport -

Potential Markets Potential Markets ) 2 oil upgrading will be required

Summary Summary to meet refinery specifications and increase value Technical – to extract and sensitive market hard input costs Environmental – water, emissions (including CO land, Social – community growth, native population Human resource – maintaining a skilled labor force Production is expected to reach 3 MM bbls/d before 2020 (currently 1 MM bbls/d) As production increases, more Future co-production of clean fuels and Petrochemicals - technically and economically feasible Canadian oil sands resources are immense Serious challenges remain Innovation is key to “technology oil” Even this aggressive development can supply only some 10 - 15% of the required new global demand ¾ ¾ ¾ ¾