Building Our Future and Protecting Our Coast: Why Building the World's Greenest Refinery is the Key to Unlocking Asian Markets

The Empire Club Presents

Samer Salameh,Executive Chairman, Pacific Future Energy:

Building Our Future And Protecting Our Coast: Why Building The World’s Greenest Refinery Is The Key To Unlocking Asian Markets

January 26, 2015

Head Table:

Distinguished Guest Speaker:

Mr. Samer Salameh, Executive Chairman, Pacific Future Energy

Guests:

Mr. Alfred Apps, counsel,

Wildeboer Dellelce LLP ; Former President, Empire Club of Canada and the Liberal Party of Canada

Mr. Noble Chummar, Partner, Cassels Brock & Blackwell LLP; Past President, Empire Club of Canada

Mr. Robert Delamar, CEO, Pacific Future Energy Corporation Mr. Dennis Fotinos, CEO, Enwave Energy Corporation

Mr. Scott McWilliams, Global Business Management Student, Centennial College

Ms. M. J. Perry, Vice President and Owner, Mr. Discount; Director, Empire Club of Canada

Ms. Verity Sylvester, Director, Teema Strategic Search; Past President, Empire Club of Canada

Mr. Doug Turnbull, Former Vice-Chair, TD Securities, Co-Chair of the Government of Canada’s Joint Task Force for the Activation of First Nations Economies, Chair of the Board of The Toronto Financial Services Alliance and Director MetroLinx

Ms. Andrea Wood, Senior Vice President, Legal Services, Telus; President, Empire Club of Canada

Welcome Address by Andrea Wood, President, Empire Club of Canada

As you all know, Canada is blessed with vast reserves of oil, but we have a problem: 97% of that oil is sold to one customer, the United States, and we are seeing declining demand and lower prices from that one customer.

Samer Salameh believes that the answer to this problem is expanding access for Canadian oil products to new markets such as Asia. He will tell us about how he plans to help to solve this problem through Pacific Future Energy. Pacific Future Energy intends to build a near net-zero carbon emissions refinery, on the coast in British Columbia.

Samer is the Executive Chair of Pacific Future Energy. In addition, he leads the telecom practice and new business development at Grupo Salinas, a large industrial conglomerate operating in 11 countries in the Americas. He managed the development and deployment of complex infrastructure projects for some of the world’s leading investors, including Carlos Slim and Ricardo Salinas.

Ladies and gentlemen, please, join me in welcoming our speaker today, Samer Salameh. Samer will be pleased to answer your questions following his remarks.

Samer Salameh

Thank you, Andrea. So, good afternoon, and, thank you, for joining us today.

The first question that people ask me when we start talking about this project of ours is, “Why are you involved?” Why am I personally involved in this thing? What is a Catholic Lebanese guy, who grew up in Paris, who has spent the last 30 years as an American citizen in the US and Latin America, working and making billions of dollars for people like Carlos Slim and Ricardo Salinas, who, as you probably know, do not need additional billions, but yet I helped them make a few? What am I doing here? And why am I involved in this project, and how did it come to be? It is more anecdote before I get into the presentation.

So, this journey that ended here—or this is a step on the way—started about 31 years ago when I first came from Paris to the US. The flight—I had $200 and a one-way ticket. This is how I arrived to New York. That was in March, 1984. The plane I took from Paris could not make it all the way through; it was a charter flight, so, actually, it landed in Gander, here, in Canada, to refuel and then continue. In the refueling stop, I got off the plane, and I saw ice cream, which is something I had never had before. I was 19 years old. I spent $3 on my first ice cream, so, when I arrived in New York, I had $197. In retrospect, I think I should have stayed in Gander and stayed in Canada, instead of taking this entire journey through New York, Mexico, Columbia, Peru, back to New York, and now back to Canada. I should have just stayed in Gander, stayed in Canada, but, hey, I am here today.

How did this project come to be? Actually, about 14 years ago, this young lawyer—I have been trying to take the law out of his mind for the last 14 years—Bob Delamar, who is my partner in this venture, started working with me in a company in Silicon Valley. I was the CEO of the company; he was one of the young people there, and we have been friends for the last 14 years. For that entire time, he has been trying to convince me to come and do something in Canada.

