TransCanada Keystone Pipeline GP Ltd. Keystone XL Pipeline Section 52 Application Section 3: Supply and Markets Page 1 of 8 1 3.0 SUPPLY AND MARKETS 2 This section provides oil supply and market information, including: o o o 3 4 5 6 7 8 9 a summary of the Western Canada Sedimentary Basin ("WCSB") oil supply; supply access at the Hardisty, Alberta hub; an overview of the United States Gulf Coast ("USGC") market for the Keystone XL Pipeline (the "Project" for the Canadian portion); and o a summary of the findings of an independent supply and market assessment prepared by Purvin & Gertz, Inc. ("PGI"). A copy of the PGI assessment is provided in Appendix 3-1. 10 3.1 WCSB Supply Forecast 11 12 13 14 15 16 The primary source of supply for the Keystone XL Pipeline is the Alberta oil sands. The Energy Resources Conservation Board reports that there are 27.5 billion cubic metres ("m3") or 173 billion barrels ("bbl") of remaining established reserves of bitumen in the Alberta oil sands. There are sufficient bitumen reserves in Alberta to sustain development of new oil sands projects for decades. Several projects currently under construction will add to supply and future export requirements. 17 18 19 20 21 22 23 24 25 In late 2008, there were announcements of the delay or cancellation of several proposed upgrader projects, due to both the high development costs in Alberta and the reduced differential between light and heavy crude oil prices. At this time, bitumen projects are more economic to develop than upgraded synthetic crude oil projects. This is expected to increase the supply of heavy crude in the next few years, which emphasizes the need to find new export markets for heavy crude oil. The Keystone XL Pipeline will be in a position to access new markets for crude oil supply, both for increased supply of heavy crude in the short term, and for future supply of light synthetic crude if the economics of upgrading projects in Alberta improve. TransCanada Keystone Pipeline GP Ltd. Keystone XL Pipeline Section 52 Application Section 3: Supply and Markets Page 2 of 8 1 2 3 4 5 6 7 8 9 Several crude supply forecasts are presented in the PGI supply and market assessment that is discussed in Section 3.4. The Canadian Association of Petroleum Producers ("CAPP") published a report in June 2008 titled "Crude Oil Forecast, Markets and Pipeline Expansions" ("CAPP forecast"). The pipeline planning case in the CAPP forecast projects that Alberta oil sands production will increase by 345,000 cubic metres per day ("m3/d") or 2.17 million barrels per day ("bbl/d") between 2007 and 2017. The growth in oil sands production is expected to more than offset declining conventional crude production. The CAPP forecast projects that overall WCSB crude oil supply will grow by 309,000 m3/d or 1.94 million bbl/d over the same period. 10 11 12 13 CAPP prepared an interim WCSB supply forecast update in December 2008. The interim forecast projects a decline in the growth of light crude oil supply in comparison with the June 2008 forecast, due to the delay of several projects. However, the interim forecast continues to show significant growth in heavy crude oil supply and overall oil supply. 14 15 16 17 18 19 20 21 22 TransCanada Keystone Pipeline GP Ltd. ("Keystone") concludes that this supply growth will require access to new crude oil markets, underpinning the need for the Keystone XL Pipeline. As noted in the CAPP forecast, U.S. Petroleum Administration for Defence District ("PADD") III is the largest untapped market for western Canadian crude oil producers. Shippers approached Keystone to provide new capacity to the USGC market and have confirmed their desire to have the Keystone XL Pipeline completed expeditiously. Further, shippers have recently reconfirmed to Keystone, their desire for the Project to continue to proceed, consistent with the currently proposed Project schedule. 23 3.2 Hardisty Supply Access 24 25 Hardisty is a major hub for the western Canadian petroleum industry. It is connected to pipelines from Edmonton, Cold Lake, Lloydminster and Fort McMurray, Alberta. The TransCanada Keystone Pipeline GP Ltd. Keystone XL Pipeline Section 52 Application Section 3: Supply and Markets Page 3 of 8 1 2 3 4 5 6 total inbound pipeline capacity to Hardisty of approximately 445,000 m3/d (2.8 million bbl/d) is also supplemented by transportation of petroleum by rail and truck. In addition to significant receipt capability, the Hardisty area has a storage capacity of approximately 2.9 million m3 (18 million bbl) (see Figure 3-1). This very liquid trading hub will provide the Keystone XL Pipeline with access to a wide variety of light and heavy crude supply for shipment to the USGC market. Figure 3-1: Hardisty Terminal Area 7 3.3 USGC Market Overview and Outlook 8 9 10 11 12 The target market for the Keystone XL Pipeline is the USGC, located within PADD III, which is the largest refining market in the world. PADD III currently has 1.34 million m3/d (8.4 million bbl/d) of crude refining capacity, mainly in Texas and Louisiana. Shippers have committed to Keystone for delivery of 60,400 m3/d (380,000 bbl/d) to the USGC market. 13 14 The Keystone XL Pipeline is proposed to terminate in the Nederland, Texas area (near Port Arthur, Texas), with a planned extension to Houston, Texas. Existing pipeline TransCanada Keystone Pipeline GP Ltd. Keystone XL Pipeline Section 52 Application Section 3: Supply and Markets Page 4 of 8 1 2 3 4 connections from the Nederland terminal area can provide access to Houston and Texas City, Texas and Lake Charles, Louisiana refineries via other pipelines. The total refining market directly accessible to Canadian crude via the Keystone XL Pipeline will be about 685,000 m3/d (4.3 million bbl/d), as shown in Table 3-1. Table 3-1: USGC Refining Market Available to the Keystone XL Pipeline Refinery Valero Energy, Port Arthur Motiva Enterprises, Port Arthur Motiva Enterprises Expansion, Port Arthur Total Petrochemicals, Port Arthur ExxonMobil Corp, Beaumont Subtotal: Port Arthur Area Valero Energy, Houston Houston Refining (Lyondell), Houston Pasedena Refining, Pasedena Shell Deer Park, Deer Park ExxonMobil Corp, Baytown Subtotal: Houston Area BP, Texas City Marathon Oil, Texas City Valero Energy, Texas City Subtotal: Texas City Area Calcasieu Refining, Lake Charles CITGO, Lake Charles ConocoPhillips, Lake Charles Subtotal: Lake Charles Area Total Refining Market NOTE: 1 This expansion is planned to be complete by 2012. 1 m3/d (x 1,000) 45.9 45.3 51.7 36.9 55.4 235.2 13.2 43.1 15.9 52.5 90.1 214.8 76.0 12.1 31.8 119.9 8.4 68.3 38.0 114.7 684.6 bbl/d (x 1,000) 289 285 325 232 349 1,480 83 271 100 330 567 1,351 478 76 200 754 53 430 239 722 4,307 5 6 7 The refining industry in PADD III has a large coking capacity. As a result, many refineries are capable of handling a variety of crude oils, including a significant amount of heavy crude oil. TransCanada Keystone Pipeline GP Ltd. Keystone XL Pipeline Section 52 Application Section 3: Supply and Markets Page 5 of 8 1 2 3 4 Heavy crude runs for the target refineries in Table 3-1 are estimated by PGI at 227,700 m3/d (1.43 million bbl/d) for 2007, nearly all of which were imported. Additionally, light crude runs in 2007 were estimated at 294,000 m3/d (1.85 million bbl/d), of which 248,600 m3/d (1.57 million bbl/d) were imported. 5 6 7 8 9 The Keystone XL Pipeline provides Canadian crude producers and USGC refiners with an opportunity to supply a portion of the total of 470,500 m3/d (2.96 million bbl/d) of heavy and light crude imports into PADD III. Furthermore, shippers on the Keystone XL Pipeline have made binding long term commitments to connect Alberta production to the USGC market. 10 3.4 Supply and Market Assessment by PGI 11 12 13 Keystone engaged PGI to conduct an independent assessment of the supply and disposition of Western Canadian crude oil to markets in the U.S., including the Gulf Coast, and the price impact of connecting Canadian supply to this new market. 14 The PGI assessment considers: o o o o o o o 15 16 17 18 19 20 21 Western Canada crude oil supply; the U.S. crude oil market; Canadian crude oil disposition; the US Gulf Coast crude oil market; PADD II crude oil market; Canadian crude oil pricing impact; and pipeline capacity requirements. TransCanada Keystone Pipeline GP Ltd. Keystone XL Pipeline Section 52 Application Section 3: Supply and Markets Page 6 of 8 1 2 3 The key findings of the PGI assessment, a copy of which is provided in Appendix 3-1, with respect to supply, markets, pricing impact and pipeline capacity, are discussed below. 4 3.4.1 Supply 5 6 7 8 There is a range of Western Canadian crude oil supply forecasts. From 2007 to 2017, crude supply is forecast to increase by as little as 247,000 m3/d (1.55 million bbl/d) in the lowest case, to as much as 385,000 m3/d (2.42 million bbl/d) in the highest case. These overall forecast increases are the result of growing production from the oil sands. 9 3.4.2 Markets 10 11 12 The Keystone XL Pipeline's target market, PADD III and specifically the USGC, is the largest refining market in the world with approximately 1.34 million m3/d (8.4 million bbl/d) of crude capacity, mainly in Texas and Louisiana. The Keystone XL Pipeline will provide pipeline access to approximately 685,000 m3/d (4.3 million bbl/d) of refinery capacity in the Port Arthur, Houston, Texas City and Lake Charles areas. 13 14 15 16 17 18 19 20 The large PADD III market currently accesses very little Canadian crude oil. This access is currently limited to the Pegasus Pipeline, which provides only 10,300 m3/d (65,000 bbl/d) of transportation capacity. Refineries in this market have a large coking capacity and can run significant amounts of heavy crude, which are similar to Canadian bitumen blends. 21 22 23 The production of crude in the U.S. continues to decline, and imports will increase due to rising demand by U.S. refineries combined with declining domestic supply. Traditional supply sources of heavy crude for the USGC, such as Mexico and Venezuela, are TransCanada Keystone Pipeline GP Ltd. Keystone XL Pipeline Section 52 Application Section 3: Supply and Markets Page 7 of 8 1 2 declining and some USGC refiners are diversifying their supply sources by obtaining access to Western Canadian crude. PGI expects that the USGC market could absorb at least an incremental 79,500 m3/d (500,000 bbl/d) of Canadian crude, which represents approximately 12% of the crude capacity of the refineries in the Port Arthur, Houston, Texas City and Lake Charles areas. 3 4 5 6 3.4.3 Crude Pricing Impact 7 8 Existing markets for Canadian heavy crude, principally PADD II, are currently oversupplied, resulting in price discounting for Canadian heavy crude oil. 9 10 11 12 13 Access to the USGC via the Keystone XL Pipeline is expected to strengthen Canadian crude oil pricing in PADD II by removing this oversupply. This is expected to increase the price of heavy crude to the equivalent cost of imported crude. Similarly, if a surplus of light synthetic crude develops in PADD II, the Keystone XL Pipeline would provide an alternate market and therefore help to mitigate a price discount. 14 15 16 The resultant increase in the price of heavy crude is estimated to provide an increase in annual revenue to the Canadian producing industry in 2013 of US $2 billion to US $3.9 billion. 