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    J. David Rushford

    Vice President, Chinook Business Unit

    APEGGA Technical Luncheon

    May 20, 2004

    CBM in Alberta

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    Tertiary

    Tertiary-Cretaceous

    Cretaceous

    Cretaceous-Jurassic

    TriassicPermian-Pennsylvanian

    Pennsylvanian

    Mississippian-Pennsylvanian

    North American CBM Resource

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    119

    40

    60

    20

    352

    115

    22

    7

    0 100 200 300 400 500 600

    Tcf

    British Columbia Foothills

    Alberta Foothills

    Alberta Plains

    East Coast

    Minimum

    Gas-In-Place

    Maximum

    Gas-In-Place

    Estimates vary widely- 146 Tcf to over 3,000 Tcf

    2001 Canadian Gas Potential Committee

    Canadian CBM Resource

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    Clearwater River

    Provincial Park

    LacLaR ongeProvincialPark

    M eadow Lake

    ProvincialPark Narrow

    Hills

    Provincial

    Park

    Prince Albert

    Nat ionalPark

    Good Spi r i tLake

    Prov. Park

    DuckMtn.

    Prov. Park

    Moose

    Mountain

    Prov.

    Park

    Sask. Landing

    Prov. Park

    Buffal oPound

    Pr ov .Par k

    Athabasca

    Lake

    Lake

    Claire

    Mamawi

    Lake

    Cornwall

    L

    R

    River

    Lake

    Wabasca

    South

    LakeW abasca

    North

    La keHeart

    Bi che

    LacLa

    Lake

    Beaverhill

    Lake

    Soundi ng

    La keNewellLake

    McGregor

    LakePakowki

    Res.

    St.M ary

    La ke

    Sullivan

    Lake

    Buffal o

    LakePi geon

    LakeBuck

    LakeGull

    Lake

    Sylva n

    LakeGleniffer

    Lak eFlat

    Lak e

    Winefred

    LakeGarson

    LakeGordon

    LakeGregoire

    La keCalling

    Lake

    McLelland

    LakesGardiner

    LakeN am ur

    El l s

    R iver

    R

    iv

    er

    R

    i

    v

    e

    r

    River

    R

    LakeMargaret Lake

    Wentzel

    LakeHay

    Lake

    Bistcho

    R

    La keBison

    Lake

    Peer less

    R

    i

    v

    er

    Rive

    r

    R i v

    e

    r

    Ri v

    er

    Whitemu

    d

    P eace

    LakeC ar di nal

    Lake

    Kimiwan

    Lake

    Utikuma

    Lake

    Snipe

    L e s se r S l a ve L a k e

    Little

    Lake

    ChipSte.Anne

    La c

    LakeW abamun

    ReservoirBr azeau

    LakeAbraham

    River

    Pembina

    River

    Red

    Dee

    r

    Athabasca

    R i v e r

    Bra

    z

    e

    a

    u

    Riv er

    River

    Oldman Oldman

    Ri v

    er

    River

    R

    i

    ver

    Mi lkR i ver

    Pea c

    e

    R

    i ver

    Richardson

    Steen

    River

    Ri

    v

    er

    R i v

    e r

    Ri

    v

    er

    River

    River

    H

    a

    y

    Hay

    H a y

    Yat

    es

    Buffalo

    Salt

    S l a

    v e

    River

    OldFort

    Ri

    v

    er

    River

    River

    M

    c Ivo r

    Birch

    Birch

    R

    i

    v

    e

    r

    Athabasca

    A th a

    b as c

    a

    N

    or th

    North

    S

    o

    u

    t

    h

    Firebag

    R

    Clea rwa t e

    r

    Riv er

    Red

    Deer

    R

    i v

    er

    Rosebud

    R iv er

    Ma cKay

    C

    h

    ri

    sti

    n

    a

    W

    i n e f r e

    d

    S

    an

    d

    Smoky

    S

    m

    o

    k

    y

    R i v

    e r

    River

    Ri v er

    River

    Ri

    v

    er

    W ap it i

    Notikewin

    C hi nc hag

    a

    Wolve

    rine

    Riv

    er

    River

    River

    River

    River

    Ri ver

    Beaver

    Saskatchewan

    Saskatchewan

    Saskatchewan

    Battle

    Bow

    B

    ell

    y

    J a c k fis

    h

    Courtesy Oilweek

    2003 Activity

    2004 Activity

    Industry Activity - CBM

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    Unconventional gas resource

