Crude by Rail Low Cost, Low Risk Market Access James Cairns VP Petroleum & Chemicals, CN
Forward-Looking Statements Certain information included in this presentation constitutes forward-looking statements within the meaning of the United States Private Securities Litigation Reform Act of 1995 and under Canadian securities laws. CN cautions that, by their nature, these forward-looking statements involve risks, uncertainties and assumptions. The Company cautions that its assumptions may not materialize and that current economic conditions render such assumptions, although reasonable at the time they were made, subject to greater uncertainty. Such forward-looking statements are not guarantees of future performance and involve known and unknown risks, uncertainties and other factors which may cause the actual results of performance of the Company or the rail industry to be materially different from the outlook or any future results or performance implied by such statements. Important factors that could affect the above forward-looking statements include, but are not limited to, the effects of general economic and business conditions, industry competition, inflation, currency and interest rate fluctuations, changes in fuel prices, legislative and/or regulatory developments, compliance with environmental laws and regulations, actions by regulators, various events which could disrupt operations, including natural events such as severe weather, droughts, floods and earthquakes, labor negotiations and disruptions, environmental claims, uncertainties of investigations, proceedings or other types of claims and litigation, risks and liabilities arising from derailments, and other risks detailed from time to time in reports filed by CN with securities regulators in Canada and the United States. Reference should be made to Management's Discussion and Analysis in CN's annual and interim reports, Annual Information Form and Form 40-F filed with Canadian and U.S. securities regulators, available on CN's website, for a summary of major risks. CN assumes no obligation to update or revise forward-looking statements to reflect future events, changes in circumstances, or changes in beliefs, unless required by applicable Canadian securities laws. In the event CN does update any forwardlooking statement, no inference should be made that CN will make additional updates with respect to that statement, related maters, or any other forward-looking statement.
Rail Does Not Preclude Pipe
Dispatchability Ship to the market with the highest netback Purity Ship in batches, product quality stays uniform Scalability Service to match your growing needs Right of Way Existing assets Low Cost, Low Risk CapEx significantly less Security of Supply Alternate mode to market. Rail does not preclude pipe Benefits of Shipping Crude by Rail
CN Network Connects Production with Desirable Markets 5
Conventional Sweet, Conventional Heavy, Distressed high TAN/sour Oil Sands Bitumen, Dilbit and blends CN directly accesses major Canadian Oil-Producing regions Bakken, Viking, Cold Lake, Lloydminster, Athabasca, and Peace River Major capital investments on rail lines to improve access and velocity to these regions The CN Network: Unparalleled reach!
Athabasca Northern Railway (ANY) provides strategic network access to Oil Sands region Acquired in 2007 $135M invested by CN to restore and increase weight limit to 268K $9M invested to constructed 2 x 8,000 sidings, increasing line capacity $10M investment in 2012 to increase Transloading capacity at Lynton CN s Strategic Network Access to Oil Sands
CN is the only railroad with access to all 3 coasts: Pacific, Atlantic and Gulf Coast Rail direct access to Eastern Canada as well as PADD 1 East Coast of Canada provides vessel access to U.S. Eastern Seaboard and USGC Eastern Canada: we go there!
PADD II: we go there! Current primary market for Alberta crude 1.489M barrels per day of refining capacity within 50 miles of our network Connectivity to Wood River and water access
Largest refining capacity in the world Direct Access to several refineries, tank farms and barge facilities PADD III: we go there!
CN transit time from Edmonton to Vancouver is 48 hours CN s Network Connects Production with West Coast Ports
CN brings the transload to the market Fast start-up capabilities days Minimize trucking expense Minimal capital expense Use existing infrastructure Anywhere our network goes All-in-one solution Single car and car blocks Manifest service or Unit Train 10,000 BPD, approx 20 cars per day Cycle time of 15 days (2 turns per month) 33% fewer cars required for manifest service 300 cars instead of 400 for unit train $1M plus in car cost savings Time is Money
Bitumen and Condensate
Oil Sands Bitumen Why Rail, Why Now? Establish Trade in Advance of Production Spike
Peak of 50,000 BPD Moving 30,000 BPD now Diluent Volume (kbpd) 1200 1000 800 600 400 Southern Lights Rail Imports AB Production CAPP Moderate Grow th Demand 200 0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 Diluent by Rail today
Economics Pipeline vs. Rail - Bittumen Diluent Penalty Transport to AB $1.00 / bbl Pipeline Toll $1.00 / bbl $1.00 x 30/70 = $.42 / bbl Diluent 30% 70% Dilbit Pipeline Toll Bitumen $1.40 / bbl Pipeline toll $ 1.00 Bitumen conversion $.40 Diluent Penalty $. 42 Total cost per barrel $ 1.82 Separates Bitumen Need to Compare on a Apples to Apples Basis
Shipping by rail is energy efficient GHG Intensity of Freight Modes gco 2e / Tonne-kilometre CN can move one tonne of freight 197 kilometres on just one litre of fuel Sources: Air - U.S. Department of Energy, Energy Intensity Indicators in the U.S, 2004. Marine The World Resource Institute, Transportation Calculation Tool, 2008. Heavy Truck U.S. Department of Energy, Transportation Energy Data Book, 2007 assuming an average shipment weight of 9.4 tonnes/vehicle (from Transport Canada, Truck Activity in Canada A Profile, 2003.) Rail U.S. Department of Energy, Transportation Energy Data Book, 2007 and Transport Canada, Locomotive Emissions Monitoring Program, 2007. Pipeline U.S. Department of Energy National Technology Laboratory, Development of Baseline Data and Analysis of Life Cycle Greenhouse Gas Emissions of Petroleum-based Fuel, 2008. *Valid for pipelines transporting crude oil in Alberta, Saskatchewan and the U.S. Environmental Benefits of Shipping by Rail
CN is committed to serving all oil producing regions in Canada Unparalleled market reach and flexibility connecting production with demand Security of supply Dispatchability & scalability Low risk, low cost Complimentary to pipeline Infrastructure in place to ship now Conclusion