17 3.4.4 Pipeline Capacity 18 19 20 21 22 Based on the PGI forecast of heavy oil supply growth, it is projected that, without the Keystone XL Pipeline, heavy crude oil pipeline capacity from Western Canada will be fully utilized by 2014. Using the supply forecast in the CAPP interim update of December 2008, PGI concludes that capacity for heavy crude oil will be fully utilized by 2015. TransCanada Keystone Pipeline GP Ltd. Keystone XL Pipeline Section 52 Application Section 3: Supply and Markets Page 8 of 8 1 3.4.5 Summary 2 3 4 5 6 7 Keystone has reviewed the PGI assessment and agrees with its conclusions. Shippers on the Keystone XL Pipeline have contracted for access to the USGC market for their oil sands production and refining needs. Not only will this directly benefit these shippers, it will also provide a benefit to all WCSB heavy crude producers by increasing the price they receive for their crude, as well as providing significant pipeline capacity to an alternative market. TransCanada Keystone Pipeline GP Ltd. Keystone XL Pipeline Section 52 Application Section 3: Supply and Markets, Appendix 3-1 Page 1 of 50 APPENDIX 3-1 SUPPLY AND MARKET ASSESSMENT PURVIN & GERTZ INC WESTERN CANADIAN CRUDE SUPPLY AND MARKETS Prepared for: TRANSCANADA KEYSTONE PIPELINE GP LTD. Prepared by: . Buenos Aires - Calgary - Dubai - Houston London - Los Angeles - Moscow - Singapore February 12, 2009 T.H. Wise ABOUT THIS REPORT This report has been prepared for the exclusive benefit of TransCanada Keystone Pipeline GP Ltd. (Keystone) for the purpose of the facilities application to the National Energy Board (NEB) for the Keystone XL Pipeline. Any party other than Keystone and the NEB in possession of the report may not rely upon its conclusions without the written consent of Purvin & Gertz. Possession of the report by third parties does not carry with it the right of publication. Changes in factors upon which the review is based could affect the results. All results are based on information available at the time of review. In preparing this report and the opinions recorded in this report, Purvin & Gertz relied upon data and information provided by reliable industry sources. Purvin & Gertz does not accept responsibility for errors or inaccuracies in information provided by others. Forecasts are inherently uncertain because of events or combinations of events that cannot reasonably be foreseen including the actions of government, individuals, third parties and competitors. Table of Contents Page -- i TABLE OF CONTENTS INTRODUCTION ................................................................................................ 1 WESTERN CANADIAN CRUDE OIL SUPPLY ................................................... 3 U.S. CRUDE OIL MARKET ................................................................................ 7 CANADIAN CRUDE OIL DISPOSITION ............................................................. 9 U.S. GULF COAST CRUDE OIL MARKET ....................................................... 11 PADD II CRUDE OIL MARKET ........................................................................ 21 CANADIAN CRUDE OIL PRICING ................................................................... 25 PIPELINE CAPACITY REQUIREMENTS.......................................................... 31 SUMMARY AND CONCLUSIONS .................................................................... 37 . ii -- Page Table of Contents LIST OF FIGURES FIGURE 1 WESTERN CANADA CRUDE SUPPLY FORECAST COMPARISON ............... 4 FIGURE 2 OIL SANDS PRODUCTION FORECAST COMPARISON ................................. 5 FIGURE 3 U.S. CRUDE OIL SUPPLY / DEMAND ............................................................. 7 FIGURE 4 PETROLEUM ADMINISTRATION FOR DEFENSE DISTRICTS (PADDS) ....... 8 FIGURE 5 WESTERN CANADA CRUDE SUPPLY/DEMAND FORECAST...................... 10 FIGURE 6 PADD III CRUDE RUNS - BY SOURCE ........................................................ 11 FIGURE 7 PADD III HEAVY CRUDE SUPPLY ................................................................ 13 FIGURE 8 MEXICO HEAVY CRUDE BALANCE.............................................................. 14 FIGURE 9 VENEZUELA CRUDE BALANCE ................................................................... 15 FIGURE 10 KEYSTONE XL PIPELINE MARKET AREA .................................................. 18 FIGURE 11 PADD II CRUDE RUNS - BY SOURCE ..................................................... 22 FIGURE 12 FORECAST COMPARISON OF CANADIAN CRUDE DELIVERIES TO PADD II......................................................................................................... 23 FIGURE 13 COLD LAKE BLEND PRICING ..................................................................... 26 FIGURE 14 TOTAL CRUDE EXPORTS VS PIPELINE CAPACITY.................................. 33 FIGURE 15 HEAVY CRUDE EXPORTS VS PIPELINE CAPACITY ................................. 34 FIGURE 16 HEAVY CRUDE OIL PIPELINE CAPACITY VS DISPOSITION 2015............ 35 LIST OF TABLES TABLE 1 WESTERN CANADIAN CRUDE SUPPLY AND DISPOSITION ........................ 39 TABLE 2 WESTERN CANADIAN CRUDE SUPPLY AND DISPOSITION SCENARIOS..................................................................................................... 40 TABLE 3 PADD III REFINERY CRUDE CAPACITY......................................................... 40 TABLE 4 PADD III REFINERY CRUDE TYPES AND SOURCES .................................... 42 TABLE 5 CAPACITIES OF EXPORT PIPELINES FOR CANADIAN CRUDE: 2012 ......... 43 TABLE 6 WESTERN CANADIAN HEAVY CRUDE SUPPLY AND DISPOSITION............ 44 TABLE 7 WESTERN CANADIAN HEAVY CRUDE SUPPLY & DISPOSITION SCENARIOS..................................................................................................... 45 . TransCanada Keystone Pipeline GP Ltd. Western Canadian Crude Supply and Markets -- 1 1 INTRODUCTION 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 TransCanada Keystone Pipeline GP Ltd. ("Keystone") is planning the Keystone XL Pipeline project to deliver Canadian crude oil from Hardisty, Alberta to Nederland, Texas near Port Arthur and Houston, Texas at the U.S. Gulf Coast ("USGC") by late 2012. The pipeline will be able to deliver a range of crudes from light to heavy crude. It will provide incremental capacity to deliver 500,000 barrels per day ("B/D"), or 79.5 thousand cubic metres per day ("103m3/d") to the USGC. Currently, there are shipper commitments for 380,000 B/D (60.4 103m3/d) for the Keystone XL Pipeline, subject to regulatory approval. Keystone is making a facilities application (the "Application") to the National Energy Board ("NEB") for the Canadian section of its pipeline from Hardisty to the U.S. border. Keystone retained Purvin & Gertz, Inc. ("Purvin & Gertz" or "PGI") to provide evidence regarding Western Canadian crude oil supply and the USGC market to be supplied by the proposed Keystone XL Pipeline. The topics discussed in this report include Western Canadian crude oil supply, the U.S. crude oil market, Canadian crude oil disposition, the USGC crude oil market, the U.S. Midwest crude oil market, Canadian crude oil pricing and pipeline capacity requirements. The Summary and Conclusions are at the end of the discussion. . 2 -- Western Canadian Crude Supply and Disposition TransCanada Keystone Pipeline GP Ltd. (This page intentionally left blank) . TransCanada Keystone Pipeline GP Ltd. Western Canadian Crude Supply and Markets -- 3 1 WESTERN CANADIAN CRUDE OIL SUPPLY 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 Western Canada has very large oil reserves due mainly to bitumen in oil sands. The Canadian Association of Petroleum Producers ("CAPP") estimated the remaining established reserves of conventional crude oil and pentanes plus in Western Canada at 585.8 million cubic metres (3.68 billion barrels) at December 31, 2006 1 . The Energy Resources Conservation Board ("ERCB") of Alberta estimated the remaining established reserves of crude bitumen in oil sands at 27.45 billion cubic metres (172.7 billion barrels) at the end of 2007 2 . At an annual bitumen production rate of 77 million cubic metres (484 million barrels) in 2007, the crude bitumen reserves are equivalent to 356 years of production. This figure would fall as bitumen production increases. Projects and plans are underway to develop the oil sands further and increase the production of bitumen and synthetic crude oil. As a basis for this discussion, we have used the Purvin & Gertz 2008 forecast for Western Canadian supply in Table 1 which is provided at the back of this report. This includes conventional light and heavy crudes as well as synthetic crude oil and bitumen blends from the oil sands. Overall, the annualized average crude supply is forecast to grow from 2007 to 2013 by approximately 1.03 million B/D (164 103m3/d). (27.3 103m3/d) each year. This is equivalent to 172,000 B/D From 2013 to 2020, crude supply is forecast to grow by another 827,000 B/D (131 103m3/d), equivalent to an annual growth rate of 118,000 B/D (18.8 10 3m3/d). Supply forecasts are uncertain but are necessary for forward planning of new facilities such as pipelines. In Figure 1 and Table 2, the Purvin & Gertz forecast is compared with other crude supply forecasts by CAPP in June 2008 3 and by Enbridge in October 2008 4 . CAPP's 1 CAPP Statistical Handbook, Section 2, Reserves, November 2007. ERCB, Alberta's Energy Reserves 2007 and Supply/Demand Outlook 2008-2017, June 2008. CAPP, Crude Oil Forecast, Markets and Pipeline Expansions, June 2008. 2 3 . 4 -- Western Canadian Crude Supply and Disposition TransCanada Keystone Pipeline GP Ltd. 1 2 3 4 5 June 2008 forecasts include a Pipeline Planning Case and a Moderate Growth Case (the "Moderate" case). In December 2008, CAPP prepared a more recent forecast (the "Interim The Enbridge and June CAPP forecasts are higher than The forecast in Update") 5 which is also included. Purvin & Gertz after 2013, although the CAPP Moderate Case is similar. CAPP's December Interim Update is lower than Purvin & Gertz until 2016. FIGURE 1 WESTERN CANADA CRUDE SUPPLY FORECAST COMPARISON 5500 5000 4500 4000 3500 3000 2500 2000 1500 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 2021 2023 Enbridge 2008 CAPP Pipeline Planning, 2008 CAPP Moderate Case, 2008 CAPP Interim Update Dec 2008 PGI 2008 (Thousand Barrels Per Day) Forecast 738 638 538 438 338 238 2025 (Thousand Cubic Metres Per Day) 838 6 7 8 9 10 11 12 13 14 Figure 1 Western Canada Crude Supply Forecast Comparison The supply in CAPP's Pipeline Planning Case is approximately 7 percent higher than in its Moderate Case in 2013 and it rises to more than 13 percent higher by 2020. The Pipeline Planning Case shows higher production and allows for pipeline operational flexibility. Over time, there can be planned and unplanned outages by pipelines, refineries and oil producers, including oil sands operators supplying bitumen blends or synthetic crude oil, so pipelines need additional capacity to sustain annual average throughputs. In a market environment where crude production is growing each year, supplies will be greater in the last half of a year compared with the first half, so annualized average throughput estimates are inadequate for pipeline planning. 4 Enbridge, Liquids Pipeline Development, Enbridge Day Presentation, October 7 and 8, 2008. CAPP, Interim Update, 2008-2020 Western Canadian Crude Oil Forecast, December 11, 2008. 