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Strategies & Market Trends : Maximum Investing

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To: Howard Bennett who wrote (76)	11/21/2002 10:54:52 PM
From: Howard Bennett	Read Replies (1) of 81

What are the economics of the Athabaska Oil Sands Project? This is from Canadian Natural Resources IR person: Howard, You are correct about Iraq having higher quality reserves at a low cost. The oil sands produce bitumen (very heavy oil) that needs to be upgraded. Our product will be upgraded to 34-36 degree API with virtually no sulphur content. The economics look as follows (all amounts in Canadian dollars). Today's selling price $45 Royalty rate 1% until project payout, then reverting to about 15% depending upon price. Op cost to extract and upgrade - about $10. As you can see, very robust netbacks. The catch is that you have to have very large reserve base and deep pockets to set up the infrastructure. Our project costs about C$8 billion, with just under $5 billion required to get us to first production. The reason is that this is essentially mining the oil. A rough rule of thumb is that 4 tons of earth yields about 2 tons of oilsands which in turn will yield 1 barrel of light sweet oil. Development costs work out to be about $1.25/bbl. Positives about the project. No geological risk (we know its all there, just like mining). No production declines like conventional production. Your production is only constrained by the speed of your mining. No technology risk - its all currently being done, but today's technology is even better than the old systems used by competitors. No political risk - except it being "soviet canuckistan" ;-) No market risk - right next door to the US with full pipelinec apacity there. Hope that all helps. If not, please feel free to send additional questions. Corey Bieber Director, Investor Relations

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