1. Ian F.H.Scott Manager, Northern Canada & Pipelines June 21, 2002
The future of the Oil & Gas Industry in Northern Canada Presentation to Inuvik Petroleum Show
Thank you. I appreciate the opportunity ot speak with you today about the future of the O&G industry in the North.
Today I will focus on natural gas but some of my comments relate to crude oil as well.
I plan to give a high level overview of the industry, the challenges facing the industry. I don’t plan to spend too much time on the activity levels over the next few years as I believe that Rod Maier will be providing more insight on that.
Ian F.H.Scott
Manager, Northern Canada & Pipelines
June 21, 2002

2. CAPP Profile
Represents 140 “upstream” companies that explore for, develop and produce petroleum
Our industry is active in 12 of 13 jurisdictions across Canada
CAPP members produce over 97 per cent of Canada’s natural gas and crude oil
Our 125 associate members provide services that support the upstream industry
Together, our members are part of a $52-billion-a-year national industry that affects the livelihoods of more than half a million Canadians

3. CAPP’s Mission
“To enhance the economic well-being and sustainability of the Canadian upstream petroleum industry in a socially, environmentally and technically responsible and safe manner.”

4. CAPP Members - North of 60º
This slide outlines the CAPP members that currently have interests in the NWT.
What is not shown is that Devon and Hunt also have interest in the Yukon.

5. Canada’s Crude Oil and Natural Gas Industry
World’s 3rd largest natural gas producer
World’s 13th largest crude oil producer
Oil & gas trade surplus accounts for:
Close 50% of Canada’s trade balance
Employment near 500,000 in Canada
Invest close to $25 billion in 2000
Close to $23 billion in Canada
Largest single private sector investor in Canada

6. Canadian Exports to the U.S.
Natural Gas
Exports to US: 3.5 trillion cubic feet per year
Largest exporter of natural gas to the US
Canada makes up 94% of total US gas imports
Canada supplies 15% of US gas consumption
Crude Oil
Exports to US: 1.4 million barrels per day
3rd largest exporter of crude oil to the US
Canada makes up 15% of total US oil imports
Canada supplies 9% of US oil consumption

7. North American Gas Supply Basins
Beaufort Sea
Mackenzie Delta
Alaska
Western
Canada
Rocky Mountains
Offshore
Nova Scotia
Mid-Continent
California
Permian
Gulf Coast
Gulf of Mexico

8. includes other regions offshore
Ultimate Potential of Natural Gas
TRILLION CUBIC FEET
Remaining
Produced
Other Frontier* 89
includes other regions offshore
east coast & west coast
North of 60
175
British
Columbia 50
Alberta
270
Grand Banks
and Scotian Shelf 63
Canada has significant, untapped reserves of natural gas which is important to develop as the decline rates in the the mature basins are growing.
In addition to the domestic market, Canadian natural gas supplies 15% of U.S. gas consumption.
The largest growth areas for new natural gas supply are the north and East Coast
Technology will soon unlock the potential of coal-bed methane and, when that happens, British Columbia is expected to be the home of the newest fossil fuel industry. There is a need for the public and private sectors, together with academic institutions, to increase the investment in research, development and deployment of technology.
Saskatchewan 9
Source: NEB

9. North American Activity
This slides shows the NA activity and the major reservoirs in NA.
It is important to note how “integrated” the NA market is.
Canada is a price taker for both oil and gas so it is extremely important that we remain competitive in both the thew NA market and the the International markets. Gas is primarily within the context of the NA market.

10. North American Natural Gas Demand
EIA Long Term Outlook
Warm Winters
This chart shows projected North American natural gas demand through to 2005.
Canada is the largest provider of natural gas to the United States accounting for 94% of total U.S. natural gas imports trillion cubic feet per year.
Canada’s share of U.S. demand is projected to increase from 14% in 1998 to 16% in This is a small increase in percentage terms but represents additional sales of x trillion cubic feet per year.
Much of the demand comes as a result of the fact that natural gas is the transition fuel of choice for electricity generation.
The steep forecast line rather dramatically highlights the opportunities and challenges that we have before us, both as an industry and as governments.
Source: U.S. D.O.E./EIA - Dec 2001

