The document discusses a presentation given by Dinara Millington from the Canadian Energy Research Institute (CERI) at a conference in Medicine Hat, Alberta. It provides an overview of CERI, including its mission to provide independent energy market analysis. It then discusses topics including current Canadian oil and oil sands production, forecasts for growth in oil sands production, and the economic impacts of oil sands development on Alberta, Canada, and US states under different pipeline scenarios.

1. Canadian Energy Research Institute
Economic Impacts of Oil Sands
Development
15th Annual Ports-To-Plains Alliance Conference
Dinara Millington
Senior Research Director
Canadian Energy Research Institute
October 2-4, 2012
Medicine Hat
Relevant • Independent • Objective
1 www.ceri.ca

2. Agenda
 Who We Are and What We Do
 Canadian Oil and Oil Sands
 Economic Benefits
 But…
 What are Some of the Problems?
 Summary
Relevant • Independent • Objective
2 www.ceri.ca

3. 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, the University of Calgary, the Canadian Association of Petroleum
Producers (CAPP) and the Small Explorers and Producers Association (SEPAC). In-kind
support is also provided by the Energy Resources Conservation Board (ERCB).
All of CERI’s research is publically available on our website at
w w w .c e r i .c a
Relevant • Independent • Objective
3 www.ceri.ca

4. 2011-2012 Reports Released
 Canadian Oil Sands Supply Costs and Development Projects (2011-2045) (March
2012)
 Canadian Energy: Pacific Access – Foreign Investment in the Oil Sands and British
Columbia Shale Gas (March 2012)
 Canadian Energy: Pacific Access – Oil Spills and First Nations: Exploring
Environmental Land Issues Surrounding the Northern Gateway Pipeline (February
2012)
 Canadian Energy: Pacific Access – Overview of Transportation Options (January 2012)
 Overview of Eastern and Atlantic Canada’s Petroleum Industry and Economic Impacts
of Offshore Atlantic Projects (November 2011)
 Applicability Abatement Potential for the Alberta Oil Sands Industry and Carbon
Capture and Storage (CCS) Applicability to Coal-fired Electricity Generation and Oil
Sands (October 2011)
 North American Natural Gas Market Dynamics: Global LNG – A Review (June 2011)
 Economic Impacts of Drilling, Completing and Operation of Gas Wells in Western
Canada (June 2011)
 Economic Impacts of Drilling, Completing and Operating Conventional Oil Wells in
Western Canada (June 2011)
Relevant • Independent • Objective
4 www.ceri.ca

5. 2012 Reports Released (July/August 2012)
 Pacific Access Part I – Linking Oil Sands Supply to New and Existing Markets
 Pacific Access Part II – Asia-Directed Oil Pathways and Their Economic Impacts
 Pacific Access Part III – Economic Impacts of Exporting Horn River Natural Gas
to Asia as LNG
 Natural Gas Liquids in North America: Overview and Outlook to 2035
Relevant • Independent • Objective
5 www.ceri.ca

6. 2012-2013 Current Work
 Potential Impact of Shale Gas Development in Quebec
 North American Natural Gas Demand Pathways
(ICF/MARBEK, whatIf? Technologies)
 Energy Metrics Handbook
 Potential Transportation Options for Alberta Land-Locked Oil
For a list of all CERI publications, please visit our website at www.ceri.ca
Relevant • Independent • Objective
6 www.ceri.ca

7. CERI Conferences
 CERI hosts three major conferences each year (Oil, Natural Gas and Petrochemicals)
attended by over 100 delegates from across North America.
CERI 2012 Petrochemical Conference
“Pathways to the Future”
June 3-5, 2012
CERI 2012 Oil Conference
“Achieving Super Power Status”
April 23-24, 2012
CERI 2012 Natural Gas Conference
“Going Global – Shifting the Focus of
the Natural Gas Industry”
February 27-28, 2012
Dates and venues for our 2013 conferences can be found on our website. For further information, contact our Conference Manager, Deanne Landry, at
403-220-2395 or dlandry@ceri.ca.
Relevant • Independent • Objective
7 www.ceri.ca

