Canada: Oh Canada! Significant Developments in Canadian Energy – December 2010

Oil Sands News

1. Suncor and Total have announced the signing of several agreements to join forces in the development of the Fort Hills, Joslyn and Voyageur projects. Interests in these projects will be pooled, with the operator of each holding 51% and the non‐operator holding 49%. The companies anticipate Fort Hills and Voyageur coming online in early 2016, while Joslyn is projected to produce 100,000 bpd of bitumen by 2017.

1. Laricina Energy recently applied for permission from regulators to expand its oil sands pilot project at Saleski in northern Alberta. The Saleski Project expansion is expected to increase bitumen production by 10,700 bpd, in addition to Saleski's current figure of 1,800 bpd, to raise total production to 12,500 bpd of bitumen. The company projects the project to be online in late 2013. With a number of further expansions, the company anticipates an ultimate capacity of more than 270,000 bpd of bitumen.

1. Connacher announced a December production total of 14,300 bpd of bitumen from its projects at Algar and Pod One. This production total from the last month of 2010 is a large improvement over its 2010 production average of 8,250 bpd of bitumen.

1. Suncor announced that it averaged approximately 325,000 bpd of bitumen production during November. The company's year‐to‐date oil sands production average is approximately 279,000 bpd of bitumen.

1. Enbridge has announced it plans to spend approximately $200 million to expand its Athabasca Pipeline to maximum capacity of nearly 570,000 bpd of crude oil. The Athabasca Pipeline transports product from oil sands projects to the mainline hub at Hardisty, Alberta. MEG Energy has begun horizontal drilling at Phase 2B of its steam assisted gravity drainage (SAGD) project, Christina Lake. The company targets a production capacity of 260,000 bpd of bitumen by 2020, and production totals of approximately 25,000 to 27,000 bpd of bitumen for 2011.

East Coast News

2. The Canada‐Newfoundland Offshore Petroleum Board has awarded interests in four new licences to Statoil, including one Significant Discovery Licence (SDL) and three Exploration Licences (ELs). The SDL is an extension of Statoil's existing Mizzen licence held by Statoil and Husky, for which Statoil is operator with a 65% interest. The ELs include a 75% interest in the Flemish Pass Basin, with Repsol as partner, a 50% interest in the Jeanne d'Arc Basin, and a 65% interest near the Mizzen SDL, both with Husky as partner.

3. Shoal Point Energy raised additional funds to increase its interest in a Newfoundland permit shared with Canadian Imperial Venture (CIVC), pursuant to a farmout agreement made in August of 2010. Following completion of the well, Shoal Point will have an 80.75% interest and CIVC 19.25%. The company expects to commence drilling shortly.

West Coast News

4. KM LNG Operating General Partnership filed a license application with the National Energy Board (NEB) to export liquefied natural gas (LNG) from the planned Kitimat LNG terminal at Bish Cove, British Columbia. The Partnership seeks to export as much as 10 million metric tonnes (468 bcf) of LNG per year over 20 years. Recently, the members of the Haisla Nation voted in favour of a lease of reserve lands needed to build the terminal. Federal and provincial environmental authorizations have been issued.

5. In mid‐December, TransCanada started shipping shale gas in its Groundbirch pipeline. This line runs from the Montney region in northeastern British Columbia into Alberta. The pipeline is reported to have shipper commitments of 1.6 bcf from five main customers.

Canadian Arctic News

6. The Mackenzie Gas Project received regulatory approval from the NEB on December 16, 2010. The next major step will be to work with the federal government toward developing a workable fiscal framework.

A new study conducted by the Conference Board of Canada noted that the northern parts of the Canadian territories, onshore and offshore, have an estimated potential 3.29 trillion cubic metres of gas, with an additional estimated 196 billion cubic metres in the southern Yukon and Northwest Territories.

Alternative Energy News

7. 8. SkyPower hired Ontario‐based Canadian Solar Solutions for engineering, procurement and construction of two projects totalling 18.5MW to be built in Napanee 7. and Thunder Bay 8., Ontario. The projects, which are expected to be completed in mid‐2011 and produce about 20m kWh a year over 20 years, will use nearly 85,000 mono‐ and polycrystalline panels. The Thunder Bay project is to be built on land near the Thunder Bay International Airport runways, labelling it the first "solar‐powered" airport in Canada.

9. Greengate Power and Capital Power have entered into a joint venture agreement to construct and operate the 150MW wind farm Halkirk I, 275 km north of Calgary, Alberta. Greengate will lead project development while Capital Power will manage construction and operation. The project, which is expected to commence commercial operation in the next year, has been granted all the necessary provincial permits. The wind resource is estimated to be sufficient to allow a second 150MW wind farm at the site. This possible project, already named Halkirk II, will be dependant on availability of financing, provincial demand for power, and long‐term power supply agreements.

The largest renewable energy developer in the U.S., NextEra, purchased 4 solar PV projects from First Solar in Ontario. The projects will have a combined capacity of 40MW. All of the power generated from the projects will be sold to the Ontario Power Authority under long‐term contracts.

On the Horizon

10. South African exploration and production company Sasol has announced that it will pay $1.05 billion for half of Talisman's Farrell Creek shale gas assets, and that it is considering the construction of a gas‐to‐liquids (GTL) plant in Canada.

A recent American Petroleum Institute report, "The State of American Energy," recommends that the U.S. government approve pipeline and refining projects to support the Canadian oil sands, stating that the oil sands are important to energy security and demand in the U.S. Such projects would include the project currently proposed by TransCanada, which seeks approval for the U.S. segment of its proposed Keystone XL pipeline, which would transport crude from Hardisty, Alberta to the Gulf Coast.

ABBREVIATIONS

In this newsletter, all dollar amounts are Canadian dollars unless otherwise stated. We have also used the following abbreviations: bpd ‐ barrels per day; mmcfpd ‐ million cubic feet per day; bcfpd ‐ billion cubic feet per day; tcf ‐ trillion cubic feet; bbl ‐ barrel; mbbl ‐ thousand barrels; mmbbl ‐ million barrels; bbbl ‐ billion barrels; boe ‐ barrels of oil equivalent; MW – megawatts; kV – kilovolt; km – kilometre.

About Fraser Milner Casgrain LLP (FMC)

FMC is one of Canada's leading business and litigation law firms with more than 500 lawyers in six full-service offices located in the country's key business centres. We focus on providing outstanding service and value to our clients, and we strive to excel as a workplace of choice for our people. Regardless of where you choose to do business in Canada, our strong team of professionals possess knowledge and expertise on regional, national and cross-border matters. FMC's well-earned reputation for consistently delivering the highest quality legal services and counsel to our clients is complemented by an ongoing commitment to diversity and inclusion to broaden our insight and perspective on our clients' needs. Visit: www.fmc-law.com

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