Oil Sands

Round TableCalgary

September 26th , 2006

Will Roach President & Chief Executive Officer

UTS Energy Corporation

Agenda

Oil Sands Introduction

Oil Sands Scale

Oil Sands Production Technologies

Oil Sands Challenges

Oil Sands Introduction

• 1875 Canada Geological Survey registers oil sands• 1915 shipments to Edmonton for paving• 1938 Abasand commercial production - 2,500 barrels

destroyed by fire in 1941 - not rebuilt• 1950’s separation technology centrifugal force

• Strong interest results in dozens of exploration leases sold by the government

• 1964 Esso starts Cold Lake; GCOS construction• 1967 first GCOS (Suncor) production - 32,000 b/d• 1978 first Syncrude production - 109,000 b/d• 1993 truck and shovel technology adopted

• key to revitalizing the development outlook

• 2004 oil sands production reaches

1 million barrels per day

Canadian Oil Sands History

Alberta’s Oil Sands

What are Oil Sands?

• A mixture of sand and other rock material containing deposits of bitumen (a heavy viscous crude oil; API gravity typically <10).

• At room temperature, near solid state and must be converted to upgraded crude (typically API gravity of between 30 to 40).

Where are the Oil Sands Deposits?

• Athabasca in NE Alberta;

• Cold Lake in E-Central Alberta; and

• Peace River in NW Alberta.

Alberta’s Oil Sands Deposits

Bitumen In-Place Volumes and Reserves

35 Mineable

143 In Situ

Initial Volume In-Place1,629 Billion Barrels

Established Reserves178 Billion Barrels

Mineable In Situ

1,516 In Situ

113 Mineable

McMurray Formation Outcrop

Lateral Accretion Beds

Oil Sands Scale

Global Crude Oil Reserves by Country

Source: Oil & Gas Journal Dec. 2005

213639

60

8092

102115

133

179

264

0

50

100

150

200

250

300

SaudiArabia

Canada Iran Iraq Kuwait Abu Dhabi Venezuela Russia Libya Nigeria UnitedStates

billion b

arre

ls

Includes 1

75 billion barre

ls

of oil s

ands rese

rves

Canada, with 175 billion barrels in oil sands reserves, ranks 2nd only to Saudi Arabia in global oil reserves

Top 10 World Crude Oil Producers in 2005

0 2 4 6 8 10

Venezuela

UAE

Canada 2005

Norway

Mexico

China

Iran

USA

Saudi Arabia

Russia

Million Barrels per Day

Source: EIA & CAPP

Oil sands growth will move Canada from #8 to #4 in the world by 2015

Canadian Oil ProductionConventional, Oil Sands and Offshore

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

5,000

5,500

thousa

nd b

arr

els

per

day

1980 1985 1990 1995 2000 2005 2010 2015 2020

Western Canadian Conventional Oil

Oil Sands

Offshore

Source: CAPP

Actual ForecastOil Sands Production: 2005 = 1.0 million b/d2015 = 3.5 million b/d2020 = 4.0 million b/d

ConstrainedCase

Oil Sands Production Technologies

Oil Sands Production Technologies

Mining & Upgrading

In-situ

Recoverable resource = 65 billion barrels

Recoverable resource = 250 billion barrels

Cyclic SteamProcess

Source: SyncrudeSource: Imperial Oil

Source: Shell Canada

Oil ProductionSteam Assisted Gravity Drainage

Steam Injection

ReservoirOil Production

SteamChamber

Steam Injection

Source: Petro-Canada

Oil Sands “Economics”(drivers really)

Attractive Economic Fundamentals

Factors making oil sands investments appealing:

Mining projects are characterized by: massive resources (measured in Billions of bbls rather than Millions of bbls); essentially “no” exploration risk; non-declining production profiles; and extremely long reserve life (typically 40 to 50 years).

In-Situ projects are characterized by: massive resources (measured in Billions of bbls rather than Millions of bbls); low exploration risk (increased production risk relative to mining); and extremely long reserve life (typically 40 to 50 years).

Both Mining and In-Situ have an attractive royalty regime.

Crude Oil Prices 1975 – 2006US $ per barrel (WTI)

0

10

20

30

40

50

60

70

80

1975

1976

1977

1978

1979

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

$US

per

bar

rel

U.S. Oil Production/Demand

U.S. oil production

reached a peak of

just under 10 million

b/d in 1970.

U.S. demand for oil

is increasing in the

country at

approximately 1-2%

per year.

Full Cycle Costs: Oil Sands versus Conventional

* FHP Development Cost assumes: CAPEX $15B / Resource of 3.5B bbls.