5 . TransCanada Keystone Pipeline GP Ltd. Western Canadian Crude Supply and Markets -- 5 1 2 3 4 5 6 The forecast growth in Western Canadian supply is due to expected increases in oil sands production, both bitumen and synthetic crude from upgrading. Oil sands growth should more than offset the continuing declines in conventional crude production. Growth in oil sands production is expected from mining as well as in-situ projects. Oil sands production forecasts are compared in Figure 2. The 2008 forecast of the ERCB is also included2. Compared with the other 2008 forecasts, it has the highest outlook for oil sands production through 2014. FIGURE 2 OIL SANDS PRODUCTION FORECAST COMPARISON 4500 4000 3500 3000 2500 2000 1500 1000 500 0 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 2021 2023 ERCB 2008 Enbridge 2008 CAPP Pipeline Planning, 2008 CAPP Moderate Case, 2008 CAPP Interim Update Dec 2008 PGI 2008 500 400 300 200 100 0 2025 (Thousand Barrels Per Day) Forecast (Thousand Cubic Metres Per Day) 700 600 Figure 2 Oil Sands Production Forecast Comparison 2 ERCB, Alberta's Energy Reserves 2007 and Supply/Demand Outlook 2008-2017, June 2008. . 6 -- Western Canadian Crude Supply and Disposition TransCanada Keystone Pipeline GP Ltd. (This page intentionally left blank) . TransCanada Keystone Pipeline GP Ltd. Western Canadian Crude Supply and Markets -- 7 1 U.S. CRUDE OIL MARKET 2 3 4 5 6 7 8 9 10 11 The U.S. refining industry has a combined crude capacity of approximately 17.6 million B/D, or 2.8 million cubic metres per day ("106m3/d"). In 2007, refinery crude runs were approximately 15.1 million B/D (2.4 10 6m3/d). As shown in Figure 3, crude runs have been slowly rising. In the outlook from the Purvin & Gertz 2008 forecast, U.S. refinery crude runs are forecast to continue to rise modestly by more than 700,000 B/D (111 103m3/d) by 2013. The production of crude in the U.S. has been falling. In 2007, U.S. crude production was approximately 5.1 million B/D (811 10 3m3/d). Further production declines are expected. With U.S. crude production at 34 percent of refinery crude runs in 2007, crude imports to the U.S. reached 10.0 million B/D (1.6 106m3/d). U.S. imports have been rising and further increases are expected due mainly to falling domestic production, as shown in Figure 3. FIGURE 3 U.S. CRUDE OIL SUPPLY / DEMAND 20,000 18,000 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0 1990 1995 2000 2005 2010 2015 2020 1000 500 0 2025 2000 1500 (Thousand Barrels per Day) Canadian Crude Imports Other Imports U.S. Crude Production Refinery Crude Runs (Thousand Cubic Metres Per Day) 3000 2500 12 13 14 15 16 Figure 3 U.S. Crude Oil Supply / Demand Crude oil imports to the U.S. include Canadian crude. Due to its rising production and exports, Canada has become the largest single source of imported crude to the U.S., with approximately 1.9 million B/D (302 103m3/d) in 2007, including East Coast crude. Canadian crude exports to the U.S. are expected to rise with growing production, assuming pipeline capacity continues to grow. . 8 -- Western Canadian Crude Supply and Disposition TransCanada Keystone Pipeline GP Ltd. 1 2 3 4 5 Canadian crude reaches many refining markets within the U.S. The U.S. is divided into five regions known as Petroleum Administration for Defense Districts ("PADDs"). These are shown on the map in Figure 4. PADD I is the East Coast; PADD II is the Midwest; PADD III is mostly the Gulf Coast; PADD IV is the Rocky Mountain region; and PADD V is the West Coast, including Alaska and Hawaii. FIGURE 4 PETROLEUM ADMINISTRATION FOR DEFENSE DISTRICTS (PADDs) IV V PADD V includes AK, HI II I III Figure 4 Petroleum Administration for Defense Districts (PADDs) . TransCanada Keystone Pipeline GP Ltd. Western Canadian Crude Supply and Markets -- 9 1 CANADIAN CRUDE OIL DISPOSITION 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 The disposition forecast for Western Canadian crude is shown in Table 1. This includes deliveries to the Texas Panhandle and the USGC within PADD III. The USGC deliveries include Keystone XL Pipeline shipments of 380,000 B/D (60.4 103m3/d) starting in 2013. Within PADD III, some of the Canadian crude is now being supplied to the Texas Panhandle via Cushing, Oklahoma, so is not available to the USGC. WRB Refining (formerly ConocoPhillips) is using Canadian heavy crude at its Borger, Texas refinery and has plans for a project to use more Canadian crude by 2013 6 . The existing Pegasus pipeline, owned by Mobil Pipeline, was reversed in 2006 to supply up to 65,000 B/D (10.3 103m3/d) of Canadian crude to the USGC. In this report, it is assumed to operate permanently although its initial commitments were for five years (until early 2011) and it could shut down after Keystone XL Pipeline commences operations. In addition, Table 1 and Figure 5 show Purvin & Gertz' 2008 disposition forecast for Canada and U.S. PADDs I, IV and V. Deliveries in Canada are to refineries in Western Canada and Ontario and the forecast allows for higher deliveries to Ontario, assuming the replacement of imports. Deliveries to PADDs I and IV are needed to meet local refinery demand. Deliveries to PADD V have been mostly to Washington state refineries. markets are forecast to rise. Overall, deliveries to these 6 EnCana website: Downstream/Borger, October 2007. . 10 -- Western Canadian Crude Supply and Disposition TransCanada Keystone Pipeline GP Ltd. FIGURE 5 WESTERN CANADA CRUDE SUPPLY/DEMAND FORECAST (Thousand Cubic Metres Per Day) (Thousand Barrels Per Day) 800 5,000 4,500 700 Supply 4,000 600 3,500 500 Deliveries to PADD II 3,000 400 2,500 2,000 Deliveries to PADD III 300 1,500 Deliveries to PADDs I, IV & V 200 1,000 100 500 Deliveries in Canada 0 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 1 2 3 4 Figure 5 Western Canada Crude Supply/Demand Forecast Table 1 and Figure 5 show the remaining volume of Canadian crude available for PADD II which is the largest market for Western Canadian crude. Canadian crude deliveries to PADD II are forecast to increase throughout the forecast period except for 2013, the year in which Keystone XL Pipeline comes onstream. . TransCanada Keystone Pipeline GP Ltd. Western Canadian Crude Supply and Markets -- 11 1 U.S. GULF COAST CRUDE OIL MARKET 2 3 4 5 6 7 8 9 10 11 12 The Keystone XL Pipeline is intended to deliver Canadian crude to the USGC in PADD III which includes states from New Mexico to Mississippi. PADD III has the largest refining system in the world with approximately 8.4 million B/D (1.3 106m3/d) of crude capacity, mainly at the USGC in Texas and Louisiana. The refineries are listed in Table 3 with their current crude capacities. As shown in Figure 6, refinery crude runs have increased and reached approximately 7.3 million B/D (1.16 10 6m3/d) in 2007. Crude runs in PADD III are projected by Purvin & Gertz to grow by over 500,000 B/D (79.5 103m3/d) by 2020. The PADD III refineries run crude to produce refined products which are consumed in PADD III and other PADDs. Large volumes of refined products are shipped by pipeline to PADDs I and II. Future refinery crude runs will depend on U.S. demand for refined products and product trade and could be higher or lower than forecast. FIGURE 6 PADD III CRUDE RUNS - BY SOURCE 11,000 10,000 9,000 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 (Thousand Barrels Per Day) (Thousand Cubic Metres Per Day) Refinery Crude Runs 1600 1400 1200 1000 800 600 400 200 0 1995 2000 2005 2010 2015 2020 2025 Canadian Crude Imports (incl. Keystone XL after 2012) Other Crude Imports Domestic Crude Use PADD III Crude Production 1990 13 14 15 16 Figure 6 PADD III Crude Runs - By Source PADD III crude production was approximately 2.8 million B/D (450 103m3/d) in 2007. Production declines have been limited in recent years as growth in offshore Gulf of Mexico production has nearly offset the decline in onshore production. production is expected to decline in the long term. However, PADD III crude . 12 -- Western Canadian Crude Supply and Disposition TransCanada Keystone Pipeline GP Ltd. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 The use of domestic crude production by PADD III refineries is forecast to remain near current levels. Approximately 1.5 million B/D (238 103m3/d) of the PADD III production, or 53 percent, was used by PADD III refineries in 2007. The remaining 1.3 million B/D (207 103m3/d) of production was shipped by pipelines to refineries in other PADDs, mostly PADD II. PADD III crude transfers to PADD II are expected to decline as PADD II uses more Canadian crude leaving a higher proportion of the indigenous crude in PADD III. Most of the crude used in PADD III is imported. Imports have grown to 5.6 million B/D (892 103m3/d) in 2007 or 77 percent of crude demand. Imports are forecast to decline initially before 2010 as more of the domestic PADD III crude production is used in PADD III, and then to increase by over 600,000 B/D (95.4 103m3/d) by 2020. The refining industry in PADD III uses a wide variety of crudes including light sweet, medium sour, heavy sour, high acid heavy sweet, and others such as synthetic crudes from Venezuela. Many of the refineries have large coking capacity, so they can run significant amounts of heavy crudes which generally have an API gravity below 28. . TransCanada Keystone Pipeline GP Ltd. Western Canadian Crude Supply and Markets -- 13 1 2 3 4 5 6 7 8 9 10 In 2007, heavy crude runs were approximately 2.5 million B/D (397 103m3/d) or 34 percent of total crude runs. Nearly all of the heavy crude used in PADD III is imported. Heavy crude runs fell from 2004 to 2007 due to reduced supply of heavy crude, especially from Mexico, as shown in Figure 7. In the first eight months of 2008, heavy crude supplies from Mexico and Venezuela fell another 300,000 B/D (31.8 103m3/d) approximately. Heavy crude imports from other countries increased, but there was a net reduction in heavy crude use of approximately 200,000 B/D (31.8 103m3/d). Some of the increased heavy crude was heavy sweet, high acid crude from Brazil and Angola. However, heavy sweet crudes are less desirable than heavy sour crudes for refineries which are designed for conventional heavy crudes similar to Canadian bitumen blends. FIGURE 7 PADD III HEAVY CRUDE SUPPLY 3,000 2,500 2,000 1,500 1,000 500 0 2000 2001 2002 2003 2004 2005 2006 2007 Notes: Data from US DOE import statistics. 2008YTD includes January to August. (Thousand Barrels Per Day) Mexico Other Foreign Canada Venezuela Domestic (Thousand Cubic Metres Per Day) Refinery Heavy Crude Runs 450 400 350 300 250 200 150 100 50 0 2008 YTD 11 12 13 14 15 16 Figure 7 PADD III Heavy Crude Supply Most of the heavy crude is used by refineries which employ coking technology to upgrade heavy vacuum residual oil. Based on the U.S. Department of Energy ("DOE")/Energy Information Administration ("EIA"), Petroleum Supply Monthly statistics, coker feed fell in the first eight months of 2008 to 1.078 million B/D (171 103m3/d) from 1.152 million B/D (183 103m3/d) in 2007, a drop of more than 6 percent. feedstock. This is consistent with a reduced supply of heavy . 14 -- Western Canadian Crude Supply and Disposition TransCanada Keystone Pipeline GP Ltd. 1 2 3 4 5 6 7 The production of heavy crude from Mexico has been falling as shown in Figure 8. USGC refinery crude runs of Mexican heavy crude have fallen by around 250,000 B/D (39.7 103m3/d) since 2006 due to falling production. In particular, production from the offshore Cantarell field which produces most of the Maya heavy crude is falling rapidly. With limited restoration plans in sight, it appears that production from Mexico will continue to decline for several years. The International Energy Agency ("IEA") forecasts a decline in total crude production from Mexico of 1.1 million B/D (175 10 3m3/d) between 2007 and 2015. 7 FIGURE 8 MEXICO HEAVY CRUDE BALANCE 3,000 2,700 2,400 2,100 1,800 1,500 1,200 900 600 300 0 2000 (Thousand Barrels Per Day) Export to USGC Export to Other Countries Mexico Production (Thousand Cubic Metres Per Day) Export to Other US Mexico Demand 450 400 350 300 250 200 150 100 50 0 Notes: Data from Petroleos Mexicanos Sistema de Informacion Energetica ("SIE") & U.S. DOE import statistics. 