    Oil sands of gas

    Gas produced from coal seams

    Large volumes of water initially produced

    Low gas rates

    Stage 1 Stage 2 Stage 3

    Stage 3

    (enlarged)

    Sandstone

    Coal

    Limestone

    What is Coal Bed Methane (CBM)

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    Dewatering

    Stage

    Stable

    Production

    Stage

    Decline

    Stage

    Time

    Gas

    WaterProductio

    nRate

    Typical CBM Well Production Profile

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    One gram of kerogen has the surface area of a football field

    1 gram

    CBM Solut ons

    What Makes CBM And Gas Shales Special

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    Tight Gas

    Sands

    Tight Gas

    Sands

    Shale Coal

    0%

    28% Ash

    4%

    14% TOC 11%

    4%

    0.31 Bcf

    0.84 Bcf 0.85 Bcf

    1.3 Bcf

    Area = 160 AcresThickness = 3 mTemp. = 38 oCPressure = 11 MPa

    Tight Gas

    Sands

    Tight Gas

    Sands

    Shale Coal

    0%

    28% Ash

    4%

    14% TOC 11%

    4%

    0.31 Bcf

    0.84 Bcf 0.85 Bcf

    1.3 Bcf

    Area = 160 AcresThickness = 3 mTemp. = 38 oCPressure = 11 MPa

    (modified from Hill, 2001)

    CBM Solut ons

    Natural Gas Storage Capacity in

    Unconventional Reservoirs

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    HorseshoeCanyon Coal

    Zone

    Aggregate

    Coal Thickness

    Author, G.S.C. Hughes

    200 m DH depth contour

    Surface mining operation

    20

    18

    16

    14

    1210

    8

    6

    4

    2

    0

    22

    Sheerness

    Battle River

    Dodds

    W. Palliser

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    Author: Bruce Misanchuk, modified from A.R.C. McCabe et al 1989

    Late Cretaceous Horseshoe Canyon And

    Bearpaw Formations (Edmonton Group)

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    Current Day Analogy

    Panama

    Swamp to Resource

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    Photos courtesy of AGS

    Horseshoe Canyon Coals

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    Lethbridge

    Basal

    Rockyford Standard

    Drumheller

    Weaver

    Carbon

    Thompson

    Coals targeted in Horseshoe Canyonare Upper Cretaceous (Edmonton-Belly

    River)

    Mean Depth increases to west (150-

    700 m)

    Total coal thickness varies from 621 m

    Up to 53 individual seams over 500 m

    of vertical interval, interbedded in

    siltstone, sandstones and shales

    Coals are low-rank - Sub Bituminous

    resulting in lower gas contents, cleat

    density.

    Geological Summary

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    Annualized Type Curve (4 wells/sec)

    0

    20

    40

    60

    80

    100

    0 5 10 15 20 25 30

    Years

    Rate(Mcf/d)

    0

    70

    140

    210

    280

    350

    CumulativeProd'n(MMcf)

    3%

    4%

    6%

    13%

    4%

    Decline Rates

    Characterized by very low declines

    Horseshoe CanyonAnnualized Type Curve

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    West Palliser Block Status

    Current production18 MMcf/d

    >500 wells drilled (+ 80 JV

    Exploration)

    ~ 200 wells producing 2004 ~300 wells (150 YTD)

    Land base ~1100 sections

    (~5% of fairway)

    First bcf of CBM gasproduced in 2003

    Calgary

    T21

    T29

    R28 R22

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    Horseshoe Canyon Rate Distribution

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    Entice 3rd

    Party Simulation

    Entice Integrated Sand/CBM

    Simulated Curve vs Actual

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    Engaging Stakeholders

    Horseshoe Canyon & Mannville CBM sits directly upon

    the most populated areas of Alberta

    AEUB G-56 public consultation requirements

    - Operational impacts (groundwater, noise, flaring, dust, etc.)- Compensation expectations

    - Direct and adverse affects objector standing

    - Showing the BIG PICTURE

    Public education Public consultation/interaction is a core competency

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    Minimal Disturbance Drilling

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    Low Impact Operations

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    Similar to shallow gas

    downspacing

    Wellsites

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    Similar to

    shallow gas

    downspacing

    Minimal Footprint

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    Regulatory Issues

    CBM minerals requirements- Currently 1 well/section, need 4 16

    - Spacing requires public consultation and approval

    - Coal and CBM rights issues must be resolved with split titles

    Sand/coal & coal/coal commingling

    - Current regulatory framework manages at single pool level- Offset mineral owners must be consulted

    Field operations

    - Drilling permits must state that CBM is the target