11. Industry Capital Spending
$ BILLIONS
Northern Canada
‘99 ‘ ‘01E ‘02F
$0.2 $0.3 $0.4 $0.5
International
‘99 ‘ ‘01F ‘02F
$1.7 $2.1 $3.5 $3.0
Oil Sands
‘99 ‘ ‘01E ‘02F
$2.4 $4.2 $5.0 $5.0
WCSB
‘99 ‘00 ‘01E ‘02F
$11 $17 $20 $16
East Coast Offshore
‘99 ‘ ‘01E ‘02F
$2.7 $1.8 $ $1.0

12. Commitments - NWT
$664,017,000
$466,498,000
$39,030,000

13. Canadian & U.S. Natural Gas Pipelines
TransCanada Alberta
(NGTL)
Westcoast
ANG/
Foothills
Alliance
TransCanada Transmission
Mainline
Foothills
TQ&M
M&NE
Northwest
PGT
Great
Lakes
PNGTS
Northwest
Northern
Border
Iroquois
PG&E
CNG
Algonquin
Kern
River
Trailblazer
ANR
NGPL
Panhandle
Texas
Eastern
Transwestern
SoCal
NGPL
ANR
Transcontinental
El Paso
El Paso

14. Mackenzie Delta / Beaufort Sea
Northern Natural Gas
ULTIMATE POTENTIAL & PROPOSED GAS ROUTES
Mainland NWT
& Yukon
17 Tcf
Mackenzie Delta / Beaufort Sea
64 Tcf
Arctic
Islands
94 Tcf
Alaska
237 Tcf
Alaska Natural Gas
Northern Pipeline
Central Pipeline
Mackenzie Valley Pipeline
Dempster Lateral
Fairbanks
Inuvik
Norman Wells
From previous slide you saw an integrated network for natural gas pipelines in North America.
What is missing from that picture is the access to market from the North.
Will spurn future development
For illustrative purposes only

15. The Future for Oil and Gas ?
Supply
Prices and
Differentials
Market
Demand
Government
Policies
Technology
Transportation
Capacity/Cost
Other Forms
of Energy

17. What’s changing in industry?
moving to oil sands, foothills, north, East Coast and coal-bed methane
North American markets consolidating
Technology
deeper, further, faster - with smaller footprint
Government Issues
increasingly complex
competing on a global stage
Stakeholders
more, different, higher expectations

18. Technological Advances
Operating practices and environmental standards have improved
Seismic
new technology
enhanced data collection [3D]
reduced “foot-print” of seismic activity
minimize environmental impacts

19. Technological Advances
Drilling
improved drill bit technology
reduced time to drill
horizontal drilling
enhances productivity of “pools”
reduces number of drilling platforms and pads on land
improved drilling muds
greater variety provide flexibility
minimize environmental impacts

20. Technological Advances
Pipelines
pipe
higher strength steel
improved coatings
improved welding techniques
“smart pigs”
improved integrity programs
directional drilling of stream crossings
reduce environmental impacts
training

21. Public Policy is Key to Competitiveness
Federal Corporate Tax Reductions
Corporate tax regime increasingly non-competitive
Industry 3% behind in % in 2003
Aboriginal
A major factor in resource access
Clarify federal and provincial governments role to ensure reasonable access to the resource
Market based policy foundation
Certainty of access to markets - exports
US Energy Legislation

22. Public Policy is Key to Competitiveness - Environment
Climate Change
None of the four federal options acceptable
Impact on competitiveness not addressed
Cumulative Effects
Air, Land & Water
Environment, health and safety stewardship
EH&S “Stewardship”  EH&S “Performance”
Regulatory Change
CEAA, SARA, Oceans Act
R&D

23. Public Policy is Key to Competitiveness - Employment and Training
Availability of Workforce
employee retention
availability of trained personnel
ongoing training/planning - continued opportunities for improved coordination between industry, IRC and government
create ability for local small contractors to train employees
challenges to train people due to the short work season
substance abuse
industry testing across the board
Accountability
cooperative approach to spending of education and training funds

25. Factors Influencing Future of Canada’s Oil and Natural Gas Industry
Competitiveness
resource base
costs
climate change
taxation
royalty regimes
Access to the Resource
environmental issues
aboriginal issues
Regulatory processes
multiple jurisdictions
complexity adds time
Enablers:
technology and innovation
cooperative approaches
identifying regulatory overlap and duplication
open access to new markets

26. Industry Optimization Formula
Maximize:
Clarity legislation
Clarity of roles & responsibilities CE
Environmental protection
Safety
Benefits/Jobs
Minimize:
Cost
Environmental Impact
Delays
Uncertainty
Regulation
Unsettled Claims