1. 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

2. 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

3. GEOS Production, Demand & Exports

4. 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

5. GEOS Gas Production >> Consumption

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

7. GEOS Resources & Supply Regions

8. 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

9. GEOS Gas Production & R/P Ratio Domestic consumption Exports

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

11. GEOS …Doubled by 2000 Large areas still not connected

12. GEOS Wells, Drilling Season, Rig Fleet...

13. GEOS WCSB Well Completions

14. GEOS WCSB Rig Fleet Predominantly Shallow Total Fleet = 656

15. GEOS Canada & US Rig Fleets – Depth Capability

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

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

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

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

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

21. GEOS Annual Slices of WCSB Gas Production

22. GEOS Area Slices of WCSB Gas Production Bcfpd

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

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

25. GEOS Total Gas Still Increasing, But Production Replacement More Onerous

26. GEOS North American Gas Supply Vintage by Region

27. GEOS Canada’s Coalbed Methane - A Sleeping Giant?

28. GEOS Western Canada Coalbed Methane Areas  Shallow foreland basin —Cretaceous-Tertiary of Plains @ < 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 Plains @ > 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

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

30. GEOS Coalbed Methane Drilling – No Commercial Production Yet

31. GEOS Western Canada Oilsands The Future is Now!

32. GEOS Crude Oil Production Growth – Driven by Oilsands

33. GEOS Canada's Barrel Getting Heavier

34. GEOS Oilsands Mining Capacity

35. GEOS Diluent requirements – Lagging in situ Bitumen Production

36. GEOS Natural Gas Requirements Growing for Bitumen & Heavy Oil

37. GEOS Growth Driving Infrastructure Investment

38. GEOS Canadian Frontier Supply Regions…

39. 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

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

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

42. 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

43. GEOS Atlantic Canada Geography

44. GEOS Atlantic Canada Geology

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

46. GEOS Scotian Shelf cf. Western Canada

47. GEOS Canadian Oil & Gas into US

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

49. GEOS 1.0 MMbopd More to US by 2010…

50. 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?

51. GEOS Future of Canadian E&P Activity

52. 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?

53. GEOS GEOS Energy Consulting 414 Superior Avenue SW Calgary, Alberta T3C 2J4 Canada eynong@shaw.ca