2008YTD includes January to August. 2001 2002 2003 2004 2005 2006 2007 2008YTD Figure 8 Mexico Heavy Crude Balance 7 IEA, World Energy Outlook, 2008, page 267, Table 11-3. . TransCanada Keystone Pipeline GP Ltd. Western Canadian Crude Supply and Markets -- 15 1 2 3 4 5 6 7 8 9 10 Most of Venezuela's crude production is heavy crude. Over half of the production is exported to the U.S. Venezuela's total crude production increased between 2003 and 2005 but most of the incremental production was sold to markets outside of the U.S. as shown in Figure 9. Since the Venezuela refinery crude capacity 8 is approximately 1.3 million B/D (204 103m3/d), and crude use outside of the U.S. has been less than this since 2002, Venezuela's exports to markets other than the U.S. have been relatively small. Since 2005, Venezuelan crude production has fallen, so refinery use in the U.S. and the other markets has also fallen. Venezuela has large reserves of heavy oil, but future supply will likely depend on commercial, market and political strategies which may oppose supplying U.S. refineries and favour exports to other markets. FIGURE 9 VENEZUELA CRUDE BALANCE 3,500 3,000 2,500 2,000 1,500 200 1,000 500 0 2000 2001 2002 2003 2004 2005 2006 2007 Note: From Petroleum Intelligence Weekly and U.S. DOE import statistics. 2008YTD includes January to August. 100 0 2008YTD (Thousand Barrels Per Day) Export to US (Thousand Cubic Metres Per Day) Domestic Demand plus Exports (excl. U.S.) Venezuela Production 500 400 300 11 12 13 14 Figure 9 Venezuela Crude Balance Although traditional supplies of heavy crude have been falling, the USGC refineries as a group are increasing their capability to use more heavy crude, by adding coking capacity. For example, Motiva, a joint venture of Saudi Aramco and Shell, has commenced a large expansion project at Port Arthur 9 with 325,000 B/D (51.7 103m3/d) of new crude capacity and 95,000 B/D 8 Oil and Gas Journal, 2007 Worldwide Refining Survey, December 24, 2007. Shell website, Major Projects and Oil & Gas Journal Worldwide Construction Update, November 19, 2007. 9 . 16 -- Western Canadian Crude Supply and Disposition TransCanada Keystone Pipeline GP Ltd. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 (15.1 103m3/d) of new coking capacity for a 2011 startup; with coking capacity at 29 percent of crude capacity, this should allow more heavy crude runs. Marathon has a project at Garyville, Louisiana 10 , with a 180,000 B/D (28.6 103m3/d) crude expansion and a 44,000 B/D (7.0 103m3/d) coker which are under construction and scheduled for startup in late 2009. Total is building a 50,000 B/D (7.9 103m3/d) coker 11 at its 232,000 B/D (36.9 103m3/d) Port Arthur refinery for startup in 2011. Smaller coker expansions are underway at Hunt, Tuscaloosa, Alabama 12 ; Valero, St. Charles, Louisiana 13 ; Flint Hills, Corpus Christi, Texas 14 , for startup in 2010. In light of declining crude supplies from Mexico and Venezuela, some USGC refiners are attempting to diversify their sources by accessing Western Canadian supplies. For example, subject to regulatory approval, Valero Energy has agreed to participate as a prospective shipper on the Keystone XL Pipeline to Port Arthur, and has secured heavy crude oil from several Canadian oil producers 15 . Valero operates three coking refineries in the area around Houston and expects to be one of the largest recipients of heavy crude from the Keystone XL Pipeline. Canadian Natural Resources Limited ("CNRL") has committed 120,000 B/D (19.1 103m3/d) to the Keystone XL Pipeline project, if approved, and also has agreed to supply 100,000 B/D (15.9 103m3/d) of heavy crude to an unnamed, USGC refiner 16 . 10 Marathon Press Release, November 7, 2006. Total website, Downstream 2006 and Downstream Segment 2007. Argus Petroleum Coke, Page 5, February 7, 2007. Valero Presentation, Lehman Brothers Energy/Power Conference, September 4, 2008. Flint Hills, Oil & Gas Journal Worldwide Construction Update, November 19, 2007. Valero News Release, July 16, 2008. CNRL 2008 Second Quarter Results, August 7, 2008. 11 12 13 14 15 16 . TransCanada Keystone Pipeline GP Ltd. Western Canadian Crude Supply and Markets -- 17 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 Refineries Supplied By Keystone XL Pipeline The proposed Keystone XL Pipeline would deliver up to 500,000 B/D (79.5 103m3/d) of heavy and light Canadian crudes to terminals near Nederland and Houston. terminals, crude could be delivered on other pipelines to many refineries. From these There are 15 refineries which would have access to Canadian crudes delivered on the Keystone XL Pipeline. These are listed as Group 1 refineries in Table 3. They are situated near Port Arthur and Houston as well as Texas City and Lake Charles, Louisiana. Their combined crude capacity is 4.0 million B/D (633 103m3/d), or nearly half of total PADD III refining capacity, and this is larger than the entire PADD II market. With the Motiva refinery expansion, the combined crude capacity will increase to 4.3 million B/D (685 103m3/d). Purvin & Gertz estimates of the refinery crude runs for Group 1 are shown by type and source in Table 4 for 2007. Heavy crude use at these refineries is estimated at 1.4 million B/D (228 103m3/d), nearly all of which was imported. Light crude runs in 2007 are estimated at 1.85 million B/D (294 103m3/d) of which light sweet crude was 784,000 B/D (125 103m3/d) and light sour crude was 1.07 million B/D (169 103m3/d). The majority of the light crude (85 percent) was imported; imports are estimated at 661,000 B/D (105 103m3/d) for light sweet crude and 904,000 B/D (144 103m3/d) for light sour crude. The refining area to be supplied by the Keystone XL Pipeline is shown in Figure 10, which shows the 15 Group 1 refineries and some of the major crude pipelines serving the refineries in the area as well as the proposed Keystone XL Pipeline to Nederland and Houston. There are many other crude pipelines and inter-connections within the four refining centres that are not shown. . . from Longview, TX to WTG from Mobil from West Texas Corsicana, TX Longview, TX FIGURE 10 KEYSTONE XL PIPELINE MARKET AREA 18 -- Western Canadian Crude Supply and Disposition Figure 10 Keystone XL Pipeline Market Area from Wichita Falls, TX from Houma, LA TransCanada Keystone Pipeline GP Ltd. to Cushing, OK TransCanada Keystone Pipeline GP Ltd. Western Canadian Crude Supply and Markets -- 19 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 The four Port Arthur area refineries have a combined crude capacity of 1.16 million B/D (184 103m3/d), which will increase to 1.48 million B/D (235 103m3/d) after the Motiva refinery expansion. The three refineries in the vicinity of Lake Charles, Louisiana have a combined crude capacity of 722,000 B/D (115 103m3/d) and Canadian crude delivered on the Keystone XL Pipeline would have to be supplied from the Port Arthur area on a CITGO pipeline from Sour Lake, Texas or a DOE line from Nederland, Texas. The five Houston area refineries have a combined crude capacity of 1.35 million B/D (215 103m3/d). Crude oil can be transported to the Houston area on a Shell pipeline from the Nederland area, and to Baytown, Texas (near Houston) on an ExxonMobil pipeline from Sour Lake. The three Texas City area refineries have a combined crude capacity of 754,000 B/D (120 103m3/d). Canadian crude delivered on the Keystone XL Pipeline would have to be supplied to Texas City from the Houston area via existing pipelines such as the BP pipeline. The Keystone XL Pipeline would be able to deliver light crude as well as heavy crude. In total, all the PADD III refineries used approximately 2.5 million B/D (402 103m3/d) of light sweet crude including 1.57 million B/D (249 103m3/d) of imports in 2007. The Group 1 refineries used only 784,000 B/D (125 103m3/d) of light sweet crude. If there are low delivery volumes from the Keystone XL Pipeline, light sweet synthetic crude would compete with conventional light sweet crude. However, if synthetic crude deliveries are as high as 500,000 B/D (79.5 103m3/d), synthetic crude would likely have to compete with conventional light sour crudes. Purvin & Gertz expects that, if the Keystone XL Pipeline is constructed, the USGC market can absorb an incremental 500,000 B/D (79.5 103m3/d) of Canadian crude, which represents around 12 percent of the crude capacity of the Group 1 refineries. The refinery crude capacity is expanding by another 325,000 B/D (51.7 103m3/d) to 4.3 million B/D (684 103m3/d) by 2011. Shipper commitments on the Keystone XL Pipeline are for 380,000 B/D (60.4 103m3/d). Based on the import volumes in PADD III, the Canadian crude imports could be heavy crude or a combination of heavy and light synthetic crudes delivered on the Keystone XL Pipeline, assuming adequate distribution connections at the USGC. . 20 -- Western Canadian Crude Supply and Disposition TransCanada Keystone Pipeline GP Ltd. (This page intentionally left blank) . TransCanada Keystone Pipeline GP Ltd. Western Canadian Crude Supply and Markets -- 21 1 PADD II CRUDE OIL MARKET 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 The availability of Western Canadian crude oil to PADD II is part of the supply and disposition forecast in Table 1. In 2007, PADD II received approximately 1.1 million B/D (179 103m3/d) of Canadian crude which was nearly 50 percent of the Western Canadian supply. As Canadian supplies grow, deliveries of Canadian crude to PADD II are also forecast to grow. Synthetic crude runs in PADD II should increase from relatively low levels. The use of Canadian bitumen blends should also increase in PADD II due to the current construction of several new coker projects at PADD II refineries; these projects include BP at Whiting, Indiana 17 ; Marathon at Detroit, Michigan 18 ; WRB Refining at Wood River, Illinois 19 ; and Sinclair at Tulsa, Oklahoma 20 . PADD II encompasses 15 states in the Midwest from the Canadian border, south to Oklahoma and east-west between the Dakotas and Ohio. PADD II is a large market for crude oil with 27 refineries having a combined crude capacity of 3.7 million B/D (588 103m3/d). Total crude runs in 2007 were around 3.2 million B/D (513 103m3/d). Refinery runs of Canadian crude have increased to around one third of total runs and are expected to rise with increased Canadian supplies. The PADD II refineries also use U.S. domestic crudes produced mainly in PADD II, Texas and Louisiana, and they import crudes via pipelines from the USGC. As Canadian production grows, Figure 11, developed by Purvin & Gertz, shows that Canadian crudes are expected to displace some of the U.S. domestic crudes from PADD II as well as other imports which are delivered from the USGC. The Canadian crude supply to PADD II in the 17 BP Press Release, September 20, 2006. Marathon 2007 Annual Report. EnCana 2007 Annual Report. Foster Wheeler Corporation News Release, September 11, 2006. 18 19 20 . 