8. “Western Canada’s Upstream Oil
and Gas Industry”
Relevant • Independent • Objective
8 www.ceri.ca

9. Western Canada’s Oil and Gas Industry
2011 Expenditures: $68.1 billion 2011 Expenditures: $45.3 billion
Royalties Royalties
Wages Wages
Production Production
Operation and Maintenance Operation and Maintenance
Construction
Completion and Tie in
Conventional Drilling Evaluation
Land Acquisition Land Acquisition
Crown Land Sales Crown Land Sales
9
Oil and Gas Drilling Oil Sands Developments

10. “Canadian
Oil and Oil Sands”
Relevant • Independent • Objective
10 www.ceri.ca

11. 2011 Facts about Canadian Crude
Production:
• Western Canada (AB,BC,SK,NWT) Conventional LIGHT Crude 561,929 bbls/day
• Western Canada (AB,BC,SK,NWT) Upgraded Bitumen 846,112 bbls/day
• Western Canada (AB,BC,SK,NWT) Condensate (C5+) 128,498 bbls/day
• Western Canada (AB,BC,SK,NWT) Conventional HEAVY Crude 421,618 bbls/day
• Western Canada (AB,BC,SK,NWT) Non Upgraded Bitumen 758,919 bbls/day
• Eastern Canada (NF/LAB,ON) Conventional LIGHT Crude 271,778 bbls/day
• Total 2011 Production of Crude Oil and Equivalent 2,988,854 bbls/day
Exports:
• PADD I (74% Light, 26% Heavy) 171,182 bbls/day
• PADD II (21% Light, 79% Heavy) 1,439,447 bbls/day
• PADD III (12% Light, 78% Heavy) 111,358 bbls/day
• PADD IV (17% Light, 83% Heavy) 213,709 bbls/day
• PADD V (61% Light, 39% Heavy) 167,295 bbls/day
• Non-US (67% Light, 33% Heavy) 35,261 bbls/day
• Total US (28% Light, 82% Heavy) 2,138,260 bbls/day
Imports: % of Capacity
• Atlantic Canada Conventional Crude 333,990 bbls/day (80%)
• Quebec Conventional Crude 298,775 bbls/day (84%)
• Ontario Conventional Crude 52,836 bbls/day (15%)
• Total Canadian Imports 685,560 bbls/day
Relevant • Independent • Objective
11 www.ceri.ca

12. WCSB Conventional Oil Production Forecast
Realistic Scenario (2010-2035)
1,400,000
1,200,000
1,000,000 + 150,000 bbls/day
Production (bbls/day)
800,000
600,000
400,000
200,000
0
British Columbia Existing Wells British Columbia New Wells Alberta Existing Wells
Alberta New Wells Saskatchewan Existing Wells Saskatchewan New Wells
Manitoba Production NWT Production
Relevant • Independent • Objective
12 www.ceri.ca

13. Western Canadian Oil Sands Potential
('000 bpd)
3,500
3,000
2,500
2,000
1,500
1,000
500
0
2007 2009 2011 2013 2015 2017 2019 2021 2023 2025 2027 2029 2031 2033 2035 2037 2039 2041 2043 2045
Total In Situ Bitumen Volumes Total Mined Bitumen Volumes
Relevant • Independent • Objective
13 www.ceri.ca

14. Western Canadian Oil Sands Potential
('000 b/d)
6,000
5,500
5,000
Announced Awaiting Approval
4,500
Approved Suspended
Under Construction Onstream
4,000
3,500
3,000
2,500
2,000
1,500
1,000
500
-
2007 2009 2011 2013 2015 2017 2019 2021 2023 2025 2027 2029 2031 2033 2035 2037 2039 2041 2043 2045
Relevant • Independent • Objective
14 www.ceri.ca

15. Options for Canadian Crude By Pipeline
Churchill
Source: Canadian Association of Petroleum Producers, Crude Oil Forecast, Markets & Pipelines, June 2011
Relevant • Independent • Objective
15 www.ceri.ca