About 18 months ago, we were skiing in Whistler, and, of course, he picked the perfect day, not like today: Beautiful weather, sunny. And he actually told me it is like that every day. Not sure that is quite true. As I got off the plane this morning, minus –12◦C was not exactly what I had in mind. But we started talking about doing something in Canada because I had come to the conclusion that this is really where—now, that I just turned 50—I want to spend the rest of my life, in Canada. There is a long story why that is the case.

But, actually, today was very funny for me, interesting, when you guys raised the glass to The Queen. That is the first time I did that and, hopefully, not the last time, as I am applying for Canadian citizenship.

But, the project came to be because we were sitting on the slopes talking to a lot of people from B.C. about the problem that Canada has and the fact that very little is being done by private enterprise to solve the problem. What is the problem? I will let the words of Finance Minister Joe Oliver summarize it. I will read it; although, I am sure you can read it on your own—this is something he said last week in the press: “It is a matter of urgent national interest that we move our oil to tidewater because our only customer, the US, has found vast amounts of shale oil and gas and will need us less and less. If we do not access new markets, our resources will be stranded, and a huge opportunity will be lost.” We decided to put these words out there because this is exactly what we were discussing 18 months ago.

I was frankly surprised, as a non-Canadian, that not everybody in this country is trying to do something about this. You guys have seen what the impact of the drop of oil has done to the Alberta economy and to the general economy in the last few months just by a small drop in oil prices. Imagine if this is not a one-year or a six-month blip on the radar screen but a continuous event. Imagine what impact that has on the Canadian economy. This is exactly the problem we set out to solve a few months ago, 18 months ago.

So, we created this company. We put in our own money in it. It has been a very interesting process, and here we are today. The issue here that Minister Oliver is talking about is one of the issues, and, actually, his comment was that the supply of oil to the U.S. would decline. There was a counter-argument, immediately, that is not true: It will, actually, stay stable. Whether is stays stable or declines, that is not the issue, in my opinion, in our opinion. The issue here is somewhat different. The producers in Alberta are trying to actually double production from two million barrels a day in Alberta to four million barrels. How do you actually get to four million from two, when the consensus is either it is going to stay flat or decline? So, that is the first problem.

But, far worse than that is the second problem. Today, why are we, as Canadians—if I may put myself in the collective we—subsidizing the U.S.? Do you guys realize that in 2014 alone, in Canadian currency, $15.9 billion went from Canada to subsidize U.S. refiners? These are actual numbers. This number at the current trend of exports, by 2020, will be $24 billion. How did we get to that number? It is very simple: That graph there is actually tracking the difference, historical difference, for the last five years, between WTI prices, so Western Texas Intermediary, which is the main index in the US, and WCS, the Canadian price oil is sold at. That is a $30 price difference between what Canada sells its oil at on the international market—and international in this case means the US because guess what? Ninety-seven percent of the oil produced from this country is going to one country: It is called the U.S., so “international,” in this case, is the U.S.

We have been selling at $30 below market prices one of the biggest commodities in this country to the US refiners. And who is making the dollars? The U.S., so, rising.

This is just from press releases from some of the producers Phillips, Shell, Exxon. They have just announced, even with declining oil prices, some of the best quarterly results ever, and the reason which is credited is refining profits in the U.S. from Canadian oil. This is what has been going on. Today—I checked this morning, and it might have changed by now, so do not quote me—WTI prices this morning was $45. So, if you buy it in the U.S. at CAD $45 today, the price is about $36. It is trading about $12 to $13 less, even today. This is the problem.

And this is a small summary of how that happens. You see that star there? This is Alberta’s production. All the pipelines are going to one destination, which is the U.S. refiners, where again, 97% of the oil is going. And 1%–3%, depending on the quarter, actually, makes its way from the south, from Texas, to Europe, to Spain where it is refined at a margin. This is how much money is left on the table here, okay. So, we are actually able to take oil from Canada; take it through a pipeline; get it on trains; get it off of trains; get it into ships; ship it to Spain; refine it; and still make a profit. And it is only going to get worse because, as Mr. Oliver said, the U.S. Shell production is only increasing. They are up to about 10 million barrels a day. Even with the declining oil prices right now—they are expected to be flat for a while, the production, and not increase as was expected, but it would pick up again later next year. So, they are supposed to go to 12–13 million barrels a day.

