GEOS CONFIDENTIAL - GEOS Energy Consulting, Calgary AB, Canada No portion of this presentation may be reproduced in any form without prior written consent The Future of Oil & Gas in North America… The Canadian Perspective George Eynon GEOS Energy Consulting, Calgary GCAGS, Austin TX — Nov 1, 2002

GEOS Outline  Production >> Consumption = Exports  Resource base changing —Deeper-, Tighter-, Coalbed- Gas; Heavier Barrel; More Remote  Wells, drilling season, rig fleet, etc. —Limitations on resource development  WCSB conventional & unconventional Gas  Coalbed methane  Heavy oil & oilsands  Frontiers —Newfoundland, Scotian Shelf, Arctic, West Coast, Gas Hydrates.  Pace of E&P? —E&P structure, economics, infrastructure & Kyoto

GEOS Production, Demand & Exports

GEOS US is Canada’s Export Market  Canada’s production >> domestic consumption —Gas: North American market + North American pricing —Crude oil: US market + World pricing  Gas production increasing since mid-80s —Domestic consumption increasing only marginally —Now export almost 60%  Oil production increasing, but heavier barrel —Light oil in decline; except offshore Newfoundland —Heavy oil and steam-assisted in situ bitumen —Oil sands mining —Upgraded & synthetic crude oil exported

GEOS Gas Production >> Consumption

GEOS Canadian Crude Oil… Production, Consumption & Exports MMbopd 2001

GEOS Resources & Supply Regions

GEOS Resource Base Not the Problem  Increasing conventional gas  Adding unconventional (deep/tight gas, CBM, oilsands)  Frontier regions oil & gas  Gas hydrates – commerciality 15 years away

GEOS Gas Production & R/P Ratio Domestic consumption Exports

GEOS Gas Pipeline Connected Area 1990… Western Canada Sedimentary basin under-exploited

GEOS …Doubled by 2000 Large areas still not connected

GEOS Wells, Drilling Season, Rig Fleet...

GEOS WCSB Well Completions

GEOS WCSB Rig Fleet Predominantly Shallow Total Fleet = 656

GEOS Canada & US Rig Fleets – Depth Capability

GEOS Highly Seasonal Drilling Activity to October 15, 2002 winter drilling season spring break-up

GEOS WCSB Rig Activity since 1990 Quarterly Average world oil price drop economic downturn high volatilitysteady growth

GEOS WCSB Natural Gas – Shallow, Deep & Tight, Structured

GEOS Exploring Deeper in the Basin Disturbed Belt: e.g. Liard River, Monkman Pass & Waterton Deep Basin & Miss-Devonian Slave Point: e.g. Ladyfern

GEOS Annual Decline Rate Flattened Out Percent Decline Increase from 10% in early 90s to >15% by 2000 then slower increase

GEOS Annual Slices of WCSB Gas Production

GEOS Area Slices of WCSB Gas Production Bcfpd

GEOS Post-1990 Area Slices – Mostly Shallow, Even from Basin Centre shallow basin centre foothills Bcfpd

GEOS WCSB Wells and Production Number producing wells & MMcfpd production MMcfpd per producing well

GEOS Total Gas Still Increasing, But Production Replacement More Onerous

GEOS North American Gas Supply Vintage by Region

GEOS Canada’s Coalbed Methane - A Sleeping Giant?

GEOS Western Canada Coalbed Methane Areas  Shallow foreland basin —Cretaceous-Tertiary of < 900 m drilling depth —Low rank; sub- to high-volatile bituminous; gas content low <150 —Thick and laterally continuous Ardley Coal zone; behind pipe in 000’s wells  Deep foreland basin —Cretaceous-Tertiary of > 900 m drilling depth —Medium-high rank volatile bituminous; gas content mod-high —Thick and laterally continuous Mannville coal; behind pipe in 000’s wells  Foothills & mountains —Western Alberta and eastern BC; shallow to ultra deep —Medium-high rank volatile bituminous; gas content ~ 600 —Kootenay coals very thick and laterally continuous; operational concerns  Restricted basins —Intermontane areas of BC; shallow to deep —low-high rank; sub-bituminous to anthracitic —Hat Creek coals very thick; lacking infrastructure

GEOS Location! Location! Location! Limits of coal deposition Mineable coals Pipeline infrastructure

GEOS Coalbed Methane Drilling – No Commercial Production Yet

GEOS Western Canada Oilsands The Future is Now!

GEOS Crude Oil Production Growth – Driven by Oilsands

GEOS Canada's Barrel Getting Heavier

GEOS Oilsands Mining Capacity

GEOS Diluent requirements – Lagging in situ Bitumen Production

GEOS Natural Gas Requirements Growing for Bitumen & Heavy Oil

GEOS Growth Driving Infrastructure Investment

GEOS Canadian Frontier Supply Regions…

GEOS …from Sea to Sea to Sea  Arctic —Mackenzie Valley, Mackenzie Delta, Beaufort Sea & Arctic Islands  Atlantic —Grand Banks, Scotian Shelf & Offshore Labrador  Pacific —Queen Charlotte Islands & offshore BC

GEOS Bridging to the Arctic Mackenzie Delta & Beaufort Sea Middle Mackenzie Valley Liard River Basin Cameron Hills

GEOS Arctic Gas Pipeline Alternatives Alaska to Mackenzie Valley “over the top” proposal Mackenzie Valley Pipe by late 2008?

GEOS Export Pipe for Arctic Throughput to US 4 Bcfpd Alaska & Canadian Arctic? 3 Bcfpd from WCSB = 2 Bcfpd for domestic consumption + 1 Bcfpd for export to US 2 Bcfpd to California 3 Bcfpd to Mid-west

GEOS Atlantic Canada Geography

GEOS Atlantic Canada Geology

GEOS Gas from Scotian Shelf = Exports to New England (& New York?) Undiscovered Discovered Producing

GEOS Scotian Shelf cf. Western Canada

GEOS Canadian Oil & Gas into US

GEOS 4 Bcfpd More Canadian Gas by 2010? (1-2 Bcfpd more by 2015?) ~1,000

GEOS 1.0 MMbopd More to US by 2010…

GEOS Gas Hydrates Potential & Timing  Potential resource base —Methane in hydrates 2x all other oil & gas worldwide  Mackenzie Delta international research —GSC, Japex, JNOC, USGS, et al —Japan driving research  Other areas of Canada —Beaufort Sea & Arctic Islands; Offshore BC; Offshore Nova Scotia, Newfoundland & Labrador  Commerciality in 15 years?

GEOS Future of Canadian E&P Activity

GEOS Impacting the Pace of Canada’s E&P  Structure of Canada’s E&P sector —M&A: “invasion of the body snatchers”; Mid-size companies swallowed-up —Limited real exploration by US companies in Canada —“Start-ups” small and privately funded —Producing assets in Royalty Income Trusts —Cash flow not fully reinvested; Large dividends to shareholders  Economic recession & recovery in US —Market slowdown; Gas demand restructured  Infrastructure requirements —Arctic gas through Alberta to Midwest & California —Scotian shelf gas to Boston & New York —refineries & upgraders —Canadian producers lack vertical integration  Politics - the Kyoto quagmire —Doing some of the right things for the wrong reasons?

GEOS GEOS Energy Consulting 414 Superior Avenue SW Calgary, Alberta T3C 2J4 Canada