16. “Economic Impacts of Oil
Sands Staged Development”
Relevant • Independent • Objective
16 www.ceri.ca

17. Input-Output (I/O) Logic
Oil Steel Trucks Natural Water Engineering Other
Sands Gas Services inputs
Oil Sands Industry
Relevant • Independent • Objective
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18. Economic Impacts by UCMRIO 2.0
• There are two types of shocks:
Impacts
– Investment on Alberta
– Operation
Impacts
Investments in Alberta Oil Sands on BC
UCMRIO
2.0 Impacts
Multipliers
Operations in Alberta Oil Sands Impacts
Impacts
Impacts
on the US
Relevant • Independent • Objective
18 www.ceri.ca

19. How Does it Work?
$0.55 Oil Sands $2.02 GDP
$0.6
UCMRIO
$1 Investment Compensation
$0.20 Construction 2.0
Oil Sands of Employees
Multipliers
$0.25 Other Investment &
Manufacturing Operations
Impacts
$0.95 11.2
Oil Sands UCMRIO Employment
$1 Operations 2.0 Opportunities
Oil Sands Multipliers
$0.05 FIRE $0.42
Taxes
Relevant • Independent • Objective
19 www.ceri.ca

20. Economic Impacts of Alberta’s Oil Sands
Case 1 - “No Expansion” Scenario
'000 bbl/d
8,000
7,000
6,000
Rail volumes
5,000
Mainline Expansion (2014)
4,000
3,000
2,000
1,000
0
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
AB Conventional Prodn SK Conventional BC Conventional
MB Conventional NWT Conventional Diluent for Primary/Eor
Existing&Under Construction US Bakken prodn Existing Export Operational Capacity
Note(s): 1) Operational Capacity is 95% of total design capacity. 2) Conventional crude volumes are net production volumes available for
export (i.e., net of domestic demand). 3) Oil Sands volumes comprise of net bitumen SCO available for export and diluent volumes required
to move bitumen as per pipeline specifications. February 2, 2012
Relevant • Independent • Objective
20 www.ceri.ca

21. ‹#›

22. ‹#›

23. Economic Impacts of Alberta’s Oil Sands - US
Case 1 - “No Expansion” Scenario
Ports-to-Plains Alliance Member States
GDP Compensation Employment
Thousand
Mln $CDN Mln $CDN
person-yrs
Colorado $3,305 $1,563 35
Kansas $2,008 $977 24
Montana $3,176 $1,504 32
Total Employment Impacts in US (2011-2035)
Nebraska $593 $280 9
New Mexico $610 $214 7
North Dakota $209 $89 3
Oklahoma $1,368 $556 16
South Dakota $252 $98 4
Texas $12,935 $5,116 119
Wyoming $382 $98 3
Relevant • Independent • Objective
23 www.ceri.ca

24. “Let’s Talk About
Pipelines”
Relevant • Independent • Objective
24 www.ceri.ca

25. Economic Impacts of Alberta’s Oil Sands – Canada
Case 2 - Inclusion of the Keystone XL Pipeline (Incremental Impacts)
'000 bbl/d
8,000 Canada AB SK
7,000
GDP (bln) $617 $583.2 $1.4
Tax Revenues (bln) $131 $121 $0.4
6,000
Keystone XL (2015)
Employment (‘000 3,497 3,016 17
5,000 person-years)
Mainline Expansion (2014)
4,000
3,000
2,000
1,000
0
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
AB Conventional Prodn SK Conventional BC Conventional
MB Conventional NWT Conventional Diluent for Primary/Eor
Existing&Under Construction US Bakken prodn Approved
Approved-on Hold Awaiting Approval Announced
KXL Addition Expansion of Enbridge mainline Existing Export Operational Capacity
Note(s): 1)Operational Capacity is 95% of total design capacity. 2) Conventional crude volumes are net production volumes available for export (i.e., net of
domestic demand). 3) Oil Sands volumes comprise of net bitumen and SCO available for export and diluent volumes req'ed to move bitumen as per
pipeline specifications. August 23, 2012
Relevant • Independent • Objective
25 www.ceri.ca