As the US is taking less and less oil, and the share of Canada’s oil from that is, hopefully, staying flat, if not declining, then, where do we go from here? How do we increase production, and how do we recapture—which is the most important piece here, and that has been left to the dialogue—$24 billion a year in money, literally, left on the table? How do we recapture that? And the last point is this is not going to go away. This is a quote from Wood Mackenzie: “Where this price arbitrage has been at $30 for the last five years, it is expected to remain roughly at $18 to $25 per barrel for the foreseeable future.” A big problem. I am not Canadian yet, and I am worried. You should be. For the last six years, we have seen this battle going on where Enbridge has tried to build a pipeline because the solution is very simple. There is a part of the world where the demand for oil is actually increasing. In Europe, the demand for oil is reducing because of conservation measures they have taken, including reliance on gas, et cetera, so, Europe is not the market. And when Libya comes back online, they are going to take less and less. Going east is not going to do anything. Going north, there is the North Pole; going south, there is the US. Where are you going to go? West. Guess what? From Prince Rupert, which is at the end of that little red line there—actually, that is Kitimat. If you go straight up, that is Prince Rupert from where it is ten days to Tokyo. It is literally the closest point on the planet to Tokyo by ship—Prince Rupert. To Shanghai, it is 13 days. Asia. This is where the growth is. There is a consensus on that, so, let us step back here. Alberta has the second-largest oil reserve in the world. Asia is the only market that is growing. How do we get from point A to point B?

So, the first efforts to date has been to build a pipeline. The problem with a pipeline is the way it was done, first of all. It was done without proper consultation with First Nations. That is an issue. And, the second issue is the value proposition. We are going to take oil from Alberta, take it to the shore and ship it, so this is 220 VLCCs, 2 million–barrel ships out of Kitimat. The first thing Bob and I did when we started getting into this thing was we rented a helicopter, and we flew over it. It is a small channel. You are going to take 220 VLCCs through that, and then you are going to take it through the Hecate Strait, so when you see the end of that red line there, that is the fourth most dangerous body of water on the face of the planet. We are going to take 220 VLCCs through that and ship it to Asia where— and if, God forbid, one of those ships goes down, with that type of oil, there are arguments whether it floats or it sinks. Either way, it is really bad news. So, when you go to the local communities and say, “We are going to take this oil out of your waters and ship it to Asia, and you will get no compensation for it to speak of, and if there is a catastrophe you get to clean it up”—it is a difficult value proposition to sell. I am a good salesman, but even I could not sell that. So, lo and behold, six years in the making, they are not going anywhere, and that pipeline is now stuck in the mud—pun intended because, again, they have not managed to catch social license. After the recent William decision by the Supreme Court, now, First Nations, actually have them blocked. The key here is they do not have social license. They did not have buy-in by the First Nations group.

If the pipeline is not the way to do it, so what do you do? So, there is our solution. We set out to build the first NZNC. What does that stand for? Near Zero Net Carbon gas emission refinery on the coast of B.C. So, the first question people asked us is Why? The obvious answer is, “Well, it is sitting on a train line, so whether a pipeline is built or not, we do not need a pipeline; we can feed it by train.” It is not ideal; we would prefer a pipeline as long as that pipeline goes right into our refinery. Okay, so if the pipeline is ever built, in fact this helps the pipeline discussion, because if we are able to get a refinery built, then it becomes more palatable to have the pipeline built into the refinery, and now you are shipping not crude, and certainly not the type of crude coming out of Alberta, but you are shipping refined product: Gasoline, diesel, et cetera. God forbid, should anything happen to that—within a few weeks that actually evaporates. As you saw in the BP thing, in the Gulf of Mexico, a huge amount of oil escaped, but it was light crude. Most of it actually just evaporates. This is what happened to that. So, it changes completely the matter of if there is a problem. But, most importantly, now you are able to create jobs in B.C. You are able to help the local economy, and it changes the equation totally. Now, you are able to do the right thing for the local economy, that is, create jobs and services in the local economy.