22 -- Western Canadian Crude Supply and Disposition TransCanada Keystone Pipeline GP Ltd. 1 2 3 4 figure is estimated without deducting deliveries to the USGC via the Keystone XL Pipeline. The Canadian crude will likely continue to replace more of the domestic crudes and imports in northern PADD II as refineries add residual conversion capacity. In addition, more Canadian crude will likely move further south as pipelines expand within PADD II. FIGURE 11 PADD II CRUDE RUNS - BY SOURCE 6,000 5,000 4,000 3,000 2,000 1,000 0 1990 1995 2000 2005 2010 2015 2020 (Thousand Barrels per Day) Canadian Imports Other Imports Domestic Receipts From Other PADDs Indigenous Production (Thousand Cubic Metres Per Day) 900 800 Refinery Crude Runs 700 600 500 400 300 200 100 0 2025 5 6 7 8 9 10 11 12 13 14 15 Figure 11 PADD II Crude Runs - by Source The volume of Canadian crude available for PADD II depends on the overall supply of Western Canadian crude. Several supply scenarios are considered in Table 2. Based on the Purvin & Gertz supply forecast, the Canadian crude available for PADD II would decrease in 2013 following the startup of Keystone XL Pipeline, but it would increase each year thereafter. Under the CAPP Interim Update supply forecast, crude for PADD II in 2013 would be similar to the forecast level for 2009, and would increase to the 2011 forecast level by 2015. The CAPP Moderate supply forecast is similar to the Purvin & Gertz forecast, so supply to PADD II would grow to a slightly higher level using this forecast. The CAPP Pipeline Planning supply forecast and the Enbridge supply forecast would provide the most crude to PADD II. Using these forecasts, deliveries to PADD II in 2013 would exceed 2010 forecast deliveries. The forecasts of deliveries to PADD II, which are based on the supply forecasts, are compared in Figure 12. . TransCanada Keystone Pipeline GP Ltd. Western Canadian Crude Supply and Markets -- 23 FIGURE 12 FORECAST COMPARISON OF CANADIAN CRUDE DELIVERIES TO PADD II 3000 2500 2000 1500 1000 500 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 (Thousand Barrels Per Day) Based on Supply: Enbridge 2008 CAPP Pipeline Planning, 2008 CAPP Moderate, 2008 CAPP Interim Update Dec 2008 PGI 2008 PGI Demand Estimate (Thousand Cubic Metres Per Day) Keystone Pipeline XL Startup 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 Figure 12 Forecast Comparison of Canadian Crude Deliveries to PADD II The figure also shows Purvin & Gertz' 2008 forecast of demand for Canadian crude in PADD II, consistent with Figure 11. In Figure 12, the demand is higher than the Purvin & Gertz forecast of deliveries because the latter calculates the availability for PADD II after deducting the Keystone XL Pipeline committed deliveries from the supply. With lower Canadian deliveries, PADD II refineries would need more domestic crude or other imports to sustain crude runs. With higher Canadian crude deliveries based on CAPP's Pipeline Planning case or the Enbridge supply forecast, the deliveries would exceed the Purvin & Gertz demand forecast. This would satisfy additional refinery demand, if any, or require that more Canadian crude be directed to other markets. Potential refinery demand for Canadian crudes in PADD II may be higher than forecast, depending on the crude types available, since some PADD II refiners are developing projects to use more Canadian crude. If other markets are needed for additional crude supply, more pipeline capacity from Canada to those markets may also be needed. The volume of Canadian crude available for PADD II also depends on the volumes delivered elsewhere. The deliveries to other markets could change from the forecast in Table 1. The volume delivered to the USGC would increase by another 120,000 B/D (19.1 103m3/d) by 2014 if Keystone XL Pipeline delivers at 500,000 B/D (79.5 103m3/d). This would decrease the availability in PADD II as shown in Table 2. On this basis, with the Keystone XL Pipeline at capacity and Pegasus Pipeline continuing to operate, the deliveries of Canadian crudes to PADD II in 2015 would be about the same as the 2010 deliveries using the Purvin & Gertz . 24 -- Western Canadian Crude Supply and Disposition TransCanada Keystone Pipeline GP Ltd. 1 2 3 4 supply forecast, but higher than the 2010 deliveries using the June CAPP and Enbridge supply forecasts. Based on the CAPP Interim Update forecast, the deliveries of Canadian crude to PADD II in 2015 would be approximately the same as the 2009 forecast deliveries. supply scenarios lead to forecasts of growing deliveries to PADD II after 2013. All the . TransCanada Keystone Pipeline GP Ltd. Western Canadian Crude Supply and Markets -- 25 1 CANADIAN CRUDE OIL PRICING Limited volumes of Canadian heavy crude has been delivered to the USGC on the Pegasus pipeline since early 2006. However, the price of Canadian heavy crude has been 2 3 4 5 6 7 8 9 10 11 12 13 14 15 discounted at the USGC. Delivery of a large volume of Canadian crude on the Keystone XL Pipeline to the large USGC market is expected to strengthen the price of Canadian heavy crude at the USGC and in Alberta for reasons discussed below in this section. Figure 13 compares the delivered price of Canadian Cold Lake bitumen blend ("CLB", also known generally as "DilBit") against the price of Mexican Maya heavy crude at the USGC 21 . The figure indicates a USGC discount on DilBit most of the time since 2006 as these crudes are similar in quality and have nearly equivalent values to refiners. This price discount suggests that the supply of Canadian heavy crudes has exceeded demand in their main markets north of the USGC. Up until 2000, the DilBit price was stronger and was equivalent to the Maya price around Wood River in the Midwest (as shown in the figure); DilBit was a "price taker" in the Midwest versus other crudes since supply did not exceed demand and other imports were needed. FIGURE 13 COLD LAKE BLEND PRICING (U.S. Dollars per Barrel) 30.00 25.00 20.00 15.00 10.00 5.00 0.00 -5.00 -10.00 Jan-97 Jan-98 Jan-99 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 CLB Premium CLB Discount Maya-CLB, Wood River Maya-CLB, USGC Figure 13 Cold Lake Blend Pricing 21 The prices and costs in this discussion are in U.S. dollars unless noted otherwise. . 26 -- Western Canadian Crude Supply and Disposition TransCanada Keystone Pipeline GP Ltd. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 The Keystone XL Pipeline to the large USGC market would expand the market for Canadian heavy crudes and increase demand. This should allow the price of Canadian heavy crude to increase at least as far as USGC parity with Maya. The price for Canadian heavy crude could increase further if the Keystone XL Pipeline causes the available supply in the Midwest to be less than the demand, resulting in a price equivalent to Midwest parity with imported Maya crude, as it was before 2000. At the USGC, the average price discount on Cold Lake Blend is estimated to have exceeded $5.00 (U.S.) per barrel versus Maya since 1996, as shown in Figure 13, when the Pegasus pipeline to the USGC started up. However, the prices have been volatile; the monthly discount has been much higher and occasionally there has been a small premium at the USGC. More recently in 2008, the average discount at the USGC was approximately $3.24 per barrel. To be conservative for discussion purposes, we have assumed a price discount of $3.00 per barrel, recognizing that the average discount was higher in 2006 and 2007. By increasing market access for Canadian heavy crudes, the $3.00 per barrel discount should be avoided in the future. The price increase should apply to all of the Canadian heavy crude supply, not just the volume shipped on the Keystone XL Pipeline. The market price received from refiners in other markets such as the Midwest would not necessarily be the same as the price received from USGC refiners for the DilBit which is shipped to the region under ship-or-pay commitments. The vast majority of the Western Canadian crude (89 percent in 2013 based on Table 2) would be delivered to refineries in markets other than the USGC. This crude would be supplied at a price which is determined by competition in the market. This should establish a market price for the Canadian crudes other than the committed volume which is shipped on the Keystone XL Pipeline. The market prices of offshore crudes delivered to PADD II are higher than the USGC prices because these crudes are delivered north from the USGC by pipeline, and this adds to the delivered crude cost. Removing volumes from the PADD II market could cause PADD II demand to exceed the available supply. Purvin & Gertz expects that PADD II would be the competitive market for Canadian crudes after the . TransCanada Keystone Pipeline GP Ltd. Western Canadian Crude Supply and Markets -- 27 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 Keystone XL Pipeline startup since the PADD II refiners would have demand for the crude which exceeds the available supply that Purvin & Gertz has forecast in Table 2. The Midwest heavy crude prices are affected by the pipeline tolls between the Midwest and the USGC. Using current pipeline tolls, the Midwest price of imported heavy crude at Patoka, Illinois delivered from the USGC is $2.27 per barrel higher than the USGC price, based on the Capline toll 22 from St. James, Louisiana to Patoka. If it is not surplus to PADD II, Canadian heavy crude supply would not move from PADD II to the USGC and would not incur the toll of $1.28 per barrel 23 on the Mobil Pegasus pipeline from Patoka to Beaumont, Texas. Based on the combined tolls, the increase in the Canadian heavy crude price at Patoka would be $3.55 per barrel over USGC parity. In this scenario with Midwest price parity against Maya, Midwest demand for Canadian heavy crude would exceed the available supply and the market price of Cold Lake Blend would be approximately $6.55 per barrel above the 2008 price level at Patoka. If the available supply for PADD II exceeds PADD II demand, the market price would likely fall to parity elsewhere. If so, sufficient pipeline capacity would be needed to deliver the Canadian crudes to other markets so that price discounting does not re-occur. There may be other events that affect the DilBit price which were not considered in this report if not related to the Keystone XL Pipeline. Synthetic crude oil may also move to the USGC market as production grows. If so, the price of synthetic crude could drop to USGC parity with conventional light crudes. However, as for heavy crudes, ship-or-pay commitments on a pipeline to the USGC could mitigate potential price discounts for synthetic crude and allow a market price which is equivalent to parity with light crude in PADD II. 22 FERC Tariff 34, Amoco Capline for viscosity of 417 SUS. FERC Tariff A-1171, Mobil Pipeline for heavy crude. 23 . 28 -- Western Canadian Crude Supply and Disposition TransCanada Keystone Pipeline GP Ltd. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 Higher crude prices resulting from the Keystone XL Pipeline would increase revenues for the Canadian producers of heavy crude blends. A Canadian heavy crude producer is expected to realize an increase in the heavy crude price of approximately $3.00 per barrel by avoiding a discount at the USGC, as discussed earlier. Although the price comparison is specifically for Cold Lake Blend versus Maya, the same level of discounting is generally applicable to all the other Canadian heavy crude blends including other DilBit, conventional heavy crudes and blends such as Western Canadian Select ("WCS"), since prices for Canadian heavy crudes track each other more than the Maya price. If deliveries on the Keystone XL Pipeline relieve the oversupply of Canadian heavy crudes, a price discount at the USGC should not be necessary. By 2013, Purvin & Gertz estimates the total supply of all the Canadian heavy crude blends to be 1.84 million B/D (293 103m3/d). Based on eliminating an average discount of $3.00 per barrel on this volume of heavy crude, the annual revenue to the Canadian producing industry would increase by approximately $2.0 billion (U.S.). Additional producer revenues are possible if the Keystone XL Pipeline also relieves the oversupply situation in the Midwest. As discussed earlier, the market prices of Canadian heavy crudes should rise in the Midwest and in Western Canada by another $3.55 per barrel. The Midwest market price would impact the price of 1.46 million B/D (231 103m3/d) which is all of the Canadian heavy crude supply, except the Keystone XL Pipeline volume of 380,000 B/D (60.4 103m3/d). Based on a further price increase of $3.55 per barrel versus the USGC, the annual increase in revenue for 1.46 million B/D (231 103m3/d) would be another $1.9 billion approximately for the Canadian producing industry in 2013. For the USGC Midwest price parity impacts, we have used heavy crude since its price has been impacted in recent years. In the future, the impacts could also apply to light synthetic crudes if supply exceeds demand in the Midwest. Following the startup of the Keystone XL Pipeline, the increased revenues should be expected to continue until Canadian supply overtakes demand. Other events which were not considered here could alter producer revenues. . TransCanada Keystone Pipeline GP Ltd. Western Canadian Crude Supply and Markets -- 29 1 2 3 4 5 6 7 8 9 10 11 12 13 The positive revenue gains available to the Canadian producing industry may be partially offset by other costs. These might include additional pipeline costs and potential impacts on crude oil netback prices which might temporarily arise from toll changes on other pipelines. In our opinion, these costs would be less than the expected revenue gains, so the net benefit to the Canadian producing industry should be positive. In summary, if the Keystone XL Pipeline causes the USGC price discount to be eliminated, the annual revenue increase to the Canadian producing industry is estimated at $2.0 billion (U.S.). In addition, if the Keystone XL Pipeline causes the Midwest price to rise above USGC parity, the annual revenue could increase by another $1.9 billion to reach approximately $3.9 billion (U.S.). The increased revenue could apply for several years as long as refinery demand and pipeline capacity exceed Canadian heavy crude supply. The large refining capacity at the USGC should allow producers to avoid a price discount below USGC parity as long as sufficient pipeline access exists for Western Canadian crude. . 30 -- Western Canadian Crude Supply and Disposition TransCanada Keystone Pipeline GP Ltd. (This page intentionally left blank) . TransCanada Keystone Pipeline GP Ltd. Western Canadian Crude Supply and Markets -- 31 1 PIPELINE CAPACITY REQUIREMENTS 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 The estimated pipeline capacity for 2011 to export Western Canadian crude oil is shown in Table 5 including pipeline expansions and projects. The pipelines include Enbridge, Trans Mountain Pipeline ("TMPL"), Milk River, Rangeland, Express and Keystone Phase 1 to Patoka with the Cushing extension. Estimated capacities for light crude and heavy crude service are provided. Overall, the pipeline capacity for total crude is estimated at 3.76 million B/D (598 103m3/d) of which 1.63 million B/D (260 103m3/d) is for light crude and 2.12 million B/D (338 103m3/d) is for heavy crude. For the following analysis, we have used an annualized service factor of 95 percent for the total pipeline capacity. Although pipelines operate at 100 percent in some months, each individual line generally does not operate at full capacity every day of the year. Not only do pipelines have outages, but crude oil producers and refineries have planned and unplanned outages which cause pipeline deliveries to change, so the available capacity of each individual pipeline cannot be fully utilized 365 days per year. Pipeline capacity depends on the properties of the commodities being shipped. Compared with light crude capacity, heavy crude reduces the pipeline capacity. There can be times when there is spare capacity for light crude on one line, but another heavy crude line is operating at full capacity. For instance, the NEB Transportation Assessment 24 notes that Enbridge operated at 88 percent of capacity in the first quarter of 2008 even though many of its individual lines were fully subscribed or operating at capacity. Also, the TMPL line operated at 80 percent of capacity in the first quarter of 2008 even though it had apportionment in January 2008. For the overall pipeline industry, there are times when shippers may prefer to ship to one market rather than another; they would then choose one pipeline over another, so they need operational flexibility within the overall pipeline network. Although each pipeline system and each line likely has a service factor incorporated 24 NEB Canadian Pipeline Transportation System: Transportation Assessment, June 2008. . 32 -- Western Canadian Crude Supply and Disposition TransCanada Keystone Pipeline GP Ltd. 1 2 with its nameplate capacity, the overall pipeline industry will likely continue to operate below 100 percent of total capacity to avoid disruptions to its shippers. . TransCanada Keystone Pipeline GP Ltd. Western Canadian Crude Supply and Markets -- 33 1 2 3 4 5 6 7 8 Five throughput forecasts for exports of total crude from Western Canada to the U.S., Ontario and offshore are shown in Figure 14. These export forecasts are based on the crude oil supply forecasts minus the disposition forecast for Western Canada, as shown in Table 2. In the figure, the throughput forecasts are compared with 95 percent of the pipeline capacity from Table 5. Based on total crude throughput, the CAPP Pipeline Planning case and the Enbridge case would require additional pipeline capacity by 2015. Using the Purvin & Gertz supply forecast and other CAPP forecasts for total crude, more capacity would not be needed until around 2020. FIGURE 14 TOTAL CRUDE EXPORTS VS PIPELINE CAPACITY 5000 4500 4000 3500 3000 2500 2000 1500 1000 500 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Enbridge 2008 CAPP Pipeline Planning 2008 CAPP Moderate 2008 CAPP Interim Update Dec 2008 PGI 2008 95% Pipeline Capacity in 2012 (Thousand Barrels Per Day) (Thousand Cubic Metres Per Day) 780 680 580 480 380 280 180 80 2020 Figure 14 Total Crude Exports vs Pipeline Capacity . 34 -- Western Canadian Crude Supply and Disposition TransCanada Keystone Pipeline GP Ltd. 1 2 3 4 5 6 7 8 9 10 However, for heavy crude oil, pipeline capacity would be needed sooner. The Purvin & Gertz 2008 heavy crude supply and disposition forecasts are shown in Table 6. The CAPP heavy crude supply forecasts are compared in Table 7. An Enbridge forecast of heavy crude supply was not available. The table shows the forecasts of heavy crude exports from Western Canada. Figure 15 compares the pipeline throughput forecasts with 95 percent of the heavy crude pipeline capacity from Table 5. For heavy crude, the Purvin & Gertz and CAPP Pipeline Planning Case heavy crude supply forecasts are similar. In both cases, additional heavy crude pipeline capacity would be needed by 2014. CAPP's Moderate Case has less supply of heavy crude, so more capacity would not be needed until 2019. CAPP's Interim Update supply forecast would require more pipeline capacity for heavy crude by 2015. FIGURE 15 HEAVY CRUDE EXPORTS VS PIPELINE CAPACITY 2800 2600 2400 2200 2000 1800 1600 1400 1200 1000 800 (Thousand Barrels Per Day) (Thousand Cubic Metres Per Day) 427 377 95% Pipeline Capacity in 2012 327 277 CAPP Pipeline Planning 2008 CAPP Moderate 2008 CAPP Interim Update Dec 2008 PGI 2008 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 227 177 127 2020 2007 Figure 15 Heavy Crude Exports vs Pipeline Capacity . TransCanada Keystone Pipeline GP Ltd. Western Canadian Crude Supply and Markets -- 35 1 2 3 4 5 6 7 8 9 10 11 12 13 The forecast disposition of heavy crude to different markets is compared with pipeline capacities in Figure 16. For this comparison, the Eastern Markets are those supplied by Enbridge and future Keystone (Phase 1) pipelines and include refineries in Ontario, PADD I, PADD II and the Texas Panhandle around Borger, Texas. The figure shows that the Enbridge pipeline would be short of heavy crude capacity in 2015 if the Keystone XL Pipeline is not in service since the pipeline capacity is less than the heavy crude supply. If the Keystone XL Pipeline is in service, and delivering 253,000 B/D (40.2 103m3/d) of heavy crude, then the Enbridge pipeline would be near capacity at that time, as indicated by the darker areas on the figure. The figure shows the small existing pipeline capacity to the USGC versus the large capacity to the Eastern Markets. Although the Keystone XL Pipeline would increase the capacity to the USGC, Canadian heavy crude supply to the Eastern Markets would still be much greater. By committing volumes to the Keystone XL Pipeline, Canadian shippers are indicating a strategy to supply a market which has had little access to their crude. FIGURE 16 HEAVY CRUDE OIL PIPELINE CAPACITY VS DISPOSITION: 2015 1600 (Thousand Barrels Per Day) Eastern Markets 1400 1412 (1) (Thousand Cubic Metres Per Day) 95% of Pipeline Capacity Canadian Heavy Crude Supply to Market Notes: (1) Eastern Markets include Ontario, PADD I, PADD II and Texas Panhandle. (2) Enbridge capacity minus Pegasus to USGC. (3) Supply on Enbridge if no Keystone XL Pipeline. (4) Enbridge supply allows for Keystone XL Pipeline to USGC (5) Keystone and Keystone XL heavy assumed at 2/3 of total crude. 240 210 180 150 120 PADD IV Market PADD V Market USGC Market 90 60 374 353 300 188 317 253 81 65 70 1200 1194 1194 1159 1000 800 600 400 200 30 0 0 Enbridge (2) (3) 65 Enbridge (2) (4) Keystone (5) Phase I Express/ Rangeland/ Milk River TMPL Pegasus Keystone XL (5) Figure 16 Heavy Crude Oil Pipeline Capacity vs Disposition 2015 . 36 -- Western Canadian Crude Supply and Disposition TransCanada Keystone Pipeline GP Ltd. 1 2 3 4 In summary, more pipeline capacity for heavy crude appears to be needed by 20142015. The Keystone XL Pipeline would serve a large market which now has very limited access to Canadian crudes, while allowing existing pipelines to operate near their capacity for heavy crude by 2015. . TransCanada Keystone Pipeline GP Ltd. Western Canadian Crude Supply and Markets -- 37 1 SUMMARY AND CONCLUSIONS 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Canadian crude oil delivered on the Keystone XL Pipeline ultimately would have pipeline access to 15 USGC refineries with a combined crude capacity of approximately 4.3 million B/D (685 103m3/d) after expansion of 325,000 B/D (51.7 103m3/d) by 2011. This large refining market would be capable of absorbing an incremental 500,000 B/D (79.5 103m3/d) of Canadian crude which is around 12 percent of the refining capacity. This market uses around Some USGC 1.4 million B/D (223 103m3/d) of heavy crude, nearly all of which is imported. refiners are expanding their heavy crude capabilities but heavy sour crude supplies from Latin America are declining. This market also uses approximately 1.9 million B/D (302 103m3/d) of conventional light crudes. Depending on the delivered volumes, Canadian light synthetic crude might have to compete with both light sweet and light sour crudes. Shipper commitments on the Keystone XL Pipeline are for 380,000 B/D (60.4 103m3/d). Most of this could be absorbed by refinery expansion alone. The supply of Western Canadian crude oil is forecast to rise due to growth in oil sands production. If 500,000 B/D (79.5 103m3/d) of Canadian crudes are delivered to the USGC by the Keystone XL Pipeline, deliveries to PADD II refineries should still continue to rise due to increasing supply, except for the pipeline startup year. The PADD II refineries should be able to use the crude, based on the Purvin & Gertz supply forecast. With higher supply forecasts such as those of CAPP and Enbridge, additional pipeline capacity to various markets might be needed. Pricing of Canadian heavy crudes has been weak due to oversupply. The access to the large USGC market to be provided by the Keystone XL Pipeline should help to strengthen the market price of Canadian heavy crude by reducing the oversupply in PADD II. Similarly, if a surplus of light synthetic crude develops, the Keystone XL Pipeline should also help to mitigate potential price discounts. The annual increase in revenue for the Canadian producing industry . 