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Shell Canada

Frontier

AN EXPLORATION & PRODUCTION PERSPECTIVE ON THE WEST COAST

OFFSHORE

AN EXPLORATION & PRODUCTION AN EXPLORATION & PRODUCTION PERSPECTIVE ON THE WEST COAST PERSPECTIVE ON THE WEST COAST

OFFSHOREOFFSHORE

B.C. NATURAL GAS SYMPOSIUMMAY 7, 2003

B.C. NATURAL GAS SYMPOSIUMMAY 7, 2003

Dave CollyerVice President, FrontierShell Canada Limited

Dave CollyerDave CollyerVice President, FrontierVice President, FrontierShell Canada LimitedShell Canada Limited

05/07/03 SCProj4/Fendlt/David Collyer/Presentations/West Coast Conference_May 2003 2

Shell Canada

FrontierAGENDAAGENDAAGENDA

INTRODUCTION

OPPORTUNITY EVALUATION FRAMEWORK (“TECOP”)TechnicalEconomicCommercialOrganizationalPolitical / Societal

CURRENT ASSESSMENT OF WEST COAST OFFSHORE

NEAR TERM PRIORITIES

KEY MESSAGES


Shell Canada

FrontierSHELL CANADA’S UPSTREAM BUSINESSSHELL CANADA’S UPSTREAM BUSINESSSHELL CANADA’S UPSTREAM BUSINESS

N.S. Offshore

Foothills

Foothills - Maintain/generate cashFoothills - Maintain/generate cash

Peace River ( oil sands ) - Grow?Peace River ( oil sands ) - Grow?

Peace River

Mackenzie Delta

Frontier - GrowFrontier - Grow

West Coast OffshoreWest Coast Offshore

Initial Shell land position 1961Exploration in 1960’s

14 wells drilledRegional 2D seismic

Farmout to Chevron 1971Moratorium 1972Environmental Assessment Panel 1986

West CoastOffshore

West Coast not a current exploration priority…but a strategic growth option of interest


Shell Canada

FrontierSHELL’S OPPORTUNITY EVALUATION

FRAMEWORK - “TECOP”SHELL’S OPPORTUNITY EVALUATION SHELL’S OPPORTUNITY EVALUATION

FRAMEWORK FRAMEWORK -- “TECOP”“TECOP”

“TECOP”

T ECHNICAL Prospectivity, costs, technology, HSE

E CONOMIC Economic attractiveness

C OMMERCIAL Market, fiscal, competition

O RGANIZATIONAL Competencies, resourcing, partners

P OLITICAL / Governments, First Nations,SOCIETAL stakeholders, reputation,

regulation


Shell Canada

FrontierTECHNICAL - GEOLOGICAL PROSPECTIVITYTECHNICAL TECHNICAL -- GEOLOGICAL PROSPECTIVITYGEOLOGICAL PROSPECTIVITY

“Positive” indicatorssource / reservoir / trap / seal

GSC / other resource estimates (± 30 TCF) New technologies not appliedExploration cycle immatureLarge areal extent

PROS

CONSEarly drilling results disappointingOil vs. gas uncertainty Relative attractiveness versus investment alternativesGSC estimates are not recoverable reserves

Resource potential HIGHLY uncertain…can only be confirmed through exploration


Shell Canada

Frontier

Early data(circa 1965)

More recent GSC data (circa 1988)

TECHNICAL - SEISMIC DATA QUALITYTECHNICAL TECHNICAL -- SEISMIC DATA QUALITYSEISMIC DATA QUALITY

Need to apply current seismic technology & geological concepts to more fully assess offshore potential


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Frontier

9 10 11 12

A “NOTIONAL” TECHNICAL TIMELINEA “NOTIONAL” A “NOTIONAL” TECHNICALTECHNICAL TIMELINETIMELINE

YEAR 0 1 2 3 4 5 6 7 8

Base regional studies

2-D Seismic

3-D Seismic

Exploration Drilling

Appraisal Drilling

Dvm’t Planning & Regulatory Approval

Development

First Production

Series of technical “gates” Concurrent process in other key areas -regulatory, fiscal, etc.?…..would allow timely exploration activity if/when go-ahead provided

REPRESENTATION OF TECHNICAL TIMELINE ONLY.....OTHER FACTORS WILL HAVE A SIGNIFICANT IMPACT ON PACE OF ACTIVITY!!


Shell Canada

FrontierTECHNICAL - ENVIRONMENTTECHNICAL TECHNICAL -- ENVIRONMENTENVIRONMENT

Establish integrated planning framework @ early stage in processGovernment leadership, broad stakeholder engagementIdentify data / information gaps (“real”, substantive)Plan / timeline to address information needs

Key requirements:Sound science as basis for decision-makingGood baseline dataEarly clarity on sensitive / protected areas (prior to significant expenditures)

Provide legitimate “foundation” for subsequent environmental assessments & regulatory reviews for specific project proposals


Shell Canada

FrontierTECHNICAL - ENVIRONMENTTECHNICAL TECHNICAL -- ENVIRONMENTENVIRONMENT

Important to acknowledge results of earlier reviews…Oct/’01 Jacques Whitford Report

“…there are no specific design, geographical or environmental issues that would preclude the development of the offshore reservoirs of British Columbia”

Jan/’02 Offshore Oil and Gas Scientific Panel Report

“There is no inherent or fundamental inadequacy of science or technology, properly applied in an appropriate regulatory framework, to justify a blanket moratorium on activities.”