Now, the key to that is the buy-in from the social community, from the First Nations, from the environmental groups. So, how do you do that? Why is this a green refinery? The first part of it is that about 40% of the reduction in gas emission comes from the fact that we are firing the refinery with gas, natural gas, which is something very abundant in that part of B.C. Just by doing that, we are able to reduce about 40% of the gas emissions. Then, the rest of it is you are able to capture most of the gas that is emitted, and you are able to recycle it. We can get into a lot questions into how we do that—under NDAs, of course. But the key point here is that compared to a normal refinery, which let us say issues at an index of 100, this will issue 7% of the gas emissions of a normal refinery—7% compared to a normal refinery. Not only is this key to what we are doing in B.C. This becomes the blueprint for every refinery going forward. There are 850 refineries in the world. They represent the second-highest source of gas emissions on the face of the planet. Refineries able to do this change forever the face of refining around the world. The value of this project goes well beyond just what we are doing in B.C.

The second piece of good news is that we actually did a lot of polling, and this was before describing what we are doing and who we are and that this is a green refinery. We asked people in BC, “Do you support a refinery in B.C.? It will create jobs, value-added services at home.” The response was yes. B.C. is open for business. Even the Green MLA from B.C. is in favour of a refinery because the alternative is to ship crude, which nobody wants. So, we have support from the community, in general.

But the key thing is that we meet the five conditions set out by Premier Christy Clark. These are the five conditions that she set out, before she got elected, in terms of what has to be done for our project to be supported by B.C. We meet all five conditions and—in bold—a refinery is the only solution to meet those conditions. A refinery is the only way to make sure that B.C. receives a fair share of the fiscal and economic benefit from a project like this. We meet all the legal requirements from Aboriginal entitlement, so we will talk about that in a second. And, obviously, by shipping refined product versus crude, we reduce dramatically the impact of a spill.

The last piece of the pule is the First Nations. We set out a year and a half ago—even before we officially formed the company—to engage with consultation with First Nations. As you can see from the team we have assembled, our first hire after we created the company was Jeffrey Copenace. Jeffrey was the lead negotiator on the Kelowna Accord that was set up by Prime Minister Paul Martin a few years ago—one of the most recognized and trusted figure in First Nations affairs. He was the chief of staff for Shawn Atleo, who was—up to a few months ago—the National Chief of the Assembly of First Nations. We were able to attract both Jeffrey Copenace, who was the lead negotiator with First Nations, to our team, and we were blessed to have people like Shawn Atleo and Ovide Mercredi, who were both National Chiefs of the First Nations, and, obviously, people on the advisory board. I will fast forward because I am running a bit out of time.

The key thing here is that when engaged with First Nations, you have to engage them as an order of government. You have to come to them and start with not, “Hey, I’m going to do my project, and here are some trinkets,” but rather, “Are you interested in a long-term, multigenerational development project that would create education and teaching, jobs for your community for generations to come? Are you interested in such a project?” And the ones who indicate they are interested are the ones with whom you engage and say, “These are the parameters of the project. Which land is mutually convenient for both parties?” It is a long-term process. You cannot fast forward those things; they do not work on the same timeline that we normally work with in a boardroom, so, it takes time.

We have been at this for 18 months, and now we are very lucky that we are getting very close on two sides to finalize discussions, so, it is bearing fruit.

We have actually assembled a team of people on both sides of the aisle, people like Stockwell Day, Mark Marissen, Jamie Caroll. You can see the profiles on our website. Truly a unique assembly of key leaders, both at the B.C. level and at the federal level on both sides of the aisle and on the First Nations levels. And guess what? This is an amazing business. Very rarely do you get a chance to actually build, do the right thing, solve so many problems and make so much money doing so. But yet, it is.

So, if you look at the current oil prices, WTI at $45 sold in the US, in Canada $36. The first tranche of the refinery is 200,000 barrels. At that tranche, this project will create $1.7 billion a year, every year, for 75 to 100 years. That is right. I will give you an example. The refinery that is feeding B.C. today was built by Chevron in 1917. These things do not die; they go on forever—this thing that has been refueling oil in B.C. for 100 years; in fact, the last refinery built in North America, in the U.S. and Canada, was built about 40 years ago. Most refineries were built in the 1950s. This is why they produce so much gas emissions. This is why they are so unproductive, and some of them are going out of business, while the ones in the US are making huge profits because of the arbitrage with Canadian oil. So, it is a very good business.

And where are we today? Under full disclosure, we cannot talk about our financing, because we are in the middle of it. We started last Monday our roadshow. We are right now in the phase where we are raising $25 million; that would take us through the permitting process. It will also take about two years to finish the permitting—two to three years—and then we go into the actual construction of the project, which would be mainly debt. So, this is where we are today. A great project. We are very excited. We have assembled a great team, and, again, rarely do you have a chance to do something that feels so good and yet is such a good project. Thank you so much.

