Mega-Project Safety in the Canadian Oilsands Wishart Robson Nexen Inc. November, 2008 1 Who is Nexen? Norway Total 2008 before royalty estimated production Syncrude North Sea 260-280 mboe/d 20-25 mboe/d 95-115 mboe/d Canada 45-50 mboe/d Gulf of Mexico 25-30 mboe/d Yemen 50-55 mboe/d Other International Offshore 6-7 mboe/d Nigeria Visible near-term growth Innovative oil sands strategy Diverse portfolio of assets Substantial exploration inventory High-impact exploration program 2 Overview of Canadian Oil Sands A World Class Resource Bitumen Resources • The Alberta Energy & Utilities Board (AEUB) estimates that under (billions of barrels) current technology, over 300 billion barrels are expected to be Peace River Alberta recoverable Cold Lake 129 – by comparison, Saudi Arabia’s current proved conventional d Lake 201 oil reserves are estimated at 260 billion barrels Peace River Region Mining Area – the U.S. DOE’s Energy Information Administration (EIA) In Situ 1188 Mining estimates Canada to have 180 billion barrels of reserves 113 Athabasca Region • The International Energy Agency’s November 2003 WEIO report states that oil sands production will exceed 5.0 million bbl/d by Athabasca Athabasca 2030 and require $92 billion of investment over the next 30 years Cold Lake Region World Oil Reserves vs Canada's Oil Sands 350 Edmonton 300 AEUB 250 Calgary 200 EIA 150 billions of barrels 100 50 0 Canada - Oil Sands Saudi Arabia Canada - All Oil Iraq Venezuela Russia United States Mexico Reserves 3 Sources: International Petroleum Encyclopedia 2003. Canada - Oil Sands sourced from the Alberta Energy and Utilities Board. Canada - All Oil Reserves sourced from the EIA International Energy Outlook. Overview of Canadian Oil Sands Recovery Technologies • Oil sands are composed primarily of sand, bitumen and water – bitumen, oil that is less than 10 degree API in its raw state, is a heavy, viscous crude oil which contains high amounts of sulphur – Two techniques currently employed to produce bitumen: • mining and in-situ • Bitumen is sold in 2 general forms: – as raw bitumen, after blending with a diluent produce a “bitumen blend”; or as a synthetic crude oil (“SCO”), after having been upgraded • Both products are sold to North American refineries – bitumen blend competes with conventional heavy oil and SCO competes with conventional medium and light oils (depending on the amount of upgrading) 4 A typical mining operation 100100 FeetFeet SHALESHALE PLUGPLUG IHSIHS CHANNELCHANNEL 5 The Long Lake Project Overview Technology - SAGD Recovery • Steam-Assisted Gravity Drainage (SAGD) process involves drilling pairs of horizontal wells in the oil sands reservoir • The Steam to Oil Ratio (“SOR”), is the key measure of a thermal project’s efficiency - the lower SOR of SAGD is a major advantage • SAGD recoveries in excess of 70% have been observed at long- running SAGD pilots this compares to 25%-30% for high quality CSS projects Natural Gas 6 Nexen/OPTI Integrated Extraction and Upgrading Employing Gasification Technology <5 0API Premium Sweet Crude 22 0API 39 0API 6-8 0API 7 The approved concept was based on several assumptions and projections 8 We knew there would be Challenges: • The first large-scale integration of SAGD (Steam Assisted Gravity Drainage) with onsite upgrading • The largest single-phase SAGD development in the world (70,000 barrels per day capacity) • The largest single-train Air Separation Unit in the world • The first application of proprietary OrCrudeTM technology in Canada • The first Gasification unit in Canada, a critical first step in future carbon capture 9 Construction Safety Management • Nexen and OPTI co-own the facilities – Nexen to operate the SAGD and cogen – OPTI to operate the Upgrader • The Prime Contractor Requirement – Time and space – Nexen assumed role of Prime Contractor • Owners and 2 lead EPC contractors created a Construction Safety Management System (SMS) • All potential contractors evaluated against the project SMS – Many “bridging” documents were created • Managed dry camp 10 11 12 13 Purpose built slant rigs with “mechanical roughneck” – very efficient and very safe 14 15 16 17 LongLong LakeLake OctoberOctober 20052005 18 SiteLongLong LakeLake ProjectProject –– Site Site ConstructionConstruction August,August, 20052005 19 LongLong LakeLake –– May May 20062006 DrillingDrilling SecuritySecurity CampCamp GateGate WellWell PadPad 99 NorthNorth AdminAdmin Lime BuildingBuilding && Lime CampCamp WaterWater Sludge WarehouseWarehouse Well Sludge TreatmentTreatment Well Ponds Pad 2 Ponds AreaArea Pad 2 Emulsion Emulsion OrcrudeOrcrude Treating Treating UnitUnit WaterWater && AreaArea BitumenBitumen GasifierGasifier