26. Economic Impacts of Alberta’s Oil Sands - US
Case 2 - Inclusion of the Keystone XL Pipeline (Incremental Impacts)
Ports-to-Plains Alliance Member States
Incremental GDP GDP Compensation
Compensation Employment
Employment
Thousand
Mln $CDN Mln $CDN
Thousand
person-yrs
Mln $CDN Mln $CDN
Colorado $4,830 $2,293 person-yrs 53
Kansas
PADD I $37,696 $3,171
$18,235 $1,513 417 35
Montana $6,430
PADD II $74,995 $35,897 $3,054 827 70
Nebraska $558 $265 6
PADD III $20,349 $9,231 216
New Mexico $544 $238 6
PADD IV Dakota $12,751
North $6,040
$206 $95 140 3
PADD V
Oklahoma $26,358 $12,469 $566
$1,244 285 14
Total US Dakota $172,149
South $241
$81,872 $109 1,883 3
Texas $13,159 $5,974 138
Wyoming $316 $128 3
Relevant • Independent • Objective
26 www.ceri.ca

27. Economic Impacts of Alberta’s Oil Sands - Canada
Case 3 - Inclusion of TMX Expansion (Incremental Impacts)
'000 bbl/d
8,000
Canada AB SK
7,000 GDP (bln) $308 $291 $0.64
6,000 TMX (2017) Tax Revenues (bln) $65 $60 $0.2
Keystone XL (2015) Employment (‘000 1,705 1,471 7
5,000
person-years)
Mainline Expansion (2014)
4,000
3,000
2,000
1,000
0
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
AB Conventional Prodn SK Conventional BC Conventional
MB Conventional NWT Conventional Diluent for Primary/Eor
Existing&Under Construction US Bakken prodn Approved
Approved-on Hold Awaiting Approval Announced
TMX Expansion KXL Addition Expansion of Enbridge mainline
Existing Export Operational Capacity
Note(s): 1)Operational Capacity is 95% of total design capacity. 2) Conventional crude volumes are net production volumes available for export (i.e., net of
domestic demand). 3) Oil Sands volumes comprise of net bitumen and SCO available for export and diluent volumes req'ed to move bitumen as per
pipeline specifications. August 23, 2012
Relevant • Independent • Objective
27 www.ceri.ca

28. Economic Impacts of Alberta’s Oil Sands - US
Case 3 - Inclusion of the TMX Expansion (Incremental Impacts)
Ports-to-Plains Alliance Member States
Incremental GDP GDPCompensation
CompensationEmployment
Employment
Thousand
Mln $CDN Mln $CDN
Thousand
person-yrs
Mln $CDN Mln $CDN
Colorado $677 $320 person-yrs 7
Kansas
PADD I $8,081 $410
$4,088 $199 93 4
Montana $636 $301 7
PADD II $10,393 $5,137 119
Nebraska $124 $58 2
PADD III Mexico $4,126
New $1,624
$128 $45 40 1
PADD IV Dakota $1,635
North $44$761 $18 18 0
Oklahoma
PADD V $5,100 $287
$2,378 $116 54 4
South Dakota $53 $21 1
Total US $29,335 $13,989 324
Texas $2,691 $1,064 25
Wyoming $79 $20 0
Relevant • Independent • Objective
28 www.ceri.ca

29. Economic Impacts of Alberta’s Oil Sands - Canada
Case 4 - Inclusion of Northern Gateway (Incremental Impacts)
'000 bbl/d
8,000
Canada AB SK
Northern Gateway (2018)
7,000 GDP (bln) $374 $352 $0.9
6,000 TMX (2017) Tax Revenues (bln) $80 $73 $0.3
Keystone XL (2015) Employment (‘000 2,150 1,853 11
5,000
person-years)
Mainline Expansion (2014)
4,000
3,000
2,000
1,000
0
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
AB Conventional Prodn SK Conventional BC Conventional
MB Conventional NWT Conventional Diluent for Primary/Eor
Existing&Under Construction US Bakken prodn Approved
Approved-on Hold Awaiting Approval Announced
Northern Gateway Addition TMX Expansion KXL Addition
Expansion of Enbridge mainline Existing Export Operational Capacity
Note(s): 1)Operational Capacity is 95% of total design capacity. 2) Conventional crude volumes are net production volumes available for export (i.e., net of
domestic demand). 3) Oil Sands volumes comprise of net bitumen and SCO available for export and diluent volumes req'ed to move bitumen as per
pipeline specifications. August 23, 2012
Relevant • Independent • Objective
29 www.ceri.ca