Questions & Answers

Q: What will the impact of the LNG be? It is going into the same area of your operations?

SS: Great question. Thank you. So, the key thing here is this is one of the reasons: 50% roughly of the savings in gas emissions is from firing the refinery with gas. So, we actually are a consumer of gas coming from the area. So, the sites we are looking at have gas pipelines going in, so we do not compete with LNG per se, but we, actually, are a customer of the gas coming in from the area into our refinery.

And we actually emit some LNG as well, so we have a small production of LNG ourselves, but it is miniscule. Most of what we do is diesel and jet fuel and gas, so no direct impact. .Some of the projects in B.C and LNG are now going through, finally. That is great. It helps the general area, and the general economy we are in, so, positive for us all around.

Q: Keystone, of course, is top of mind for many Canadians. Tell me, how will your project be affected by Keystone? Approval or disapproval?

SS: That is right. So, again, another good question. Keystone does not affect us one way or another. Roughly, it is 800,000 barrels that are scheduled to go through Keystone XL—that was six years ago. In the meantime, of course, it has found its way to the refineries, so most of that oil today is going down there anyway by train, so, if XL is approved by the time it is built, our expectation and the industry expectation is that it is not going to really increase production from Alberta; rather, it is going to reduce the cost by shifting it back from rail to a pipeline rather than actually increase production.

In any case, the other problem that Canada has is that refining capacity in the U.S. is full. Refiners in the

U.S. are barely able to keep with all the oil coming in from Shell. And, now, with what is happening in Mexico over the next few years, the big issue is that, even if they are able to produce more oil, they are going to produce three to four million more barrels a day in the U.S. in the next three to four years. By the time there is expanded current capacity, they will not able to handle the volume, let alone three, four years from now when all that comes online. Long answer, but the short of it is it does not really affect us at all.

Q: Just curious: Is the near net-zero emission technology proven at production scale for refineries?

SS: Great questions. Yes, but not this way. This goes back to something I said earlier. There has not been a refinery built in the US and Canada for 40 years. Imagine if you had a 40-year-old car, what kind of technology that is compared to a Tesla today. This is the difference we are talking about between a Tesla and an Oldsmobile built in 1960 or 1970. What they have done for the last few years is they have done expansions on current refineries where the emission-capturing technology in the storage has been deployed. Firing with gas has been done, but to build a Greenfield refinery from scratch with both hands, no, that has not been done. This will be the first, and that is the key point.

There is no technology risk here; it is not like, oh, you are going to spend $11 billion, and it does not work. No, it will work. All the pieces already fit together and work, but no one has done it quite this way, ever, and this is a key point.

Once you are able to go back to the industry and say, “Hey, the second-highest producing industry in the world in gas emissions—7% of global carbon emissions in the world is from refining, and we reduced that by 90%,” guess what? It puts a lot of pressure worldwide to do this, and that probably has more impact on global gas emissions, carbon emissions, than anything else being done in the world today—our little project. Again, this is why this is a feel-good project. When you come into our office at five o’clock in the morning, we are not there, but we are connected on Skype, and we are talking to each other. It is a vibrant place because rarely do you get so excited about something you are doing.

Q: With regards to the oil that is coming from the oil sands, how would the carbon emissions affect how its carbon components with other extractions be less carbon effective with the extraction part?

SS: We are not in the producing phase, so our point is that oil is being produced today, anyway, but, certainly, if you take it end to end, from extraction to refining, my guess is it would actually way more than make up for it compared to traditional producing—way more.

Incidentally, when you look at electric cars, if the electric car is filled up from your house outlet and your electric producer is generating electricity from a coal-powered plant, that electric car is producing as much carbon emissions as a regular petrol car, so, we have to look at the entire value chain, and your point if very well taken. So, we certainly reduce the impact of the oil sands emissions, for sure. And we actually hope that what we are doing moves upstream to the production and started using that as well. But, let us stick with the battle we have at hand right now. But, it certainly has a big impact, yes.

Q: How do you see the governments of Alberta and B.C. resolving their economic-sharing issues?

