1. Relevant Independent Objective www.ceri.ca 1 Pacific Northwest as a Gateway to Asia Energy Export Opportunities Canadian Energy Research Institute Peter Howard President and CEO Canadian Energy Research Institute Pacific Northwest Gateway to Asia October 28, 2014

2. Relevant Independent Objective www.ceri.ca 2 Canadian Energy Research Institute Overview Founded in 1975, the Canadian Energy Research Institute (CERI) is an independent, non- profit research institute specializing in the analysis of energy economics and related environmental policy issues in the energy production, transportation, and consumption sectors. Our mission is to provide relevant, independent, and objective economic research in energy and related environmental issues. A central goal of CERI is to bring the insights of scientific research, economic analysis, and practical experience to the attention of government policy-makers, business sector decision-makers, the media, and citizens in Canada and abroad. Core members of the Institute include the Canadian Government, the Government of the Province of Alberta, and the Canadian Association of Petroleum Producers (CAPP). In-kind support is also provided by the University of Calgary and the Alberta Energy Regulator (AER). All of CERI’s research is publically available on our website at www. ceri. ca

3. Relevant Independent Objective www.ceri.ca 3 The Canadian Energy Research Institute’s Recently Released and Pending Studies

4. Land Acquisition Crown Land Sales Evaluation Construction Operation and Maintenance Production Wages Royalties Western Canada’s Energy Sector Land Acquisition Crown Land Sales Conventional Drilling Completion and Tie in Operation and Maintenance Production Wages Royalties 2013 Expenditures: $63.8 billion2013 Expenditures: $54.8 billion Oil and Gas DrillingOil Sands Developments 4

5. Relevant Independent Objective www.ceri.ca 5 LNG : not for the weak of heart

6. Relevant Independent Objective www.ceri.ca 6 North American NGL Pathways LNG Exports: Pacific Northwest LNG Pacific Northwest LNG Petronas Japex Indian Oil Corp. Pet. Brunei SINOPEC Capital Cost $9-$11 Billion Prince Rupert Gas Transmission TransCanada Pipelines Capital Cost $6.5 billion Progress Energy project metrics: 1100 wells (2014-2018) 7360 wells (2019-2038) Gathering Systems Field Processing plants Assuming Montney Horizontal Well Vertical Depth: 1850 m Horizontal Length: 1650 m Rig Crew: 12-15 ( 302 People employed per site: PSAC ) Rig-in to Tear out: 28 days Cost per well: $6.2 million (2014 $) Economies of scale $3.1 million (2014 $) Field Expenditures $3 billion for wells(2014-2018) $2 billion for field facilities (2014-2018) $26 billion for wells (2019-2038) $10 billion for field facilities(2019-2038) Pacific Northwest LNG Project Upstream $42 + Billion CDN Pipeline $ 6.5 billion CDN LNG Facility $10 billion CDN

7. Relevant Independent Objective www.ceri.ca 7 Asian market Suppliers

8. Relevant Independent Objective www.ceri.ca 8 China Korea Japan India Alaska LNG Up to 3.5 bcf/day Kitimat LNG LNG Canada Pacific Northwest LNG West Coast LNG Prince Rupert LNG Woodfibre LNG Up to 17 bcf/day Jordon Cove Oregon LNG Sabine Pass Freeport LNG Cameron LNG Dominion Cove LNG Lake Charles LNG Corpus Christi LNG Up to 30 bcf/day Australia Operating Australia Under Construction Australia Proposed (now 2.5 bcf/day) Russia Sakhalin Island LNG (now 1.1 bcf/day) Competition to Supply LNG in the Asia-Pacific Basin Qatar LNG (8 Operating) (Total 9.5 bcf/day) (now 7.5 bcf/day) Mozambique Anadarko Shell Up to (6.5 bcf/day) West Africa Indonesia Malaysia Others 3.2 – 13.5 – 16.0 bcf/day Pipeline: 3.2 – 6.4 bcf/day

9. Relevant Independent Objective www.ceri.ca 9 North American Natural Gas Demand Pathways Reference Case: LNG Export Potential to the Pacific Basin 9.7 Bcf/day (75% to Asian Basin) BC LNG Projects 2 Projects (AFID) Up to 3.2 bcf/day Maybe! Lower 48 Sabine Pass (UC) Freeport (UC Q4 2014) Cameron LNG (UC Q4 2014) Oregon LNG (SC 2015) Jordan Cove LNG (SC 2015)

10. Relevant Independent Objective www.ceri.ca 10 Natural Gas Liquids

11. Relevant Independent Objective www.ceri.ca 11 LNG = Liquefied Natural Gas Methane Ethane Propane Butane LPG’s = Liquid Petroleum Gases Propane Butane Diluent = Diluent/Condensate Pentanes plus Terminology

12. Relevant Independent Objective www.ceri.ca 12 Anacortes, WA AltaGas, PetroGas, Idemitsu (30,000 b/d) Portland, OR Pembina (40,000 b/d) Port of Longview, WA Sage Midstream (47,000 b/d) Prince Rupert, BC Kitimat, BC NE BC NW, WC AB Liquids Rich Shale Resources LPG :Lost Opportunity