30. Economic Impacts of Alberta’s Oil Sands - US
Case 4 - Inclusion of the Northern Gateway Pipeline (Incremental Impacts)
Ports-to-Plains Alliance Member States
Incremental GDP GDP Compensation Employment
Compensation Employment
Thousand
Mln $CDN Mln $CDN
Thousand
person-yrs
Colorado
Mln $CDN Mln $CDN $400
$847 10
person-yrs
Kansas $502 $245 6
PADD I $11,228 $5,668 128
Montana $695 $329 7
PADD II
Nebraska $13,388 $6,625
$176 $83 154 2
PADD III Mexico $5,624
New $2,214
$181 $65 55 2
PADD IV Dakota $1,998
North $65 $927 $28 22 1
Oklahoma $404 $166 4
PADD V $7,054 $3,290 74
South Dakota $77 $30 1
TotalTexas
US $39,292 $18,724 $1,457
$3,683 433 33
Wyoming $105 $27 1
Relevant • Independent • Objective
30 www.ceri.ca

31. Western Canadian Potential
'000 bbl/d
8,000
Looping/Expanding Existing Pipelines
7,000 Northern Gateway (2018)
6,000 TMX (2017)
Keystone XL (2015)
5,000
Mainline Expansion (2014)
4,000
3,000
2,000
1,000
0
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
AB Conventional Prodn SK Conventional BC Conventional
MB Conventional NWT Conventional Diluent for Primary/Eor
Existing&Under Construction US Bakken prodn Approved
Approved-on Hold Awaiting Approval Announced
Northern Gateway Addition TMX Expansion KXL Addition
Expansion of Enbridge mainline Existing Export Operational Capacity
Note(s): 1)Operational Capacity is 95% of total design capacity. 2) Conventional crude volumes are net production volumes available for export (i.e., net of
domestic demand). 3) Oil Sands volumes comprise of net bitumen and SCO available for export and diluent volumes req'ed to move bitumen as per
pipeline specifications. August 23, 2012
Relevant • Independent • Objective
31 www.ceri.ca

32. Economic Impacts of Alberta’s Oil Sands - Canada
Comparison of Cases
Incremental GDP Impacts
(Bln CDN$)
1,600
1,400
1,200
1,000 Incremental Employment Impacts
800
('000 person-years)
600
8,000
400
7,000
200
6,000
0
Alberta Ontario British 5,000
Saskatchewan
Columbia
4,000
Case 1 1,439.9 44.3 19.4 3.1
Case 2 583.2 18.6 8.3 3,000 1.4
Case 3 291.3 9.0 4.0 2,000 0.6
Case 4 352.3 11.4 5.1 0.9
1,000
0
Alberta Ontario British Saskatchewan
Columbia
Case 1 7,209 602 290 37
Case 2 3,016 252 123 17
Case 3 1,471 123 59 7
Case 4 1,853 155 76 11
Relevant • Independent • Objective
32 www.ceri.ca