SS: I certainly would not pretend to address that on their behalf, but I think what we have seen with Premier Prentice in the last few months are improvements in discussions. And the key thing here is a project like this addresses the five conditions, so, by definition, our project, hopefully, will eliminate the core issue. But, again, I do not want to address issues at the government level. But, I think this will help the discussion greatly.

Q: Would you be able to capture that discount from a refinery in Canada?

SS: We hope so. The economics of our business are not contingent on their discount, but it is here to stay for a while. So, as long as it stays, it simply makes our economics so much better. The economics I mentioned before, $1.7 billion, that includes some of that, but even if that goes away, it is still a very profitable business. But, unfortunately, we do not see that discount going away because 200,000 barrels a day is a very small quantity to change the scales right now. But we do hope to go to one million barrels.

If everything goes well, then based on the demand on the other side of the Pacific, if we get the full million barrels, then that will certainly start shifting that, reducing the margin for sure, the arbitrage.

Q: If the facility costs in the hundreds of billions to build and can produce value in billions, how come no one else has done it before you?

SS: I wish I had the answer to that. It cost $11 billion, so this is not for the faint of heart, okay. This is something that has taken us decades of experience to actually take on. But, we will pay back the $11 billion in less than ten years. This is a hugely profitable business, and it solves a fundamental problem, one that is glaring, one that is not—it is not like we have uncovered something that nobody else sees. Everybody has been talking about this forever. These profit margins from the U.S., everybody knows about them. The disparity between WCS and WTI is there. This is public data. I wish we could say we are such amazing visionaries that we found something that nobody else before us found. Everybody sees the problem, but we decided to do something about it.

Why has no one else done something about it before? I do not know. That is a good question. People get scared sometimes, and you know what? There is something about us. We do not get scared. We do not worry about failure because we actually believe that this is how you learn. And, before you get to a point where you can do something like this, you have to do a lot of mistakes before you get here. One mistake: I did not get off the plane 30 years ago in Gander, but, since then I have done a few, but this is where we are today.

Q: How long is the expansion of the market? You are looking only for Asian. How about Latin America, for example, and Brazil? Do you have any views about expansion in another market—or only in Asia?

SS: You mean to sell the end product into Brazil?

Q: Yes, or in South America.

SS: No, we do not see Brazil or Latin America as a national market for us because one of the key points of where we are is this one of the closest geographic points on the planet to Asia—ten to Tokyo, 13 to Shanghai. Once you go from Prince Rupert down to Brazil, it is a long way to go, so we lose the entire value advantage from a shipping perspective. But, another very interesting market for us could be the U.S. But, that is not a part of our business plan. Our business plan is focused on Asia. We are already seeing a lot of interest, actually, to shipping some of the product down to the U.S., so that could happen, especially, as the U.S. is getting into a shortage of refining. The interesting thing that is happening in the U.S. dynamics is now they are increasing their production dramatically. Refining is not able to keep up with it, and the type of crude they are issuing from the U.S. is light crude. We do heavy crude from Alberta, so I will not get into the impact of that here, but there is a mismatch between what is being produced and the demand. There is potentially a big demand in the U.S., but that would be the icing on the cake. That would be just even better for our margins, if it happens. But, no, Brazil or Mexico. What is happening now with the changes in the law last year is good for Mexico, and I think that will equilibrate the supply and demand of refined product in Mexico. Let us see what happens in Venezuela. That is a very big question, about what happens there for the next few years. Brazil, I think, is too far away, but, I might be wrong.

Q: Is there a fatal flaw or a problem with actually just building a refinery at the source in Alberta?

SS: Great question. We have actually done a lot of data on that, and what we have found—and this is based on evidence that we have found in the ground—is if you build the same refinery, it will cost us $11 billion in B.C.; it will cost probably $15 to 16 billion and add another year or two of construction to build it in Alberta. The reason for that is threefold:

There is a huge labour shortage in Alberta, so you will not even get the labour if you want it, and this is one of the reasons why most of the operating projects that happen in Alberta for the last few years have gone into over-budgeting and have run two, three years over their production, construction timeline. So, you do not have the labour to build it in Alberta.

