Opportunities and

Challenges of Oil Sands

Development

Presented on : September 9, 2004

For : Ft. McMurray Conference

Soheil Asgarpour Ph.D., P.Eng.

Alberta Department of Energy
 Our Vision
To pave the way for Alberta’s bitumen
production to reach 3 million barrels per day
by 2020 while minimizing the overall costs
and environmental footprint. A significant
portion of this production will involve value-
added processing within Alberta.
 Alberta’s Oil Sands in 2020
World Scale Hub for Energy and Refined Products

Alberta Bitumen Production

Upgrading & 3 Million Barrels Per Day

Refining
Petrochemical
Electricity
Development
Generation

Offshore Exports Rest of Canada Exports

Exports of Crude Oil and

Refined Petroleum Products

United States Exports

 Economic Impact of Oil Sands in 2020

•Over $80 Billion Dollars

Invested (2003 to 2020)
-Oil sands extraction Athabasca
Peace River
-Upgrading and refining
-Petrochemical facilities
Wabasca
-Infrastructure
Cold Lake
•Over 10,000 New Hires at Oil
Edmonton
Sands Plants
Light
•52% of Alberta Non-Renewable Oil
Resource Revenues
Heavy
Oil
Source: RIWG, ADOE
 Alberta Petrochemical Hub

„ Plant Area
– 650 hectares
„ 70 companies
„ 4,000 products
 Proven World Crude Oil
Reserves
300

250
billion barrels

200

150
Alberta

100

50

0
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bi

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si

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Ira

zu

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ra

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an
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Sources: Oil and Gas Journal – Dec 2002, AEUB

 Oil Sands Reserves - 2020
Remaining Established
180
160
140
86%
Billion barrels

120
100 Insitu
80 Mineable
60
40
20 14%
0
Source: EUB

Reserve Life Index - 2020

Mineable 25 years
In Situ 675 years
 Oil Sands Reserves - 2020
Remaining Established
In Situ Reserves

1600

1400

1200
Billion barrels

1000

800 The Prize

600

400

200

0
Initial Volume Current In Situ Low Presurre Shallow Thin Unclassified
in Place Technology Reservoirs Reservoirs Reservoirs Reservoirs
 Investment in Alberta’s Oil Sands
14

12
Future Opportunities
Investment Trends are illustrative
10 Incremental Capital Band
Completed* $24
Refineries, petrochemical, pipelines
Cdn$Billions

Proposed >$80
8
Strong growth
6
Base Capital Band
4 Mines/in-situ/upgrading
(Strategic & Sustaining)
2
Weak growth

0
96

98

00

02

04

06

08

10

12

14

16

18

20
19

19

20

20

20

20

20

20

20

20

20

20

20
*Completed – 1996 to 2002
*Estimate - 2003

Source: CAPP, ADOE

 North America Petroleum
Supply & Demand
36 Demand
34
Oil Sands Supply
32
30 Conventional Supply
28 Market
Million Barrels Per Day

26 Potential
24
22 ~15 million
20
18
bpd
16
14
12
10
8
6
4
2
0
2001 2003 2005 2007 2009 2011 2013 2015 2017 2019

Source: EIA, ADOE

 Major Canadian and U.S. Crude Oil Pipelines

9 FT MCMURRAY
10
EDMONTON
11
HARDISTY
VANCOUVER 2 3

REGINA
4 5
FERNDALE/ 1
ANACORTES B 6
POPLAR MONTREAL M
CLEARBROOK
A
C V
BILLINGS 7 PORTLAND
BAKER
8 U
O ST. PAUL
SUPERIOR U.S. PIPELINES
D CAPACITY
CASPER (000 B/D)
P T X SARNIA A CONOCO 94
GUERNSEY
B SANTA RITA 45
CHICAGO TOLEDO C TEXACO 60
Q E
SALT LAKE L D BUTTE 94
CITY N E PLATTE 150
F PATOKA F AMOCO 245
W OOD G ARCO 120
H RIVER W H CUSHING-CHICAGO 300
I LOOP 1,400
CANADIAN PIPELINES CUSHING S J LOCAP 1,300
K CAPLINE 1,078
CRUDE CAPACITY 500
(000 B/D)
L CHICAP
G M PORTLAND 200
1 ENBRIDGE/LAKEHEAD 1,700 N W OODPAT 315
K
2 TERASEN TMPL 280 O AMOCO/CONOCO 50
3 E.S.E.P. 17 MIDLAND CORSICANA
R P FRONTIER 40
4 RANGELAND 100 ST. JAMES 32
Q AMOCO
5 BOW RIVER/ 110 J R SEAW AY 270
MILK RIVER HOUSTON
I S MOBIL 150
6 W ASCANA 45 T KOCH 105
LOUISIANA
7 Enbridge LINE 9 240 U MINNESOTA 270
OFFSHORE
8 EXPRESS 172 OIL PORT V PORTAL 100
9 ENBRIDGE Gateway 400 W SUN/MID-VALLEY 400
10 TERASEN Corridor 220 X ENBRIDGE Southern 250
11 TERASEN TMX 400
 Alberta Supply vs. Take Away
Capacity
3500