33. Economic Impacts of Alberta’s Oil Sands - US
Comparison of Cases
Incremental GDP Impacts by PADD Region
(Mln CDN$)
80,000
70,000 Incremental Employment Impacts
60,000
('000 person-years)
50,000 900
40,000 800
30,000 700
600
20,000
500
10,000
400
0
PADD I PADD II PADD III 300 PADD IV PADD V
Case 1 38,742 50,550 19,844 8,028 24,474
200
Case 2 37,695.9 74,994.6 20,349.4 12,751.2 26,358.2
Case 3 8,080.9 10,392.9 4,125.7 100 1,635.3 5,100.2
Case 4 11,227.6 13,388.1 5,624.5 1,997.7 7,053.7
0
PADD I PADD II PADD III PADD IV PADD V
Case 1 447 580 195 88 258
Case 2 417 827 216 140 285
Case 3 93 119 40 18 54
Case 4 128 154 55 22 74
Relevant • Independent • Objective
33 www.ceri.ca

34. “BUT”
Relevant • Independent • Objective
34 www.ceri.ca

35. What are the Problems for WCSB OIL?
1. Canadian exports currently feed one market (flat demand and increasing domestic
supply).
2. Western Canadian oil/oil sands are land-locked and need transportation options in
order to grow either new barrels to the US or Asia.
3. Alberta needs oil hydrocarbon growth in the face of a tanking gas market (Growth =
GDP, Employment, Taxes, Royalties).
4. The Cushing Oklahoma bottleneck is affecting PADD II and Canadian market prices
“negatively”.
5. Tightening Canadian pipeline capacity will
 Affect Edmonton/Hardisty basis differential ($$$ left on the table)
 Potentially slow development of the Oil Sands
 Potentially slow development of Conventional Oil
6. Oil on Oil Competition for pipeline space and access to refineries
 Competition with Alberta/Saskatchewan conventional oil developments
 Competition with North Dakota Bakken oil developments
 Competition with US Shales (Niobrara, Eagle Ford, etc.)
Relevant • Independent • Objective
35 www.ceri.ca

36. Problem WTI-Brent Differential
$135.00 $8.00
$130.00 $6.00
$125.00 $4.00
$120.00
$2.00
$115.00
$-
$110.00
$(2.00)
$105.00
$(4.00)
$100.00
$95.00 $(6.00)
$90.00 $(8.00)
$85.00 $(10.00)
$80.00 $(12.00)
$75.00 $(14.00)
$70.00
$(16.00)
$65.00
$(18.00)
$60.00
$(20.00)
$55.00
$(22.00)
$50.00
WTI - Brent Differential ($/b)
$45.00 $(24.00)
Europe Brent Spot Price FOB ($/b)
$40.00 $(26.00)
West Texas Intermediate (WTI) @ Cushing ($/b)
$35.00 $(28.00)
Jan-2005
Oct-2005
Jan-2006
Oct-2006
Jan-2007
Oct-2007
Jan-2008
Oct-2008
Jan-2009
Oct-2009
Jan-2010
Oct-2010
Jan-2011
Oct-2011
Jan-2012
Apr-2005
Apr-2006
Apr-2007
Apr-2008
Apr-2009
Apr-2010
Apr-2011
Apr-2012
Jul-2005
Jul-2006
Jul-2007
Jul-2008
Jul-2009
Jul-2010
Jul-2011
Jul-2012
Relevant • Independent • Objective
36 www.ceri.ca

37. Problem WTI-Brent Differential
Q3 2011
• WTI discount averaged $23 to Brent
• Canadian Crude (Conventional, SCO, Bitumen) Exports
• 1,477,000 bbls/day to PADD II
• 105,000 bbls/day to PADD III
• 216,000 bbls/day to PADD IV
• 157,000 bbls/day to PADD V
Simple Math: 2,152,000 bbls/day times $23/bbl
= $50 million per day (discounted Value)
2012-2013 “The Pipeline Solution”
• Enterprise/ETP (Cushing to Houston) 400,000 b/d Q4 2012
• Enbridge/Wrangler (Cushing to Houston) (light crude) 2013
• Enbridge Monarch (Cushing to Houston) 350,000 b/d Q4 2013
• Houston to El Paso reversal (bypass Cushing) 200,000 b/d Q2 2013
• TCPL Keystone Market Link (Cushing to Houston) 150,000 b/d Q2 2013
Relevant • Independent • Objective
37 www.ceri.ca