38 -- Western Canadian Crude Supply and Disposition TransCanada Keystone Pipeline GP Ltd. 1 2 3 4 5 6 in 2013 is estimated to be in the range of $2.0 to $3.9 billion (U.S.) if the Keystone XL Pipeline relieves the oversupply of heavy crude and causes heavy crude prices to strengthen. More pipeline capacity for Canadian heavy crude appears to be needed by 2014-2015. The Keystone XL Pipeline would deliver crude to the USGC market which now has limited access to Canadian crude, while allowing existing export pipelines to operate near their capacity for heavy crude. . TransCanada Keystone Pipeline GP Ltd. Western Canadian Crude Supply and Markets -- 39 Table 1 Western Canadian Crude Supply and Disposition TABLE 1 WESTERN CANADIAN CRUDE SUPPLY AND DISPOSITION 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 (Thousand Barrels Per Day) Supply (1) Disposition (1) Western Canada Ontario (1) 2,313 2,348 2,463 2,653 2,877 3,046 3,202 3,379 3,540 3,643 3,776 3,903 4,019 4,138 4,206 562 212 774 65 278 109 (1) 586 217 803 59 295 132 487 11 65 76 1,365 983 570 273 843 63 305 143 510 26 65 91 1,445 1,019 572 274 846 63 311 152 526 40 65 105 1,478 1,175 579 278 857 63 306 172 540 40 65 105 1,502 1,375 593 282 875 63 311 164 538 40 65 105 1,518 1,529 616 328 944 63 325 157 545 40 65 105 1,594 1,608 628 373 1,002 63 336 151 550 75 445 520 2,072 1,307 640 377 1,017 63 350 152 565 110 445 555 2,137 1,404 651 380 1,031 63 352 153 568 110 445 555 2,154 1,489 655 383 1,038 63 357 154 573 110 445 555 2,167 1,609 661 386 1,046 63 362 155 580 110 445 555 2,181 1,722 666 387 1,054 63 368 156 587 110 445 555 2,195 1,824 672 388 1,060 63 375 157 594 110 445 555 2,209 1,929 677 390 1,067 63 381 157 602 110 445 555 2,223 1,983 Subtotal, Canada PADD I PADD IV PADD V Subtotal PADDs I, IV, V 452 (2) Texas Panhandle (PADD III) USGC (PADD III) Subtotal PADD III Total (except PADD II) Available for PADD II (3) 1 57 58 1,285 1,029 (Thousand Cubic Metres Per Day) Supply (1) Disposition (1) Western Canada Ontario (1) 367.7 373.3 391.6 421.8 457.4 484.3 509.1 537.3 562.9 579.2 600.4 620.5 639.0 657.9 668.6 89.3 33.8 123.0 10.4 44.2 17.3 (1) 93.1 34.5 127.6 9.4 47.0 21.0 77.4 1.7 10.3 12.0 217.0 156.3 90.7 43.4 134.1 10.0 48.5 22.7 81.1 4.2 10.3 14.5 229.7 161.9 91.0 43.5 134.5 10.0 49.5 24.2 83.7 6.4 10.3 16.7 234.9 186.9 92.0 44.2 136.2 10.0 48.6 27.3 85.9 6.4 10.3 16.7 238.8 218.6 94.2 44.9 139.1 10.0 49.4 26.1 85.5 6.4 10.3 16.7 241.3 243.0 98.0 52.1 150.1 10.0 51.7 24.9 86.6 6.4 10.3 16.7 253.4 255.6 99.9 59.3 159.2 10.0 53.5 24.0 87.5 11.9 70.7 82.7 329.4 207.9 101.7 60.0 161.7 10.0 55.6 24.2 89.8 17.5 70.7 88.2 339.7 223.2 103.5 60.5 163.9 10.0 55.9 24.3 90.2 17.5 70.7 88.2 342.4 236.8 104.2 60.9 165.1 10.0 56.7 24.5 91.2 17.5 70.7 88.2 344.5 255.9 105.0 61.3 166.3 10.0 57.6 24.6 92.2 17.5 70.7 88.2 346.8 273.7 105.9 61.6 167.5 10.0 58.5 24.7 93.3 17.5 70.7 88.2 349.0 290.0 106.8 61.8 168.5 10.0 59.5 24.9 94.4 17.5 70.7 88.2 351.2 306.7 107.6 62.0 169.6 10.0 60.6 25.0 95.6 17.5 70.7 88.2 353.4 315.2 Subtotal, Canada PADD I PADD IV PADD V Subtotal PADDs I, IV, V 71.9 (2) Texas Panhandle (PADD III) USGC (PADD III) Subtotal PADD III Total (except PADD II) Available for PADD II (3) 0.2 9.1 9.3 204.2 163.5 Notes: (1) Source: PGI estimates in proprietary market analysis, April 2008. Notes: (2) For WRB Refining at Borger, Texas. Notes: (3) Via Pegasus and Keystone XL Pipelines . 40 -- Western Canadian Crude Supply and Disposition TransCanada Keystone Pipeline GP Ltd. TABLE 2 WESTERN CANADIAN CRUDE SUPPLY AND DISPOSITION SCENARIOS 2006 2007 2008 2009 2010 2011 2012 (Thousand Barrels Per Day) 2013 2014 2015 2016 2017 2018 2019 Supply Scenarios: PGI 2008 (1) CAPP Moderate, 2008 (2) CAPP Pipeline Planning, 2008 (2) Enbridge 2008 (3) CAPP Interim Update Dec 2008 (4) Demand Scenario with Keystone XL at 380,000 B/D Total (except PADD II) Including USGC Available for PADD II, based on supply: PGI 2008 CAPP Moderate, 2008 CAPP Pipeline Planning, 2008 Enbridge 2008 CAPP Interim Update Dec 2008 Demand Scenario with Keystone XL at 500,000 B/D Total Demand (except PADD II) Including USGC Available for PADD II, based on supply PGI 2008 CAPP Moderate, 2008 CAPP Pipeline Planning, 2008 Enbridge 2008 CAPP Interim Update Dec 2008 Export Scenarios(5) Western Canada Demand Export Scenario based on Supply PGI 2008 CAPP Moderate, 2008 CAPP Pipeline Planning, 2008 Enbridge 2008 CAPP Interim Update Dec 2008 2,313 2,373 2,373 2,280 2,348 2,431 2,431 2,350 2,463 2,516 2,567 2,500 2,425 2,653 2,712 2,762 2,710 2,649 2,877 2,786 2,880 2,850 2,739 3,046 2,906 3,036 3,080 2,851 3,202 3,146 3,372 3,490 3,047 3,379 3,372 3,621 3,700 3,194 3,540 3,580 3,923 3,980 3,288 3,643 3,785 4,196 4,280 3,478 3,776 3,961 4,297 4,490 3,702 3,903 4,034 4,375 4,770 3,930 4,019 4,124 4,528 4,073 4,138 4,214 4,802 4,196 1,285 57 1,365 65 1,445 65 1,478 65 1,502 65 1,518 65 1,594 65 2,072 445 2,137 445 2,154 445 2,167 445 2,181 445 2,195 445 2,209 445 1,029 1,088 1,088 995 983 1,066 1,066 985 1,019 1,071 1,123 1,055 980 1,175 1,234 1,284 1,232 1,171 1,375 1,284 1,378 1,348 1,237 1,529 1,388 1,519 1,562 1,333 1,608 1,552 1,778 1,896 1,453 1,307 1,300 1,549 1,628 1,122 1,404 1,443 1,787 1,843 1,151 1,489 1,631 2,042 2,126 1,324 1,609 1,794 2,130 2,323 1,535 1,722 1,853 2,194 2,589 1,749 1,824 1,928 2,333 1,878 1,929 2,005 2,593 1,987 2,072 445 2,257 565 2,274 565 2,287 565 2,301 565 2,315 565 2,329 565 1,307 1,300 1,549 1,628 1,122 1,284 1,323 1,667 1,723 1,031 1,369 1,511 1,922 2,006 1,204 1,489 1,674 2,010 2,203 1,415 1,602 1,733 2,074 2,469 1,629 1,704 1,808 2,213 1,758 1,809 1,885 2,473 1,867 562 586 570 572 579 593 616 628 640 651 655 661 666 672 1,751 1,811 1,811 1,718 1,762 1,846 1,846 1,764 1,893 1,946 1,997 1,930 1,855 2,081 2,140 2,190 2,138 2,077 2,299 2,207 2,301 2,271 2,160 2,454 2,313 2,444 2,487 2,258 2,586 2,530 2,756 2,874 2,431 2,751 2,743 2,993 3,072 2,566 2,901 2,940 3,283 3,340 2,648 2,992 3,134 3,545 3,629 2,827 3,121 3,305 3,642 3,835 3,047 3,242 3,374 3,714 4,109 3,269 3,353 3,457 3,862 3,407 3,466 3,542 4,131 3,524 (Thousand Cubic Metres Per Day) Supply Scenarios: PGI 2008 CAPP Moderate, 2008 CAPP Pipeline Planning, 2008 Enbridge 2008 CAPP Interim Update Dec 2008 Demand Scenario with Keystone XL at 380,000 B/D Total Demand (except PADD II) Including USGC Available for PADD II, based on supply: PGI 2008 CAPP Moderate, 2008 CAPP Pipeline Planning, 2008 Enbridge 2008 CAPP Interim Update Dec 2008 Demand Scenario with Keystone XL at 500,000 B/D Total (except PADD II) Including USGC Available for PADD II, based on supply: PGI 2008 CAPP Moderate, 2008 CAPP Pipeline Planning, 2008 Enbridge 2008 CAPP Interim Update Dec 2008 Export Scenarios(5) Western Canada Demand Export Scenario based on Supply PGI 2008 CAPP Moderate, 2008 CAPP Pipeline Planning, 2008 Enbridge 2008 CAPP Interim Update Dec 2008 278.5 288.0 288.0 273.2 280.2 293.4 293.4 280.5 301.0 309.3 317.5 306.8 294.9 330.8 340.2 348.1 339.8 330.1 365.4 350.9 365.9 361.1 343.5 390.1 367.8 388.5 395.4 359.0 411.1 402.2 438.2 456.9 386.5 437.4 436.1 475.8 488.3 407.9 461.1 467.4 522.0 531.0 421.0 475.7 498.3 563.6 577.0 449.5 496.2 525.5 579.0 609.6 484.4 515.4 536.4 590.5 653.3 519.8 533.1 549.6 614.0 541.6 551.1 563.1 656.7 560.3 89.3 93.1 90.7 91.0 92.0 94.2 98.0 99.9 101.7 103.5 104.2 105.0 105.9 106.8 207.9 206.6 246.3 258.8 178.4 204.1 210.4 265.0 274.0 164.0 217.7 240.3 305.6 319.0 191.5 236.8 266.1 319.6 350.3 225.0 254.6 275.5 329.7 392.5 259.0 270.9 287.5 351.8 279.5 287.6 299.6 393.2 296.8 329.4 70.7 358.8 89.8 361.5 89.8 363.6 89.8 365.8 89.8 368.1 89.8 370.3 89.8 163.5 173.0 173.0 158.3 156.3 169.5 169.5 156.6 161.9 170.3 178.5 167.7 155.8 186.9 196.2 204.2 195.9 186.2 218.6 204.1 219.1 214.3 196.6 243.0 220.7 241.4 248.4 212.0 255.6 246.8 282.7 301.4 231.0 207.9 206.6 246.3 258.8 178.4 223.2 229.4 284.0 293.1 183.0 236.8 259.4 324.7 338.0 210.5 255.9 285.2 338.7 369.3 244.1 273.7 294.6 348.8 411.6 278.0 290.0 306.6 370.9 298.5 306.7 318.7 412.3 315.9 204.2 9.1 217.0 10.3 229.7 10.3 234.9 10.3 238.8 10.3 241.3 10.3 253.4 10.3 329.4 70.7 339.7 70.7 342.4 70.7 344.5 70.7 346.8 70.7 349.0 70.7 351.2 70.7 367.7 377.3 377.3 362.5 373.3 386.5 386.5 373.6 391.6 400.0 408.2 397.5 385.5 421.8 431.2 439.1 430.8 421.1 457.4 442.9 457.9 453.1 435.5 484.3 462.0 482.7 489.7 453.3 509.1 500.2 536.1 554.8 484.4 537.3 536.0 575.7 588.2 507.8 562.9 569.1 623.7 632.8 522.7 579.2 601.8 667.1 680.4 552.9 600.4 629.7 683.2 713.8 588.6 620.5 641.4 695.5 758.3 624.8 639.0 655.6 719.9 647.5 657.9 669.9 763.5 667.1 Supply Sources: (1) PGI proprietary market analysis, April 2008 (2) CAPP, Crude Oil Forecast, Markets and Pipeline Expansions, June 2008 (3) Enbridge, Liquids Pipeline Development, Enbridge Day Presentation, October 7 and 8, 2008 (4) CAPP, Interium Update, 2008-2020 Western Crude Oil Forecast, December 11, 2008 (5) Export from Western Canada includes shipments for Ontario Table 2 Western Canadian Crude Supply and Disposition Scenarios Table 3 PADD III Refinery Crude Capacity . TransCanada Keystone Pipeline GP Ltd. Western Canadian Crude Supply and Markets -- 41 TABLE 3 PADD III REFINERY CRUDE CAPACITY: 2008 (1) Thousand Barrels per Day Group 1 - Coastal Refineries - Direct Pipeline Access to Canadian Crude Motiva Enterprises LLC; Port Arthur, TX Total Petrochemicals; Port Arthur, TX Valero Energy Corp.; Port Arthur, TX Exxon Mobil; Beaumont, TX Pasadena Refining; Pasadena, TX Houston Refining (Lyondell); Houston, TX Valero Energy Corp.; Houston, TX Deer Park Refining; Deer Park, TX Exxon Mobil; Baytown, TX BP; Texas City, TX Marathon Oil; Texas City, TX Valero Energy Corp.; Texas City, TX Calcasieu Refining; Lake Charles, LA CITGO; Lake Charles, LA ConocoPhillips; Lake Charles/Westlake, LA Sub-Total Group 1 Group 2 - Coastal Refineries Requiring Pipeline / Water Transfer of Canadian Crude Hunt Refining Co.; Tuscaloosa, AL ConocoPhillips; Belle Chasse, LA Exxon Mobil; Baton Rouge, LA Valero Energy Corp.; Krotz Springs, LA Valero Energy Corp.; St. Charles, LA Marathon Oil; Garyville, LA Chalmette Refining; Chalmette, LA Murphy Oil; Meraux, LA Motiva Enterprises LLC; Norco, LA Motiva Enterprises LLC; Convent, LA Placid Refining; Port Allen, LA Shell Chemical; Saint Rose, LA ChevronTexaco; Pascagoula, MS ConocoPhillips; Sweeny, TX CITGO; Corpus Christi, TX Valero Energy Corp.; Three Rivers, TX Flint Hills Resources; Corpus Christi, TX Valero Energy Corp.; Corpus Christi, TX Sub-Total Group 2 Group 3 - Inland PADD III Refineries with Possible Pipeline Connection to Canadian Crude Navajo Refining; Artesia, NM WRB Refining; Borger, TX Valero Energy Corp.; Sunray/McKee, TX Alon USA; Big Spring, TX Delek; Tyler, TX Sub-Total Group 3 Others Without Access Sub-Total Other PADD III GRAND TOTAL 449 8,416 71.4 1,338.0 84 146 171 67 58 526 13.4 23.2 27.2 10.7 9.2 83.6 35 247 503 80 185 256 193 120 236 235 56 55 330 247 156 96 288 142 3,460 5.6 39.3 80.0 12.7 29.4 40.7 30.7 19.1 37.5 37.4 8.9 8.7 52.5 39.3 24.8 15.3 45.8 22.6 550.1 285 232 289 349 100 271 83 330 567 478 76 200 53 430 239 3,981 45.3 36.9 45.9 55.4 15.9 43.1 13.2 52.5 90.1 76.0 12.1 31.8 8.4 68.3 38.0 632.9 Thousand Cubic Metres per Day Note: (1) Source: U.S. Energy Information Administration (EIA), Refining Capacity, 2008. . 