Peak Oil

Paul Wallace

Hunton Energy April 2008

Global Energy Demand

Source: The Outlook for Energy, ExxonMobil Jan 2008

Source of Energy Consumption by Sector

Heating Chemicals, Steel, Cement

Oil, gas and coal supply majority of global energy for power, transportation, and industrial use 2

Global Power Generation

Source: The Outlook for Energy, ExxonMobil Jan 2008 Power growth supplied by increased gas consumption and dirty coal plants in developing countries 3

Oil, Nat Gas and Coal Pricing

Source: Key Commodity Price and Differentials, Valero Apr 2008; Natural Gas Year in Review 2007, EIA Mar 2008; Average Weekly Coal Commodity Spot Prices, EIA Apr 2008; Canadian Oil Sands The Future of Oil in Canada, CAPP Jan 2008 $/boe* $120 $100 $80 $60 $40 Light Crude (WTI) Bitumen (Oil Sands) Nat Gas (HH) PRB Coal $20 $0 2003 2004 * Basis 6 MSCF nat gas/bbl, 2.9 bbl/ton PRB coal 2005 2006 2007 Light oil and nat gas prices increasing – coal significantly cheaper 4 2008

Liquid Fuel Sources

Source: Outlook for Liquids, ExxonMobil Jan 2007 North America liquid opportunity – heavy oil and oil shale 5

2 4 6 8

Oil Sands Energy Consumption

Source: BMO Capital Markets Conference, EnCana Sep 2007 SOR bbl stm/bbl bit 10 Natural Gas Required for Bitumen Production Gas/Bitumen MSCF/bbl 4 SOR Gas/Bit 3 2 1 0 Husky Tucker Lk Nexen Long Lk CNRL Primrose & Wolf Lk Conoco Surmont Shell Peace River Suncor Firebag EnCana FC&CL PetroCan McKay 0 *Basis 0.35 MSCF/bbl stm 15-50% of crude energy value required to produce heavy oil sands bitumen 6

Heavy Crude Conversion

Sources: GTL Products, Sasol Chevron Feb 2004; Chevron Downstream Analyst Presenation, Mar 2008; Wall Street Journal Dec 3 2007, Conoco Phillips Fact Book 2007 Diesel and Hybrid – Same MPG Vol% 160% Clean Product Yield From Heavy Crudes 140% LPG Gasoline/Naphtha Distillates Requires significant hydrogen 120% 100% Produces Byproduct coke 80% 60% 40% 20% 0% Typical Coking Refinery Chevron VRSH Technology 80% US and Europe New Diesel Vehicle Sales 60%

Europe US

40% 20% 0% 1990 1995 2000 2005 2010 2015 2020 35 MPG Req’d New refining technology required to produce high efficiency transportation fuels from heavy crudes 7

Natural Gas and Coal Sources

Source: Energy Outlook, ExxonMobil Jan 2006, Natixis Hidden Gems Conference, Rentech Inc Oct 2007

Projected LNG Growth Global Energy Reserves

GECF*

* Gas Exporting Countries Forum Large LNG component globalizes gas price – increases energy security risk 8

CO2 Emissions Reduction Options

Source: Energy Outlook ExxonMobil, Jan 2006 Capture CO2 from coal fired power plants – or replace with nat gas fired plants 9

Power Production CO2 Emissions

Source: Review of Supercritical Power Plant Technology Elsam, March 2003 CO2 kg/MWh CO2 reduced by power plant fuel switching and efficiency increasing 10

Current NGCC

USGC CO2 to EOR

Source: Moving Permian Basin Technology to the Gulf Coast: the Geologic Distribution of CO2 EOR Potential in Gulf Coast Reservoirs, Bureau of Economic Geology, UT Oct 2005

EOR CO2 pipelines Under development

Oil EOR potential – 5 billion bbls CO2 storage 3 billion tons Large USGC CO2 to EOR potential 11

Multizone Miscible CO2 Vertical Flood

Source: Geologic Sequestration of Carbon and CO2 – EOR, Advanced Resources International, Dec 2006 12

Current EOR

• •

Extended EOR/ CO2 Storage 8x CO2 3x oil

% 100%

Renewable Power Generation Dependability

Sources: Potential for Energy Efficiency, Demand Response and Onsite Renewable Energy to Meet Texas’s Growing Electricity Needs, Mar 2007; Wind Development FP&L March 2008 Power Generation Dependabilty Projected US Wind Power Growth 90% 80% 60% 40% 20% 15% 0% Wind 50% Solar Biomass, Coal, Nat Gas Large growth in wind power capacity – need backup source due to low reliability 13