StorageStorage UnitUnit AreaArea Future Steam Future Steam SteamSteam Expansion Expansion GenerationGeneration (to(to 3.33.3 SOR)SOR) AirAir Hydro-Hydro- SeparationSeparation CrackerCracker UnitUnit UnitUnit ProductProduct StorageStorage PhasePhase 22 AreaArea UpgraderUpgrader SiteSite RailRail Well Well SpurSpur PhasePhase 33 PadsPads 6,76,7 && 88 UpgraderUpgrader SiteSite 20 By any measure, constructing the Long Lake Project was an enormous undertaking. • 97 km of underground piping • 170.6 km of module piping • 205 km of field installed pipe • 758 modules • 2,138 km of electrical cable and wire • 17,996 piles driven • 23,883 metric tonnes of structural steel • 46,042 cubic meters of concrete • 26 million person-hours – over 5 million camp meals served – over 35,000 construction orientations ( turnover) – over 64,000 visitor orientations – almost 5,000 non work related clinic visits 21 OverOver 10001000 “dimension“dimension loads”loads” by by roadroad andand railrail –– in in partpart duedue toto modularizationmodularization 22 Another “Special Load” arrives on site 23 Safety and Security concerns extended offsite with respect to transportation To Fort McMurray Safety on Highway 881 Highway 881 is everyone’s responsibility. FROM THE INTERSECTION OF HIGHWAY 881 to The Long Lake Project -- 23 km Watch for: High Traffic Volumes Large & Oversized Loads Limited Shoulders Gregoire Lake Provincial Park Gregoire Lake (Willow Lake) Highway 63 Gregoire Hamlet of Lake Anzac Estates CAUTION: Cheecham Village MULTIPLE SPEED ZONES Fort McMurray First Nation 100 km 80 km 50 km Watch for school buses and pedestrians along Highway 881 70 km 24 Long Lake October 2nd 2008 25 Commissioning and Hand over to Operations • FAST FACT – Getting the Long Lake Project up and running involved commissioning 330 systems between the Upgrader and SAGD facilities. This task involved more than 2 million hours of effort and an intense focus on safe work practices. Nexen and OPTI Operations have now logged over 2.5 million hours -- and counting -- without a Lost Time Accident 26 HSE Challenges • Workforce – Turnover – Skill level – Diversity – Supervision • Working conditions – Weather, congestion, managed open site • Management of change – Change out of contractors, number of contractors, shift changes • Reporting 27 HSE Outcome 3.5 3 2.5 2 1.5 1 0.5 January February 2005 M a r c h - 2006 - 2007 April May June July August September October November MA + LTl INJURY RATE Industry 2.91Decemb 2.57er 2.50 2.32 n/a Project 0.59 0.26 0.19 0.08 0.17 January February March April 2004 May Project end LTI rate was 0.17 asLOST of July TIME 2008 INJURY RATEJun YTDe July August September 2005 October November PROJECT December January February 2006 March April May June 2007 July A u g u s t 2008 September October November 2008 December January February March April May June July 28 HSE Outcome 4.00 3.00 2.00 1.00 0.00 -1.00 2004 2005 2006 2007 2008 LOST TIME INJURY RATE YTD PROJECT INDUSTRY 2004 2005 2006 2007 2008 Industry 2.91 2.57 2.50 2.32 n/a LOST TIMEProject INJURY 0.59 RATE YTD 0.26 0.19 0.08 0.17 2004Project end 2005LTI rate was 20060.17 as of July2007 2008 2008 Industry 2.91 2.57 2.50 2.32 n/a Project 0.59 0.26 0.19 0.08 0.17 Project end LTI rate was 0.17 as of July 2008 29 HSE - Outcome • The health, safety and environmental challenges were managed successfully by – Strictly following the HSE plan that was established. – Development of site rules and enforcement of the rules was key (camp rules, site rules, discipline policy,etc) – Having a sufficiently resourced and dedicated HSE team – Perception surveys, audits, “Cold Eyes” reviews, and independent third-party evaluators – A high degree of security searches to keep the work site as free from drugs and alcohol as possible and continue to provide onsite A&D testing – High caliber Emergency Response 30 Cold Eyes support from the Buzzard Project– UK Sector North Sea 31 Closing Comments • Construction safety is a very different game • Managed Open Site strategy was very successful. Use of Temp Foreign Workers (peaked at 500 to 600 workers) and challenges faced by scheduling and communications to make sure they worked safe. • The initiatives/incentives taken to develop a safety culture on site • Working with local stakeholders such as the Traffic Committee and initiatives to improve the fire response for local communities • Relationship developed with local police dept (RCMP). Our security procedures for the site was leading edge • The visibility and attitude of the Construction Superintendent is absolutely fundamental 32 Safety is an integral part of how we do our business – Safety is about People 33.