38. Future Problem WTI-Brent Differential
Pipeline Capacity Into and Out of Cushing
3,500,000
3,000,000
RISK
2,500,000
Capacity BPD
2,000,000
1,500,000 Total Flow Into Cushing
Total Flow Out of Cushing
1,000,000
500,000
0
2011 2012 2013 2014 2015 2016
Year
Relevant • Independent • Objective
38 www.ceri.ca

39. Western Canada WTI-WCS Differential
$135.00
$130.00 WTI - WCS Differential ($/b)
$125.00 West Texas Intermediate (WTI) @ Cushing ($/b) Risk of widening differential
$120.00
$115.00
Western Canadian Select (WCS) @ Hardisty ($/b)
Average Light - Heavy Differential ($/b)
if new pipelines are delayed
$110.00
$105.00 2005 - 2006 Median Differential ($/b)
$100.00 2007 - 2008 Median Differential ($/b)
$95.00 2009 - 2010 Median Differential ($/b)
$90.00 2011 Median Differential ($/b)
$85.00 Linear (Average Light - Heavy Differential ($/b))
$80.00
$75.00
$70.00
$65.00
$60.00
$55.00 Keystone Base and Production
$50.00
$45.00 Alberta Clipper new ramps up
$40.00
$35.00
capacity
$30.00
$25.00
$20.00
$15.00
$10.00
$5.00
Apr-2005
Apr-2006
Apr-2007
Apr-2008
Apr-2009
Apr-2010
Apr-2011
Oct-2005
Oct-2006
Oct-2007
Oct-2008
Oct-2009
Oct-2010
Oct-2011
Jul-2005
Jul-2006
Jul-2007
Jul-2008
Jul-2009
Jul-2010
Jul-2011
Jan-2005
Jan-2006
Jan-2007
Jan-2008
Jan-2009
Jan-2010
Jan-2011
Jan-2012
Relevant • Independent • Objective
39 www.ceri.ca

40. Problem WTI-WCS Differential
Q3 2011
• WCS discount averaged $17 to WTI (net approximately $10)
• Canadian Crude (Conventional, SCO, Bitumen) Exports
• 1,477,000 bbls/day to PADD II
• 105,000 bbls/day to PADD III
• 216,000 bbls/day to PADD IV
• 157,000 bbls/day to PADD V
Simple Math: 2,152,000 bbls/day times $10/bbl
= $21 million per day (discounted Value)
2012-2020 “The Pipeline Solution”
• Keystone XL (Hardisty to Houston) 700,000 b/d 2016
• Trans Mountain Expansion (Hardisty to Vancouver) 450,000 b/d 2017
• Northern Gateway (Edmonton to Kitimat) 525,000 b/d 2019
• Line 9 Reversal (Sarnia to Westover, ON) 50,000 b/d Q2 2012
• Line 9 Reversal (Westover to Montreal ) 100,000 b/d ????
• Portland to Montreal Pipeline (Reversal) 400,000 b/d ????
Relevant • Independent • Objective
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41. In Summary
1. The production from conventional sources in Western Canada is growing as
technology is able to unlock resources that were once thought to be difficult to
extract. Nevertheless, oil sands will continue to dominate the future production
growth in this region.
2. Presently, the crude pipeline capacity out of Western Canada is sufficient to
transport production coming from on stream and under construction oil sands
projects. Additional crude export capacity from Western Canada will be essential by
as early as 2015.
3. Value of upgrading at the source in Alberta, Environmental
Issues, Differentials, Refinery Configurations, Crude Competition, Politics, Energy
Security.
4. Given that all oil sands development takes place in Alberta, it is clear that Alberta
will be the largest beneficiary, followed by Ontario and then British Columbia.
5. In the US, PADD II (Midwest) is the biggest beneficiary from spin-off effects of
Alberta’s oil sands development, followed by PADD I (East Coast) and PADD V (West
Coast).
Relevant • Independent • Objective
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42. Canadian Energy Research Institute
Thank you for your time
Please visit us at
www.ceri.ca
Relevant • Independent • Objective
42 www.ceri.ca