Suncor and Canadas Oil Sands: Challenges and Barriers to Innovation

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Suncor and Canadas Oil Sands Challenges and
Barriers to Innovation

• Dianne Zimmerman
• Sr. Manager, Issues Management and Stakeholder
  Engagement
• Sustainable Development
• Suncor Energy Inc.
• Toronto, October 17, 2006

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Suncor Energy at a glance

• Integrated energy company - upstream, refining,
  marketing, pipelines and wind power
• Market capitalization 41 billion (US36 billion)
• Original and single largest investor in the
  Athabasca oil sands
• Production capacity of nearly 300,000 BOE/day
• More than 5,000 employees
• Suncors vision is to be a unique and sustainable
  energy company, dedicated to vigorous growth by
  meeting the changing needs of our current
  andfuture stakeholders

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Suncor Operating Areas
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The Energy Dilemma

• The worlds energy demands are increasing while
  conventional sources are in decline
• The oil sands is an abundant, secure source of
  oil, but development creates significant
  challenges
• The dilemma how do we meet growing energy
  demands and reduce undesired impacts at the same
  time?

Our biggest challenge is to find a way forward
that reconciles our desire to increase
shareholder value with the need to reduce our
environmental impact and contribute to the
well-being of society. For me, thats what
sustainability is all about.
-- Suncor CEO Rick George
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Suncors parallel path

• Emergence of both/and instead of either/or
  approach
• Early entry into the wind energy business

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Agenda

• Focus on Oil Sands
• Historical challenges
• Current and future challenges
• Opportunities
• Case Study Carbon Capture and Storage
• a significant GHG reduction opportunity for
  Canada
• Barriers to overcome

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Oil Sands historical challenges

• Developing unconventional oil - separating oil
  from sand
• Overcoming costs when the world price of oil is
  10 per barrel
• Addressing barriers to capital investment in
  early 1990s
• The federal and provincial governments and
  industry jointly declared a decade ago that
• Oil sands development was in the national public
  interest
• Responsible development was a theme and care for
  the environment was explicitly referenced
• However, social and environmental issues were of
  secondary importance in the absence of real
  investment/growth
• 2006 Success beyond expectations in terms of
  growth

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Current Context New set of challenges

• Innovation including development and deployment
  of new technologies remains a strategic priority
  this is not a mature industry
• Significant challenges being encountered
  associated with GROWTH and PACE of development
• Labour - Capacity for engineering, procurement
  and construction
• Costs - Escalating construction costs
• Society - Community Infrastructure and services
• Environment - Cumulative regional environmental
  impacts (air, land, water) and carbon emissions
  constraints/liabilities over long term
• Permits - Approvals processes which are
  overwhelming government/stakeholder capacity
• Governments - Certainty of environmental policy
  and fiscal policy with higher crude prices

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Current and future Challenges

• Emerging strategic issues for North America
• Growing US/China/India demand and interest in oil
  sands
• Energy security escalating to Presidential/Prime
  Minister level
• The current environmental regulatory system is
  not designed to manage cumulative impacts
  compliance could still result in unacceptable
  cumulative impacts
• Many stakeholders (governments, industry,
  community) short term reactive versus long term
  proactive focus (lack of an engaging vision to
  align to?) requires leadership from the top

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Opportunities

• Canadas Oil Sands is a world scale resource that
  requires a long term sustainability approach
• Key Success Factor meet stakeholder expectations
  for economic benefits social well being
  environmental quality
• Time scale differentiates oil sands versus
  conventional oil/gas
• Requires the long term perspective to ensure
  future success
• Decisions we make now chart a course for the next
  30 years
• Bold economic growth requires an equally bold
  approach to social issues and environmental
  performance
• Maintain investor confidence
• Market forces and private sector capital required
  to trigger longer term technologies, greater
  collaboration between governments industry
• Figure it out in Canada Demand for hydrocarbon
  energy will be met discouraging investment in
  Canada only displaces investment/production to
  other countries with potentially less concern for
  society and environment
• Need an aligned/collaborative commitment among
  all parties to ensure long term success

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Case Study Carbon Capture Storage potential
to reduce large amounts of GHG

• Canada is uniquely positioned in the world for
  CCS deployment
• Significant and unique overlap of point sources
  and geological formations (IPPC report)
• More opportunity in Canada than anywhere else in
  the world
• A significant portion of GHG emissions come from
  large point sources (primarily power generation,
  industrial, and petroleum complexes)
• CCS can take place anywhere in Canada that large
  final emitters are located within reasonable
  distance of suitable geologic storage sites
• In certain locations CCS has revenue potential
  from CO2 use as an fluid for enhanced oil
  recovery (this EOR has been done for gt25 years
  in N. America)
• Although CCS is not currently commercial it
  represents an enabling technology with the
  potential to dramatically reduce CO2 emissions in
  a cost effective way

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Barriers to Overcome

• Will the government, in their Made-in-Canada
  Green Plan support CCS to meet economic (oil
  sands) and environmental (GHG and other
  pollutants) objectives?
• Technology is available and environmentally
  desirable but it is very expensive question
  is one of who pays?
• Fostering innovative regulations? Yes, establish
  a long-term sustainable energy strategy for
  Canada. Include GHG policies regulations with
  flexible market mechanisms such as emissions
  trading.
• Private Public Partnerships - Requires a
  collaboration with provincial and federal
  governments and a number of industry players
  oil and gas, electricity, fertilizers

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Conclusion

• We know that there is no silver bullet to solve
  our energy dilemma it will be a combination of
  innovation and a variety of technologies. We must
  continue on our path of eco-efficiency, however,
  we are moving to a mindset of an economy that has
  a zero tolerance for wasteful resources in air,
  land and water.
• Gord Lambert, VP Sustainable Development,
  Suncor