The key thing what we are doing here is we are actually building the refinery in huge modules. Imagine, if you will, a very big LEGO set. You are building it in Asia. We are in discussion with a few manufacturers today, and then you take it by boat to shore, and you take it right off the boat, and you barge it up, if you have to, a few kilometers, and you assemble it. That is how you save money on CapEx, and this is what happened in Alberta. To do the same project in Alberta, you have to take it probably into the U.S.— take it through roads, where these things do not fit so that reduces the volume of your pieces; take it through Indiana; take it up through Alberta. By the time you do that, you added two, three years of time, and you reduced your kinds of scale because your modules are smaller. It has been proven that it is not the optimal way to do it, all the way around.

Besides, this is an export facility, so when you do a refinery, you are close to the source or to the market. We are close to the market, ten days by boat to Tokyo. That is considered very close, so this is an export refinery built basically on water, so you can save a huge amount on CapEx and on deployment cost. This is why we will not do it in Alberta.

Q: I am from China, and you just mentioned Shanghai, so I have a question: Oil is controlled by the state- owned company in China, so would entry to a Chinese market reduce the oil price?

SS: Do you mean whether entry into a Chinese market would reduce the oil price in China?

Q: Yes. Is it possible?

SS: No. The volume we are talking about here is a drop in the bucket for the Chinese market. I do not know the number—maybe, Bob Delamar, do you know how much the daily refining in China is?

BD: Yes, two million barrels per day of refined product. So, we are only 10%.

SS: So, no, we are too small to change the dynamics in China. Hopefully, one day. That is something to aspire to, but not today. We are too small.

BD: What is the most interesting thing that you have discovered about Canada since your time here, besides your wonderful friends?

SS: We have been colleagues for 14 years, so one of the things I have been trying to beat out of him for 14 years is being a lawyer and becoming more of a businessman. I am almost there, almost there. And one of the things he keeps correcting me on is I keep saying “I” versus “we,” so he keeps telling me, “You cannot say ‘I’ in Canada; it’s a ‘we’ society.” Eventually, in a few years, I will get there. I am working on it.

But it is a very different—you know, it is shocking. I am a U.S. citizen; I have been working in the U.S. for 20 years, 30 years. God, I have just aged myself. In any case, it is really surprising—and you guys know this—that when you go over the 49th parallel to get into Canada, the business ethics on how things are done changes so dramatically, and this was surprising to me. So, it is very exciting to be here.

Thank you so much.

Note of Appreciation by Alfred Apps, Counsel, Wildeboer Dellelce LLP; Former President, Liberal Party of Canada; Past President, Empire Club of Canada

The Empire Club has been around for a long time, and it is kind of a precious little institution. I can say that because I am a past president of the Club, but, they actually call these thank you remarks the appreciation. I think it is interesting just looking at the last couple of weeks and watching the State of the Union address and the robust recovery of the American economy and the panic that has descended on Canadian markets because of the crisis in oil markets, the Bank of Canada, et cetera. It seems to me that the appreciation that is appropriate is an appreciation for another great idea that takes Canada from what we have so often been, and described ourselves as “hewers of wood,” “drawers of water”—more lately, “chippers of mineral and stone,” and “pumpers of crude” or “sifters of crude,” I guess in terms of the oil sands, and to come up with a big idea that is, at one level, so self-evidently exciting and, at another level, once you dig deep and do the diligence, you understand that refining crude has maintained its margins even when the prices have fluctuated wildly.

So, I think that the appreciation I want to express is the appreciation to you for being here today and in a town that is anything but an oil and gas town—appreciation to the team for the vision. You said earlier, you know, it is an obvious idea, but I think the vision is more about the how. It is about how you are doing this relative to First Nations communities, environmental issues, the Green Party, et cetera. I think the how is where you are showing some real leadership, and the appreciation, on behalf of all of us, is because these are the things that are ultimately transformative and good for our quality of life and good for the country, so, thank you very much.

Concluding Remarks by Andrea Wood

Thanks, Alfred. I would like to extend a few thank you’s as well. I would like to thank our very generous sponsors, Wildeboer Dellelce for sponsoring our event today. Thank you, Enwave Energy Corporation, for sponsoring our VIP reception, and Braxted Group Inc., for sponsoring our student table this afternoon. I would also like to thank the National Post as our print media sponsor. This meeting will be broadcast on Rogers TV.

And you can follow us on Twitter at @Empire_Club, and visit us online at www.empireclub.org.

Thank you all for coming. I appreciate that you are joining us today. Please, come again soon. There is a brochure on all of your tables describing some of the exciting upcoming events. We look forward to seeing you again. This meeting is now adjourned. Thank you.