Nuclear Waste and Permitting Issues

Source: ExxonMobil Energy Outlook 2007, NRG 3Q2007 Results Presentation, Nov 2007

US Nuclear Waste

Thousand Metric Tons

US Nuclear Permitting Timeline

Schedule Risk Nuclear power has significant permitting and waste disposal issues 14

Biomass

Source: Biomass as Feedstock for a Bioenergy and Bioproducts Industry: The Technical Feasibility of a Billion-Ton Annual Supply, DOE, USDA April 2005; Measuring the Merits of Corn Stover-Based Ethanol, Science Daily Jul, 2007

US Energy Supply from Biomass

% of Total US Energy Demand 20%

Key Issues

• Additional transportation fuel consumption • Limited collection infrastructure • Drying fuel consumption • Increased fertilizer demand • Lower food crop yield • Soil erosion 15% Agriculture Forest Products 10% 5% 5% 0% 3% Currently Utilized Total Available Resource Corn stover bales ready for collection Significant energy potential in domestic biomass 15

Biomass Gasification

Source: Update of Nuon Power Buggenum plant performance and fuel flexibility, June 2005; Shell Coal Gasificaiton Process for Power and Hydrogen/Chemicals, Shell Global Solutions Oct 2004; The Willem-Alexander Centrale Visit – Coal Technology and Climate Change, July 2006 Shell Gasification Process – Dry Feed System

Biomass+

To CO2 capture and H2 production

Biomass Feed System – 50 wt% co-feed

Nuon Buggenum gasification plant with biomass co-feed system Biomass commercially converted into hydrogen rich synthesis gas 16

Biofuels

Sources: CBOT April 2008; NYMEX April 2008;The Market newsletter April 2008; Agrium – Growing Across the Value Chain April 2008; World Bank April 2008; World Hunger Education Service, April 2008; GM April 2008

US Corn Use Corn Alternatives

500 lb Corn

$/Bushel $6 $4 $2 $0 2005 Corn 2008-10 $/Bushel $10 $8 $6 $4 $2 $0 $/bbl $150

Crop Price Increases

Wheat Soybeans $/Bushel $6 $4 $/Bushel $25 $20 $15 $2 $0 $10 $5 $0 2005 2008-10 2005 2008-10 Diesel

Fuel/Fertilizer Price Increases

$/Met ton $600 Ammonia $/Met ton $1,000 Phosphate $/Met ton $600 Rice 2005 Potash 2008-10 $100 $400 $400 $500 $50 $200 $200 $0 $0 $0 $0 2005 2008-10 2005 2008 2005 2008 2005 2008 Feed child for 1 year Fill SUV with Ethanol (26 gal) Biofuels – increase food prices and decrease exports volumes 17

Reduced Energy Lifestyle Changes

Source: SolCool website 2008; Pedbikeimages.org/Dan Burden 2008

Energy efficient housing

• Windows, insulation, solar air conditioning • High efficiency appliances, smart shutoff • Minimal or reusable packaging • Requires price/tax incentives

Work from home

• Utilize Internet connectivity • Eliminate routine commute • Eliminate redundant energy and materials use • Requires employer incentives

Mixed use communities

• Walk to work and services • Multi-story residential footprint • Reverse suburban sprawl • Requires incentives for urban redevelopment SolCool solar powered air conditioning system Potential for reduced consumption through lifestyle changes Mixed use community 18

Path Forward

Alternative Issues 1) Lifestyle Change Redevelopment costs 2) Wind Reliability 3) Biomass 4) Heavy Oil 5) Coal 6) Nuclear 7) Biofuels 8) Light Oil 9) LNG Low net fuel yield Low net fuel yield, CO2, emissions Low net energy yield, CO2, emissions Toxic waste, security Food shortages Availability, security Availability, security Technology Opportunity Lower energy consumption devices, infrastructure Energy storage + demand management Efficient collection and conversion CO2 capture, reduced emissions and improved yields CO2 capture, reduced emissions and improved yields Eliminate toxic wastes Increase yields for food and fuel Switch to alternatives Switch to alternatives 19