3000
Expansion
Thousand barrels per day

2500

2000
Existing Pipeline
1500 Capacity

1000

500

0
2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020
SCO Bitumen Conventional Heavy
Conventional Light Pipelines Expansion

Source: ADOE
Alberta Refining - Current
Company Location Capacity (bpd)

Husky Oil Operation Lloydminster 25,000

Imperial Oil Edmonton 179,600

Parkland Refining Bowden 6,000

Petro Canada Edmonton 130,000

Shell Canada Scotford 95,000

TOTAL CAPACITY 435,600

 Alberta Upgrading (bbl/d)
Capacity
Company 2003 2005 2010

Shell Scotford 155,000 225,000 425,000

Suncor 225,000 260,000 500,000
Syncrude 245,000 345,000 500,000
Husky (Lloyd) 75,000 150,000 150,000
Other* 0 30,000 140,000

TOTAL CAPACITY 700,000 1,010,000 1,715,000

Heavy Forecast* 1,041,000 1,314,000 1,765,000
Difference (341,000) (304,000) (50,000)

*Heavy includes production from mining and insitu as well as

conventional heavy crude
*Other – OPTI @ 90 mbpd; BA Energy @ 50 mbpd

Source: ADOE/Industry Sources

0
1
2
3
Bcf/d
2004

Growth
to 2020

0
1
2
3

3 million bpd At
Bcf/d

Current per bbl Rate

1% Annual
Net Natural Gas Usage

2020

Improvement
POSSIBLE FUTURES

Industry Data
(unaudited)
 Make-Up Water Usage
2004 2020
Million Bbls/d Million Bbls/d
6 6
POSSIBLE FUTURES
5 5

Current per bbl Rate

4 4

3 million bpd At

Industry Data
(unaudited)
3 3

Improvement
1% Annual
2 Growth 2

1
to 2020
1

0 0
 Diluent/Blending Usage
2004 2020
Thousand Bbls/d 400 Thousand Bbls/d
400
POSSIBLE FUTURES
350 350

Current per bbl Rate

300 300

3 million bpd At
250 250

Improvement
200

1% Annual
200
150 150
Growth
100 100
to 2020
50 50

0 0
 Net Electricity Usage
2004 2020

60 Million KWh/d 60 Million KWh/d

POSSIBLE FUTURES
50 50

40 40

Current per bbl Rate

3 million bpd At
30 30

Improvement
1% Annual

Industry Data
(unaudited)
20 20
Growth
10 to 2020 10

0 0
 CO2 Emissions
2004 2020
Million tonnes 100 Million tonnes
100
90 POSSIBLE FUTURES
90
80 80

Current per bbl Rate

70 70

3 million bpd At
60 60

Improvement
50

1% Annual
50
40 40
30 Growth 30
20 to 2020 20
10 10
0 0
 Supply Costs
(C$/barrel)
Operating
In Situ Recovery Crude Type Supply Cost*
Cost
Cold Production –
Bitumen 4 to 7 10 to 14
Wabasca, Seal
Cold Heavy Oil
Production with Sand Bitumen 6 to 9 12 to 16
(CHOPS) – Cold Lake
Cyclic Steam Stimulation
Bitumen 8 to 14 13 to 19
(CSS)
Steam Assisted Gravity
Bitumen 8 to 14 11 to 17
Drainage (SAGD)
Mining Recovery
Mining Extraction Bitumen 6 to 10 12 to 16
Integrated
Synthetic 12 to 18 22 to 28
Mining/Upgrading
Assumes an oil price of US$24/bbl (WTI), a gas price of US$4/MMBtu, and a light/heavy differential at
Hardisty of US$7/bbl. Exchange rate at $0.75.
*Supply costs include capital costs, operating costs, taxes, royalties and a 10% real rate of return to the
producer.

Source: NEB Oil Sands Report

 After-tax Nominal
Rate of Return
20

18
200 mb/d Integrated
16
ROR

14

12 120 mb/d SAGD

10

8
20 24 28
WTI @ Cushing ($US/bbl)
Source: NEB
 Oil Sands By-Products
„ Titanium and Zircon*
– Potential supply (2010)
» 40% titanium and 30% zircon of world supply

„ Syncrude and Suncor production**

– Coke
» ~ 5.3 million tonnes in 2003
– Sulphur
» ~ I million tonnes in 2003
*Source: Titanium Corporation’s 2004 AGM presentation (available from their website)
**Source: EUB “Alberta Oil Sands Plant Statistics”
 Opportunities to Improve
Profitability
„ Reduce Costs
• Reduce energy intensity
• Improve project management
• Develop labour capacity

„ Increase Revenues
• Improve oil quality and meet customer needs
• Cogeneration power exports
• Open new markets (pipeline & port access)
• Value-added products
 Technology Development
Removing “limits to growth”!

„ Viable alternatives to natural gas

„ Manage water demands within supply
„ Reduce capital costs
„ Reduce land disturbance / reclamation
costs
„ Reduce GHG intensity
„ Match product quality with customer
demand
Thank You