Source FirstEnergy Capital Corp: **Average 2005 Western Canadian Opex per bbl; ***Average 2005 Western Canadian FD&A per barrel (Proved plus Risked Probable); including Future Capital Costs, **** Average 2005 Western Canadian Reserve Life Index

Finding

Development

Mining

Extraction

Upgrading

Energy:

Natural Gas

Sustaining Capex

Site Restoration

$0.10

$4.25*

$4.00

$4.00

$4.00

$8.00

$1.00

$0.50

Total Notional

C$25.85/bbl

$18.70***

$8.30**

$1.00

$??

FD&A

Sustaining Capex

Abandonment

Oil Sands (Fort Hills) Conventional

Total

C$28.00+/boe

OPEX

OPEX

F&D

RLI 50 years RLI 10.5years****

Capital Investment in Alberta

0

5

10

15

20

25

30

35

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

E

2006

F

Oil Sands

Conventional Oil & Gas

$ b

illio

ns

Close toClose to $60 Billion i$60 Billion investment in oil sands projected for 2006-2010

Oil Sands Capital Costs IncreasesGlobal Cost Increases Not Just Local

0

20,000

40,000

60,000

80,000

100,000

120,000

Suncor -Millenium

Albian Syncrude- Aurora 2

& UE 1

Nexen-OPTI

CNRL -Horizon

Shell -Muskeg &Scotford

Cap

ital

$ p

er b

bl/

day

ProductionStart Date 2001 2003 2006 2007 2008 2010

Fort Hills Project and Technology Selection

Fort Hills Project will use naphthenic froth treating and delayed coking upgrading technology

MineOre

Prep. UpgraderExtraction & Tailings

Froth Treatment

Pipeline

Bitumen Production

Naphthenic

Paraffinic Hydro-Cracker

Delayed Coker

Common

Dedicated

Upgrader Technology: Costs

101 kbpd SCOHydro-Cracker (paraffinic)

( + H )

86 kbpd SCO

Bitumen

100 kbpd

Hydro-cracker SCO

volume is 17%

HIGHER

or

Hydro-cracker uses 45-55% MORE natural

gas, thus Opex is HIGHER

Coker(naphthenic)

( - C )

Operating Costs

SCO Yields from Upgrader

Hydro-cracker on-stream time ~

5% LOWER than Coker

Capital Intensity per flowing barrel

of SCO for Hydro-cracker

is 20-30% HIGHER

Capital Costs

Upgrader Technology: Capital Intensity

The following comparison is based on a notional 100 kbpd bitumen to the upgrader:

Mine Bit. Prod. UpgraderFHP:

Coker 100 kbpd 100 kbpd 86 kbpd

Mine Bit. Prod. UpgraderHydro-Cracker 105 kbpd 100 kbpd 101 kbpd

Difference in Capital Intensity for Hydro-cracker +20 to 30%

per flowing barrel of SCO

Total

Total

Incremental Capital Intensity for Hydro-Cracker vs. Coker per flowing barrel of SCO

0% +20 to 30% +25 to 35% +20 to 30%

Oil Sands Challenges

Oil Sands Challenges

Challenges:

Use of land

Use of water

Use of natural gas

Infrastructure requirements

Workforce availability

Access to markets

Costs

Research and development is aimed at:

Sustainable resource development in an environmentally responsible manner

Reducing costs

Oil Sands Production TechnologiesAlternatives to Natural Gas

THAITM (Toe-to-Heel Air Injection)Petrobank Whitesands Project

OrCrude Process - Nexen/OPTI Longlake

Multiphase Superfine Atomized Residue - DeerCreekSuncor 3rd Upgrader - Coke Gasification

OXYGEN WASTE WATER PETROLEUM COKE

SYNTHETIC GAS

(CO, H2, CO2)

GASIFIER

CO2 CAPTURE &SEQUESTER

HYDROGEN

HYDROTREATORSBOILERS

STEAM & ELECTRICITY

FUEL

Industrial Construction Projects>100 MM Cdn (2004 Q1 – 2010 Q4)

Calgary

Edmonton

ALBERTAMining Area

Oil Sands Areas

Fort McMurray

VCIVCI

VCIVCI

VCIVCI

VCIVCI

Mineable Area, AEUB

Currently Operating/Under Construction Mining Projects

Planned Mining Projects

Currently Operating/Under Construction In-situ Projects

Planned In-situ Projects

Other Oil Sands Leases

Leases 5, 8 & 52: 30% WI (46,170 acres)

Lease 437/438: 30% WI (12,968 acres) Lease 311: 50% WI (11,520 acres)

Lease 14: 100% WI (7,067 acres)

Lease 634: 100% WI (1,280 acres)

Athabasca region