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Opening Session, Part 3

Tue, 9 Sep 2008|

Bob Frykland, Vice President of Global E&P Critical Analysis -- IHS, speaks during the opening session of the Oil Sands Heavy Oil Technologies conference held July 2008 in Alberta, Canada. His speech focuses on geology and business development in the industry.



I. Yeah. Our next speaker is Bob Strickland is vice president of global in. IA TS in Houston. He joined -- in 2006. Serving as Libya president -- Brazil country manager for ConocoPhillips. -- more than 28 years of industry experience. Has held senior leadership positions with British Borneo. He union Texas and -- out -- -- please welcome Bob frequent. Thank you thought. It's always a pleasure to be back here in Calgary. -- as many times I can't come up to visit the office and work with people here. I'm gonna take a little different perspective gonna move a little bit back upstream. And look at things today through the eyes of the geologist and -- business development. Type of view. And I think that maybe the easiest thing to start with though is sort of looking at the scale of things. And on -- town and many of you've been up to Fort McMurray. Had a chance to see that the operations. But this is -- typical mining truck. And you could see that it's about six people hot. And that's really what we're talking about when we talk about oil -- particularly in Venezuela and then in candidate here. And to put it in the global perspective I'm gonna start off with a little bit with some statistics. If you if you think. What's in place right now that we think is probably gonna be recoverable it's about one point seven trillion barrels. If you look at what's been produced. So far over the years. It's a one trillion barrels. So there's a tremendous amount of potential resources. That are flat in the oil sands. And right now the remaining. Number is around a 179. Billion girls so again it. If you think of perspective relative to place like Iraq there's a 115 billion proven. Again it's an enormous number. And if we look around the world to sort of see in context. We're other -- and plays are bitten and -- is as we like to refer to appear. On the big elephants in the room of course there are Venezuela. And of course Canada. But there are some other places. That do have interest in plays. I mentioned Iraq there isn't a heavy oil play in Iraq it's about three to five billion in place. Recently some you've probably seen announcement that Andy has joined -- the Congolese and developing. Their heavy oil sands that's another one that's three to five Nigeria has Israel's -- In Colombia Peru. As well as Venezuela. We're a policy a heavy oil auction. Again a lot of interest and billions of barrels potential. Still small in comparison to Canada. And small compares in Venezuela. But every molecule counts these days. With reporters sort of look at it relative to some of the other non conventional us this chart shows. The remaining recoverable conventional liquids in the world. And if you look at kind of the typical one lately it's gotten a lot of -- -- in the United States is the Green River shale oil. Now to put both Alberta and Bjorn -- together you get equivalent pretty close to what degree -- rivers potential it is. And -- put all three together you basically what I said mentioned earlier. You pretty much close to the remaining discovered reserves. In the world which is a little over a billion girls. But one of the conundrum is if you would save between this resource -- courses converting it. Production has not held up so far to the out outcomes that people have put forward and I want to show you that by looking a little bit historically. At first as Venezuela. And I purposely used. Slides from a different time period kind of show you what the forecast work for these next to present where we are. And this is the forecast from -- -- days it. In 2005 in their plan. And the Red Line was the increase. That they had planned on. And where we are -- -- that black -- line just barely moving along. -- a little bit under 600. Thousand barrels a day. It's going to be quite an accomplishment for them to get even close to their plan moving -- to two point fifty. Particularly given the resource capacity issues. If we think about the same sort of looking at a similar way for Albert and those projections. Oddly enough were based on. On the high -- about a 200000 barrel -- day increase. In -- in the original projections in -- if you look back a couple years ago we're very similar. This is from 2006. And I have three different forecasts on here but I want you to pay attention to. The yellow one if you -- -- here additional with a black line and again. Oddly enough people were using 200000 barrels -- -- is the incremental increase. On a year by year basis going forward and we know -- just did a nice job talking little bit about what some. The main issues -- for that. But. It looks as if Canada again is slowing down it'll probably be closer to. By 2015 to about two million barrels of if you look at the split. In Canada now focus between mining it and thermal. Sort of methods. You can see that right now there's a big gap. Between the Green Line red line. Which one is actually producing the most. We expect though that thermal start to catch up. Here in the near term. As we move forward. If you kind of schedule -- out on a project by project basis and -- built in to hear a little bit the the -- if you would have some of the more recent projects. The peak. There we're seeing so to speak or shall we say that that the next big increase. Its gonna come in 20102011. So when you start to look at this -- on a map I think many of you are familiar with -- with the three main areas a peace river up in the upper left of which now is producing 37000. Barrels a day. If you move over to the right to Fort McMurray. Right now there's really two different groups Thursday in -- you in the mining in the NCQ are -- with a little red -- in the -- little green triangles. It's 785000. -- as a 185000. For the to split respectively. And then if you go to the south to look at its -- -- that's where that is the most of it is. The cold -- 315. Currently. So who -- the Big Five. If -- look at it in 2007. Numbers that were complete and then looking forward. -- the group. But you can see a pretty interesting changes we go forward shelves working very diligently here and getting some more on line in the -- And some core course as well -- moving ahead with some major projects is as a -- -- -- so there's a little bit of a shift in who the Big Five will be. But those are many of the front leaders and those are many of the ones that. If the oil price tends to move -- -- downward direction. Have good good covers show which. If if you target start to look at this sort of on a map view. These next couple slides what I wanna do show you