Shell Canada

FrontierCOMMERCIAL - MARKETS & INFRASTRUCTURE

COMMERCIAL COMMERCIAL -- MARKETS & MARKETS & INFRASTRUCTUREINFRASTRUCTURE

Positive medium term outlook for N.A. gas marketOther commercial issues to be addressed by industry:

pipeline infrastructurelocal market developmentaccess to export markets

20

25

30

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

Tcf/Yr..

Forecast Range

* Includes Canada and the U.S.

0.5%/ Yr...

1.5%/ Yr...

Three warmwinters

Economicslowdown

Price OutlookPrice OutlookN.A. Demand*N.A. Demand*

1.0

2.0

3.0

4.0

5.0

6.0

19951996199719981999200020012002200320042005200620072008

U.S.$/MMBtu

Market Strip*

* As of April 17th, 2003

Forecast Range

RecentNYMEX

Y.T.D.


Shell Canada

FrontierCOMMERCIAL - LANDHOLDINGS &

PARTNERSHIPSCOMMERCIAL COMMERCIAL -- LANDHOLDINGS & LANDHOLDINGS &

PARTNERSHIPSPARTNERSHIPS

Highly concentrated landholdingsResponsible operators with global experience…Shell, ChevronTexaco, PetroCanada Strong partnerships (Shell / ChevronTexaco)Rights & interests of existing landholders must be respected!

1997: Shell and others donate 129,000 ha to set up Gwaii Haanas Marine Reserve


Shell Canada

FrontierPOLITICAL / SOCIETALPOLITICAL / SOCIETALPOLITICAL / SOCIETAL

Governments must jointly take lead in resolution of…Jurisdictional issuesRegulatory frameworkFiscal regime & revenue sharingRights & tenureEnvironmental assessment process

Need a pragmatic tripartite process involving First Nations peoplesMeaningful consultation Focussed process

Industry (& other stakeholders) will engage once multi-stakeholder process(es) established

Is there sufficient alignment of interests & political will?


Shell Canada

FrontierW.C. OFFSHORE - CURRENT ASSESSMENTW.C. OFFSHORE W.C. OFFSHORE -- CURRENT ASSESSMENTCURRENT ASSESSMENT

T ECHNICAL Prospectivity highly uncertain, technology exists, environmental must be addressed (appears doable)

E CONOMIC Costs & economics uncertain

C OMMERCIAL Market outlook very favourable

O RGANIZATIONAL Industry capability exists, limited current capacity for West Coast Offshore

P OLITICAL / Jurisdiction, fiscal, regulatory framework are SOCIETAL undefined, meaningful First Nations

engagement required… mixed stakeholder messages

“TECOP”

Some positive indicators, many unknowns, significant issues to be resolved!


Shell Canada

FrontierNEAR TERM PRIORITIESNEAR TERM PRIORITIESNEAR TERM PRIORITIES

Establish a coordinated & transparent multi-stakeholder process (joint Federal / Provincial)

Establish integrated planning framework…focus on substantive gaps in environmental information & plans to address

Federal & Provincial governments align to address:fiscal regimeregulatory frameworkjurisdictionrights & tenure

Meaningful consultation with First Nations peoples….. tripartiteprocess?

Concurrent, flexible process building momentum toward lifting of moratorium


Shell Canada

FrontierKEY MESSAGESKEY MESSAGESKEY MESSAGES

Shell largest West Coast landholder…offshore “on the radar screen”, driven by market pull & potential geological prospectivityIssues / challenges are reasonably well-understood…but difficult, complex, diverse

Industry needs clarity, certainty, transparency on “rules of game” before undertaking significant investments

Industry will engage in multi-stakeholder processes… once established by responsible gov’ts & regulators

Some momentum established, but much work to be done before “moratorium” lifted

Take longer term view & be realistic about timelines / expectations

Potential window of opportunity…is there sufficient alignment to proceed?


Shell Canada

FrontierSHELL & SUSTAINABLE DEVELOPMENTSHELL & SUSTAINABLE DEVELOPMENTSHELL & SUSTAINABLE DEVELOPMENT

Context in which offshore oil & gas activity MUST be evaluated!

An overarching commitment to SD - Economic, Social, Environmental - part of our Business Principles


Shell Canada

Frontier

THANK YOU THANK YOU THANK YOU

We’re all in this boat together, so let’s do it right…... We’re all in this boat together, so let’s do it right…... We’re all in this boat together, so let’s do it right…...

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