13. Relevant Independent Objective www.ceri.ca 13 Oil and Oil Sands

14. Relevant Independent Objective www.ceri.ca 14 OIL New Brunswick  OIL WCSB Crude Oil: “Where oh where should the oil go?” North, South, East or West

15. Relevant Independent Objective www.ceri.ca 15 Kinder Morgan Edmonton Rail Terminal to expand to 250,000 bbls/day “The continued interest in this facility, and additional volume being contracted for with this announcement, further demonstrates how important it is for our customers to secure crude oil take away capacity using a variety of transport options including both pipeline and railway capacity to ensure crude oil reaches market” John Schlosser: President Kinder Morgan Terminals Western Canada rail loading capacity will reach 1,350,000 bbls per day by 2017 CERI The company (TransCanada) is contemplating a “rail bridge” from the oil sands area to a crude oil hub in either Cushing, Oklahoma or Steele City, Nebraska where it can tap into south bound pipelines. (Daily Oil Bulletin) Russ Girling: CEO TransCanada

16. Relevant Independent Objective www.ceri.ca 16 WCSB Crude Oil Equivalent Volumes vs Transport System Study 141 Oil Pathways (July 2014) “Given the current existing export pipeline capacity and accounting for the proposed expansions to the Enbridge mainline and assuming a ramp up in rail transport capacity from the current level of 120,000 barrels per day to 700,000 barrels per day by 2017, market access for Western Canadian oil and oil sands volumes will be market challenged starting in 2017”

17. Relevant Independent Objective www.ceri.ca 17 Oil Sands Forecasts and Economic Impacts (Sept. 2014) Economic Impacts for the period 2014 to 2038 “Oil Sands bitumen production (upgraded and non-upgraded) is forecasted to grow from the current level of 1.98 million barrels per day (2013) to 3.7 million barrels per day by 2020 and 5.2 million barrels per day by 2030. Conventional Oil production will reach 1.5 million barrels per day by 2030” “Total investment in new Alberta oil sands projects and re-investment (sustaining capital) in existing oil sands projects will exceed $514 billion (2013 Canadian dollars). Operating revenue over the same period will exceed $2,506 billion (2013 Canadian dollars) “The sum of initial capital, sustaining capital and capital required for operations is expected to average $55 billion per year (2013 Canadian dollars).” “For every direct job (1) generated in the Alberta Oil Sands, 1 additional job is generated by indirect association and 1.5 jobs by induced association, ALL in Canada.” “Oil sands related taxes (indirect, personal and corporate) will pay to the British Columbia Provincial Government a total of $9.5 billion (2013 Canadian dollars)”.

18. Relevant Independent Objective www.ceri.ca 18 HOWEVER The Gateway maybe closing WCSB Hydrocarbon Developments: Crude Oil / Bitumen, LNG, LPG’s Investment opportunity, Employment, GDP growth, Taxes, Royalties

19. Relevant Independent Objective www.ceri.ca 19 Canadian Energy Research Institute Thank you for your time Please visit us at www.ceri.ca

20. Relevant Independent Objective www.ceri.ca 20 2013 Facts about Canadian Crude Production: Western Canada (AB,BC,SK,NWT) Conventional LIGHT Crude694,775 bbls/day Western Canada (AB,BC,SK,NWT) Upgraded Bitumen961,084 bbls/day Western Canada (AB,BC,SK,NWT) Condensate (C5+)147,770 bbls/day Western Canada (AB,BC,SK,NWT) Conventional HEAVY Crude451,618 bbls/day Western Canada (AB,BC,SK,NWT) Non-Upgraded Bitumen1,019,810 bbls/day Eastern Canada (NF/LAB,ON) Conventional LIGHT Crude235,566 bbls/day Total 2011 Production of Crude Oil and Equivalent3,510,643 bbls/day Exports:* PADD I(74% Light, 26% Heavy) 196,327 bbls/day PADD II(21% Light, 79% Heavy)1,737,246 bbls/day PADD III(12% Light, 78% Heavy)124,790 bbls/day PADD IV(17% Light, 83% Heavy)230,137 bbls/day PADD V(61% Light, 39% Heavy)199,027 bbls/day Non-US(67% Light, 33% Heavy)84,119 bbls/day Total US(28% Light, 82% Heavy) 2,571,165 bbls/day Imports:* % of Imports Eastern Canada Light 612,017 bbls/day (93%) Eastern Canada Heavy 44,449 bbls/day (7%) Total Canadian Imports 656,466 bbls/day * 2013 Average January to September 2013/2008 + 30% + 44%

21. Relevant Independent Objective www.ceri.ca 21 2013 Facts about Canadian Natural Gas, NGLs All volumes expressed as average day Production: Western Canada (AB) Marketable Natural Gas 9,740 mmcf/day Western Canada (BC) Marketable Natural Gas 3,759 mmcf/day Canada (other Provinces) Marketable Natural Gas 620 mmcf/day Total 2013 Production 14,119 mmcf/day Exports: To United States 8,800 mmcf/day Imports: Pipeline gas from the United States and LNG imports 2,600 mmcf/day Natural Gas Liquids: Recovered Ethane 200,000 bbls/day Recovered Propane 145,000 bbls/day Recovered Butane 64,000 bbls/day Recovered Pentanes + 101,000 bbls/day