senator. From a a collage if you would. Of of we hear some of the majors aren't in the major acreage holders are in this -- -- -- -- ones. And it's pretty dominant than you can see -- the production. Leaders are so that the red is -- -- and Ariel and then you you have Scott land though is. In blue which is the second. And Kana is the third and then moving down ConocoPhillips fourth. With the camp project. -- If we look at the mining acreage of course it's pretty concentrated. A similar set of groups in crude suncor Canadian. A natural resources are the leaders as well show. But when I'm at a show -- in a couple minutes is there's been some major changes in the last year. In some of this. And then royalty trusts. The world to trust the course of her as Tom mentioned and as you all know are under a lot of pressure. With -- 2010. Deadline coming. As well as some other structural issues. To undergo some changes but these are the leaders right now -- -- -- bona Vista enerplus. Paramount and growth in -- west and they're kind of scattered. Across. All three years. But if you kind of -- -- things and a strategic standpoint. What this graph shows. -- the kind of the way that I like to look at things you have integrated companies. And those tend to be the super majors but the -- there are few small ones. That you have the upstream -- early upstream players. And then a group of investors that are based looking at buying equity and -- hoping -- to do a deal or be taken out and then the royalty trusts. And in the last group that we like to look at -- merchant refiners. And what I've color coded if you if you follow the they're kind of a checkerboard colors here but first one maybe it's as husky you don't like green well if you go over to the far right they did a deal with -- who originally. Two years ago said that they weren't gonna in -- upstream side. On the there just going to be a merchant refiner. Of course they change their tune. Perhaps on the heels of the next one down which is ConocoPhillips with their animal. And if you start and see when -- -- -- you match the colors that you can see. There's been quite a bit of movement around here lately a lot of it though from. The speculator class if you would. And all this movement happened in the last year. It's. It's pretty interesting to watch. And I suspect that many of you in this room are. Looking it. Some of these companies for acquisitions or partnership. And if we sort of look at the activities and of what's going on in the independent and one of the ways of access of course around -- through crown public sales. And this is a snapshot from 2004 to 2008. And there's been a huge increase in the last year of those that we call the speculator or investor side it's gone up 20%. Of their participation in these sales. Versus those in the upstream it's -- just a little bit. If you kind of look at the ones that are what we kind of called consolidators. Many of those -- income trusts. And look at on the left side is 2004. On the right hand side the -- 2008. Again you can see a dramatic change. That's occurring. In the in the in the group and speculators. Again it's gone up. From the 12%. -- up over 50%. The ups upstream is going up a little bit the other one that's gone up a lot of the income trusts. So the playing field is changing. And just a consolidated -- get it consolidated view at this last hi this is if you put both those groups together. And looked at what was going wrong. So. In total it's about a third. For upstream and about a third for the the speculator land position holders and then the rest is split between the income -- and you agree. For dramatic change though from last year. And some of that's driven by and a large group of new entrants. Some of you might suggest you might wanna turn your neighbor and introduce yourself -- next year at this time you may be -- partner. But. There's been quite a few. Groups that have moved in on the Asian aside. The European side of course it's Austin at all he drew -- -- There's also a rise of Canadian domestic groups. That we haven't seen before that are starting and here's three listed here are three of the smaller ones. And then there's also been -- last group that's moved in this Saskatchewan has the plate moves out to the fringes of but the margin. It's sort of a throw a kind of -- -- that you have sort of my prediction of who might be here next year -- not here this year if you think of some of the people that I showed before that may be missing the Australasian. Indians and our friends from Australia BH peer group that are so far somewhat elusive. European majors reps all. -- what we call the three keys Patrick brought Petra not some -- of -- There still are few large independents that are missing. Last journalists had occidental and of course there. They've made deals since then. The Russians rosneft and also -- well what I would add to that list. Are also missing. And they're continue to be a lot of equity companies that are present here in Canada attack of the EU UAE company. That are not. Currently involved in the -- -- play. In that same respect -- a lot of companies that are capitalizing on the high pricing environment as well as some other things and they're rationalizing or exiting their portfolios. And these are for that have been involved in the rationalizations -- Exe process here lately Murphy tells me enerplus and they haven't. So what I wanna do for this next part is just talk a little bit about if you're looking at things what sort of screening tools. And what are some of the -- entry costs that we see that are out there. And thickness I'll talk a little bit about witnesses is a key one. As one goes for the thickness of the -- -- -- is always so -- -- traditional sort of parameter. Saturation but -- from inception mission rather than. Total oil saturation as you might typically talk about and recovery factor -- -- the three big ones in my mind. And that from an entry cost really -- -- talk about two different ones which is the the cost of acreage and how -- doing on acquisitions. And probably the biggest time. From one of the most clear ways to look at things when you're screening things is really to look at -- A relative pay -- based on the average -- and this is a map from. Our frontiers -- you'd be. And it it was published in 2006. And it shows to -- about the dark blue was 250 feet in the read history is thirty feet -- -- you can clearly see where this weak spots -- on here. You can get a copy this map from them and it's it's -- we. The average amount of its human. For most of the projects is ranges between 812% saturation. The process -- in here -- amazing I'm quite high that are greater than 35%. And the pay zones have a lot as as the map shows a huge amount of variability. But. The ten averaged a lot less than that and I'll talk about that -- Okay.

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