42 -- Western Canadian Crude Supply and Disposition TransCanada Keystone Pipeline GP Ltd. Table 4 PADD III Refinery Crude Types and Sources TABLE 4 PADD III REFINERY CRUDE TYPES AND SOURCES Estimated 2007 Crude Runs (1) Heavy (2) Light Light Sweet Sour Thousand Barrels per Day Group 1 Refineries (3) Domestic Crude 2008 Crude Capacity Total 124 661 784 161 904 1,065 37 1,395 1,432 322 2,959 3,281 3,981 Imports (1) Total Crude to Group 1 Total PADD III (4) Domestic Crude 930 1,596 2,525 848 1,530 2,378 50 2,452 2,502 1,828 5,578 7,406 8,416 Imports (1) Total Crude to PADD III Thousand Cubic Metres per Day Group 1 Refineries (3) Domestic Crude 19.7 105.0 124.7 25.7 143.6 169.3 5.9 221.8 227.7 51.2 470.5 521.7 632.9 Imports (1) Total Crude to Group 1 Total PADD III (4) Domestic Crude 147.8 253.7 401.5 134.9 243.3 378.1 7.9 389.9 397.7 290.5 886.8 1,177.3 1,338.0 Imports (1) Total Crude to PADD III Notes: (1) Estimated crude runs from DOE import data as well as PGI estimates of refinery crude runs Notes: and domestic crude use. Notes: (2) Heavy includes High TAN crudes. Notes: (3) 15 Group 1 refineries from Texas City to Lake Charles, LA as listed in Table 3. Notes: (4) PADD III includes Group 1 refineries. . TransCanada Keystone Pipeline GP Ltd. Western Canadian Crude Supply and Markets -- 43 Table 5 Capacities of Export Pipelines for Canadian Crude: 2012 TABLE 5 CAPACITIES OF EXPORT PIPELINES FOR CANADIAN CRUDES: 2012 (Thousand Barrels Per Day) Light Enbridge (1) (a) Line 1 (b) Line 2 (b) (c) Line 3 (b) Line 4 (d) LSR (b) Clipper Subtotal (e) Express (2) TransMountain (3) Milk River (4) (Thousand Cubic Metres Per Day) Total Light Heavy Total Heavy 77 440 500 880 186 1,203 94 85 5 50 450 1,330 188 85 113 15 77 440 500 880 186 450 2,533 282 170 118 65 12.2 70.0 79.5 139.9 29.6 191.3 14.9 13.5 0.8 7.9 71.5 211.4 29.9 13.5 18.0 2.4 12.2 70.0 79.5 139.9 29.6 71.5 402.7 44.8 27.0 18.8 10.3 Rangeland/Aurora (4) Keystone (5) Phase 1-A & B Total 95% of Total 197 1,634 1,552 393 2,124 2,018 590 3,758 3,570 31.3 259.7 246.7 62.5 337.7 320.9 93.8 597.5 567.6 Notes: (1) Enbridge sources below. Crude capacities ex Cromer, Manitoba. 3 3 Notes: (a) Enbridge Pipeline System Configuration, March 2006 for total capacity = 237,000 B/D (37.6 10 m /d). 3 3 Notes: (b) Crude capacity is reduced by delivery of refined products and natural gas liquids assumed at 160,000 B/D (25.4 10 m /d). Notes: (b) Enbridge Appendix 14 in Reponse to Information Request 14 of Communications, Energy & Paperworkers Union (CEP) Notes: (b) at NEB hearing OH-4-2007, re Clipper. Notes: (c) Source (b) includes change in Line 3 service from heavy crude to light crude Notes: (d) Enbridge Facility Application for Southern Lights Vol. 1. pg 2-3, February, 2007 (NEB hearing OH-3-2007) Notes: (e) Enbridge subtotal assumes sufficient takeaway capacity from Superior to Chicago and Marysville. Notes: (2) Source: Kinder Morgan website\business\Canada for total crude capacity. Express heavy crude assumed = 2/3 of tota crude. Notes: (3) Source: Terasen Pipelines Inc. Facility Application for Trans Mountain Pipeline Anchor Loop, pg 2-4, Feb. 17, 2006. 3 3 Notes: (3) for total capacity = 300,000 B/D (47.7 10 m /d). Export capacity is reduced by domestic delivery of light crude and refined 3 3 Notes: (3) products assumed at 130,000 B/D (20.7 10 m /d). TransMountain crude capacity assumed at half light crude for Washington. Notes: (4) Purvin & Gertz estimates Notes: (5) Keystone heavy assumed at 2/3 of total crude. . 44 -- Western Canadian Crude Supply and Disposition TransCanada Keystone Pipeline GP Ltd. Table 6 Western Canadian Heavy Crude Supply and Disposition TABLE 6 WESTERN CANADIAN HEAVY CRUDE SUPPLY AND DISPOSITION 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 (Thousand Barrels Per Day) Supply (1) Disposition (1) Western Canada Ontario (1) 1,117 1,171 1,263 1,398 1,565 1,727 1,822 1,978 2,127 2,236 2,282 2,348 2,400 2,474 2,487 87 71 158 37 144 31 (1) 77 61 138 36 138 47 221 11 65 76 435 736 87 102 189 37 158 62 257 26 65 91 537 726 91 123 214 37 162 74 273 40 65 105 592 806 111 125 236 37 166 88 291 40 65 105 632 933 124 126 250 37 168 79 284 40 65 105 639 1,088 125 137 262 37 174 71 283 40 65 105 650 1,172 127 149 276 37 179 65 281 75 331 406 962 1,016 129 165 294 37 183 65 285 110 331 441 1,020 1,107 131 167 297 37 188 65 289 110 331 441 1,028 1,208 132 168 300 37 189 65 291 110 331 441 1,032 1,250 134 168 302 37 191 65 293 110 331 441 1,036 1,311 136 169 305 37 193 65 295 110 331 441 1,041 1,360 137 170 307 37 195 65 297 110 331 441 1,045 1,429 139 202 342 37 196 65 298 110 331 441 1,081 1,407 Subtotal, Canada PADD I PADD IV PADD V Subtotal PADDs I, IV, V 212 (2) Texas Panhandle (PADD III) USGC (PADD III) Subtotal PADD III Total (except PADD II) Available for PADD II (3) 1 57 58 428 689 (Thousand Cubic Metres Per Day) Supply (1) Disposition (1) Western Canada (1) Ontario Subtotal, Canada PADD I PADD IV PADD V Subtotal PADDs I, IV, V (1) 177.6 186.1 200.8 222.3 248.8 274.6 289.7 314.5 338.1 355.5 362.8 373.2 381.6 393.3 395.5 13.8 11.2 25.1 5.8 22.9 4.9 33.7 (2) 12.2 9.8 22.0 5.7 22.0 7.5 35.2 1.7 10.3 12.0 69.2 116.9 13.9 16.2 30.1 5.9 25.2 9.8 40.8 4.2 10.3 14.5 85.4 115.4 14.5 19.6 34.1 5.9 25.8 11.7 43.3 6.4 10.3 16.7 94.1 128.1 17.7 19.8 37.5 5.9 26.4 14.0 46.2 6.4 10.3 16.7 100.4 148.4 19.6 20.0 39.7 5.9 26.8 12.6 45.2 6.4 10.3 16.7 101.6 173.0 19.9 21.9 41.7 5.9 27.7 11.3 44.9 6.4 10.3 16.7 103.4 186.4 20.2 23.7 43.8 5.9 28.4 10.3 44.6 11.9 52.6 64.5 153.0 161.5 20.5 26.3 46.7 5.9 29.1 10.3 45.3 17.5 52.6 70.1 162.2 176.0 20.7 26.5 47.3 5.9 29.8 10.3 46.0 17.5 52.6 70.1 163.4 192.1 21.0 26.6 47.7 5.9 30.1 10.3 46.3 17.5 52.6 70.1 164.1 198.7 21.3 26.8 48.1 5.9 30.4 10.3 46.6 17.5 52.6 70.1 164.8 208.5 21.6 26.9 48.5 5.9 30.7 10.3 46.9 17.5 52.6 70.1 165.5 216.2 21.8 27.0 48.9 5.9 31.0 10.3 47.1 17.5 52.6 70.1 166.1 227.1 22.1 32.2 54.3 5.9 31.2 10.3 47.4 17.5 52.6 70.1 171.8 223.6 Texas Panhandle (PADD III) USGC (PADD III) Subtotal PADD III Total (except PADD II) Available for PADD II (3) 0.2 9.1 9.3 68.0 109.5 Notes: (1) Source: PGI estimates in proprietary market analysis, April 2008. Notes: (2) For WRB Refining at Borger, Texas Notes: (3) Via Pegasus and Keystone XL Pipelines . TransCanada Keystone Pipeline GP Ltd. Western Canadian Crude Supply and Markets -- 45 TABLE 7 WESTERN CANADIAN HEAVY CRUDE SUPPLY AND DISPOSITION SCENARIOS 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 (Thousand Barrels Per Day) Supply Scenarios: (1) PGI 2008 (2) CAPP Moderate, 2008 (2) CAPP Pipeline Planning, 2008 (3) CAPP Interim Update Dec 2008 Demand Scenario with Keystone XL at 380,000 B/D Total (except PADD II) Including USGC Available for PADD II, based on supply: PGI 2008 CAPP Moderate, 2008 CAPP Pipeline Planning, 2008 CAPP Interim Update Dec 2008 Demand Scenario with Keystone XL at 500,000 B/D Total Demand (except PADD II) Including USGC Available for PADD II, based on supply PGI 2008 CAPP Moderate, 2008 CAPP Pipeline Planning, 2008 CAPP Interim Update Dec 2008 Export Scenarios (4) 1,117 1,213 1,213 1,171 1,211 1,211 1,263 1,263 1,272 1,244 1,398 1,321 1,345 1,311 1,565 1,372 1,431 1,384 1,727 1,404 1,508 1,450 1,822 1,527 1,719 1,635 1,978 1,634 1,836 1,764 2,127 1,768 2,047 1,845 2,236 1,855 2,182 2,058 2,282 1,944 2,196 2,231 2,348 1,994 2,255 2,374 2,400 2,046 2,357 2,461 2,474 2,123 2,497 2,572 2,487 2,291 2,671 2,711 428 57 435 65 537 65 592 65 632 65 639 65 650 65 962 331 1,020 331 1,028 331 1,032 331 1,036 331 1,041 331 1,045 331 1,081 331 689 785 785 736 776 776 726 726 735 707 806 729 753 719 933 741 800 752 1,088 765 868 811 1,172 877 1,069 985 1,016 671 874 802 1,107 748 1,027 825 1,208 828 1,155 1,030 1,250 912 1,164 1,199 1,311 957 1,219 1,338 1,360 1,005 1,317 1,420 1,429 1,078 1,452 1,527 1,407 1,210 1,590 1,630 962 331 1,104 415 1,112 415 1,116 415 1,120 415 1,125 415 1,129 415 1,165 415 1,016 671 874 802 1,023 664 943 741 1,124 744 1,071 946 1,166 828 1,080 1,115 1,227 873 1,135 1,254 1,276 921 1,233 1,336 1,345 994 1,368 1,443 1,323 1,126 1,506 1,546 Western Canada Demand Export Scenario based on Supply PGI 2008 CAPP Moderate, 2008 CAPP Pipeline Planning, 2008 CAPP Interim Update Dec 2008 87 77 87 91 111 124 125 127 129 131 132 134 136 137 139 1,030 1,126 1,126 1,094 1,134 1,134 1,176 1,176 1,184 1,157 1,307 1,230 1,254 1,220 1,454 1,261 1,320 1,273 1,604 1,280 1,384 1,326 1,697 1,402 1,594 1,510 1,851 1,507 1,709 1,637 1,998 1,639 1,919 1,716 2,105 1,725 2,052 1,927 2,150 1,812 2,064 2,099 2,214 1,860 2,121 2,240 2,265 1,910 2,222 2,325 2,336 1,986 2,359 2,435 2,348 2,151 2,532 2,572 (Thousand Cubic Metres Per Day) Supply Scenarios: PGI 2008 CAPP Moderate, 2008 CAPP Pipeline Planning, 2008 CAPP Interim Update Dec 2008 Demand Scenario with Keystone XL at 380,000 B/D Total Demand (except PADD II) Including USGC Available for PADD II, based on supply: PGI 2008 CAPP Moderate, 2008 CAPP Pipeline Planning, 2008 CAPP Interim Update Dec 2008 Demand Scenario with Keystone XL at 500,000 B/D Total (except PADD II) Including USGC Available for PADD II, based on supply: PGI 2008 CAPP Moderate, 2008 CAPP Pipeline Planning, 2008 CAPP Interim Update Dec 2008 Export Scenarios (4) 177.6 192.9 192.9 186.1 192.5 192.5 200.8 200.8 202.2 197.8 222.3 210.0 213.9 208.4 248.8 218.2 227.6 220.0 274.6 223.2 239.7 230.5 289.7 242.8 273.3 259.9 314.5 259.7 291.9 280.4 338.1 281.0 325.5 293.3 355.5 295.0 346.9 327.2 362.8 309.1 349.2 354.7 373.2 317.0 358.5 377.4 381.6 325.3 374.8 391.3 393.3 337.6 397.0 408.9 395.5 364.2 424.6 431.0 68.0 9.1 69.2 10.3 85.4 10.3 94.1 10.3 100.4 10.3 101.6 10.3 103.4 10.3 153.0 52.6 162.2 52.6 163.4 52.6 164.1 52.6 164.8 52.6 165.5 52.6 166.1 52.6 171.8 52.6 109.5 124.9 124.9 116.9 123.3 123.3 115.4 115.4 116.8 112.4 128.1 115.9 119.8 114.3 148.4 117.7 127.2 119.6 173.0 121.6 138.1 128.9 186.4 139.5 170.0 156.6 161.5 106.7 138.9 127.4 176.0 118.9 163.3 131.2 192.1 131.6 183.6 163.8 198.7 145.1 185.1 190.6 208.5 152.2 193.7 212.7 216.2 159.8 209.3 225.8 227.1 171.4 230.8 242.8 223.6 192.3 252.8 259.2 153.0 52.6 175.5 66.0 176.7 66.0 177.4 66.0 178.1 66.0 178.8 66.0 179.5 66.0 185.2 66.0 161.5 106.7 138.9 127.4 162.6 105.5 150.0 117.8 178.7 118.3 170.2 150.5 185.3 131.7 171.8 177.3 195.1 138.9 180.4 199.3 202.8 146.5 196.0 212.4 213.8 158.1 217.5 229.4 210.3 179.0 239.4 245.8 Western Canada Demand Export Scenario based on Supply PGI 2008 CAPP Moderate, 2008 CAPP Pipeline Planning, 2008 CAPP Interim Update Dec 2008 13.8 12.2 13.9 14.5 17.7 19.6 19.9 20.2 20.5 20.7 21.0 21.3 21.6 21.8 22.1 163.7 179.1 179.1 173.9 180.3 180.3 186.9 186.9 188.3 183.9 207.8 195.5 199.4 193.9 231.1 200.5 209.9 202.4 255.0 203.6 220.0 210.9 269.9 222.9 253.5 240.1 294.3 239.5 271.7 260.3 317.7 260.6 305.0 272.9 334.7 274.2 326.2 306.4 341.7 288.1 328.2 333.7 351.9 295.7 337.2 356.1 360.1 303.7 353.2 369.7 371.4 315.7 375.1 387.1 373.3 342.0 402.5 408.9 Supply Sources: (1) PGI proprietary market analysis, April 2008 (2) CAPP, Crude Oil Forecast, Markets and Pipeline Expansions, June 2008 (3) CAPP, Interium Update, 2008-2020 Western Crude Oil Forecast, December 11, 2008 (4) "Export" from Western Canada includes shipments for Ontario Table 7 Western Canadian Heavy Crude Supply & Disposition Scenarios .