Climate May 7, 2015 Presentation to ROABA Overview Role of OSCA - PowerPoint PPT Presentation

Current Economic Climate May 7, 2015 Presentation to ROABA

Overview • Role of OSCA • Business environment and trends • Working with change

OSCA’s Vision To pursue innovative solutions that help to build thriving communities and shared value with our neighbours and enables the responsible growth of Canada’s oil sands . We facilitate engagement, build relationships and collaborate to create measurable socio-economic benefits. 3

OSCA’s Structure and Focus Areas Oil Sands CEO Council Workforce Aboriginal Work with other active Relations CAPP Oil Sands groups to forecast Executive Policy Strengthen relationships employee numbers, Group with Aboriginal identify required skills, communities by and help to retain an OSCA Steering collaborating to enhance Group adequate supply of socio-economic trained workers in opportunities Alberta’s oil sands. OSCA Community Infrastructure Well-Being Foster collaboration Maintain the social amongst stakeholders to license to operate in help plan, prioritize, & affected communities promote the while recognizing the Regional development of responsibility to help infrastructure by promote sustainable Stakeholder governments and development of Engagement industry in Alberta’s oil Alberta’s oil sands. sands.

OSCA Members and Mandate Area • 23 oil sands companies with assets or interests in the Athabasca Oil Sands Area.

OSCA’s Key Initiatives Production Population Workforce Community Well-Being Sustainable Community Indicators Task Group: • Joint models for planning and measuring sustainable communities (Municipal, industry, stakeholders) Healthy Society Task Group: • Strong relations with AHS: on-line medical controls for patient transfers, bio-hazard disposal program • Industry best practices on short and long-term disability • Improving Addictions & Mental Health services (working group) Property Tax and Assessment Task Group: • Joint population forecast model (industry, municipality, Province) • Municipal budgets, property assessments, taxation • Municipal planning 6

OSCA’s Key Initiatives Aboriginal Relations Education and Skills • Developing an inclusive multi-sector forum Sustainable Communities JIP • Community capacity building through youth Business Development Task Group • One-on-one engagement with business • Education on industry lifecycle • Expanding opportunities 7

OSCA’s Key Initiatives Infrastructure Ground Transportation Task Group: • High Load Corridor JIP • AOSA Industry infrastructure priorities Aviation Task Group: • YYC east runway policy delaying industry charters • JIP with NavCanada for improved navigation infrastructure Camps Task Group: • Bear Management & Safety JIP • Survey of industry standards Power and Co-generation Task Group: • Electricity transmission reliability • Fair provincial policy on co-generation 8

OSCA’s Key Initiatives Workforce • Pilot JIP to increase supply of power engineers • Improve workforce forecast models

OSCA’s Stakeholder Engagement Purpose: • Work with regional stakeholders to identify, prioritize and manage key socio-economic issues to improve outcomes. • Identify opportunities for collaboration among stakeholders. • R eaffirm industry’s commitment to building and maintaining relationships, communication and dialogue. Areas of focus: • Communities in the Athabasca Oil Sands Area (AOSA). Engagement to date: • Two sessions in each of Fort McMurray and Lac La Biche. • 12 top priorities identified and being actioned.

Pressures on the Canadian Oil Industry Crude Oil Geopolitics Supply/Demand Technology Market Access The Canadian Environmental Social Performance License Oil Industry Government Demand & Policy Competition Aboriginal Skilled Relationships Workforce 11

Crude Oil Prices 12

Recent Oil Price Trend

Revised Oil Sands Capital Investment Forecast for 2015 Capital Investment in oil sands in 2015: $25 BILLION Enbridge Mainline PADD IV Trans Mountain • 2015 capital investment in oil sands is forecast at Express $25 billion compared to $33 billion last year – down 28%. 14

Canadian Pipeline Capacity vs 2014 Supply Forecast Enbridge Mainline PADD IV Trans Mountain Express Note: Access to markets via pipeline is essential despite current economic climate 15

Economic Forecasts for Q2 2015/16 Date Organization Alberta Real Oil Price Q2 Oil Price 2016 GDP Growth 2015 TD Bank 1.1% 42 70 April May BMO 0.4% 52 avg 65 April ATB 0.8% 55 70 April CIBC - 57 68 RBC 0.6% Modest - Mar. growth Feb. U.S. EIA: - 55 avg 71 Oil Price in WTI U.S.$/bbl

Challenging Environment Oversupply: • OPEC producing 31 M bpd – highest in four years • U.S. production rose at 1.0 m b/d over past 3 years • Canadian oil sands production increases • Inventory storage is limited

World Oil Demand • The forecast of global oil demand for 2015 has been raised by 90 kb/d to 93.6 mb/d, a gain of 1.1 mb/d on the year. This increase on 2014's 0.7 mb/d growth follows cold temperatures in 1Q15 and an improving global economic backdrop. • Global supply rose by an estimated 1 mb/d month-on-month in March, to 95.2 mb/d, as OPEC production recorded its highest monthly increase in nearly four years. Annual gains of a whopping 3.5 mb/d were split between OPEC and non-OPEC production International Energy Agency – World Oil Outlook March 2015

Challenging Times • Industry revenues forecast to be down more than $50 billion in 2015, down from $150 billion in 2014 • 2015 industry budgets reduced significantly • Approx. 14,000 natural resource sector jobs lost in Alberta ( StatsCan Mar. 2015 Labour Market Survey) • Project schedules delayed or cancelled • Projects moving from construction to operations

Member Company Q1 Results Suncor Energy April 30 • Posted $341M loss in Q1 2015. 90% decline in operating profit. April 30 • Cenovus Posted $686M loss in Q1 2015 April 30 • Imperial Oil Earnings down 55% over same time last year to $421M in Q1 2015. • Royal Dutch May 1 Earnings down 56% over same time last year to Shell $675M in Q1 2015 • Canadian Oil May 5 Posted loss of $186M in Q1 2015. Down 46% over Q1 Sands Trust of 2014. • Husky Energy May 5 Posted Q1 2015 earnings of $191M, down from $669M same time in 2014.

Oil Sands Production Increases – South Athabasca (capacity - bbl/day) Company 2011 2012 2013 2014 2015 F Blackpearl – Blackrod Pilot 800 CNRL – Kirby South 40,000 Cenovus – Christina Lake 40,000 40,000 40,000 40,000 Cenovus – Foster Creek 30,000 Cenovus – Pelican Lk Pilot 600 CNOOC Kinosis (K1A) 20,000 ConocoPhillips-Surmont Ph.2 118,000 Devon – Jackfish 2 and 3 35,000 35,000 Connacher – Algar Ph.1 6,000 Harvest Energy – Blackgold Ph.1 10,0000 Grizzly – Algar Lake 6,000 MEG Energy – Christina Lake Ph.2 55,000 Statoil – Leismer 10,000 TOTALS 46,400 40,000 135,000 137,000 168,000

OSCA Aboriginal Business Development Task Group Purpose: Work to identify and build partnerships with Aboriginal businesses and associations to enhance business capacity, skills and knowledge and to support economic development initiatives. Current activities include: • Connecting with key Aboriginal businesses and organizations to build relationships and understand business needs and challenges to help foster success • Developing information on the oil sands industry lifecycle and what it means to local business • Identifying present and future opportunities

Thank You! For more information: Reegan McCullough Executive Director E-mail: reegan.mccullough@oscaalberta.ca Phone: 780-790-1999