Eadie Group - Heavy Oil Upgrading Technology /Used Oil Recycling Technology

Detailed Revenue Analysis

By providing a visbreaker refinery type of operation in the field at battery sites there are a number of factors that come into play depending upon the site conditions and/or location. Each location will require a separate assessment of the overall benefit provided by the EADIEMAC plant.

The following is a list of factors to be considered that all go into the actual revenue potential for each site:

a.) Elimination of the need to construct a diluent pipleline including the operating costs, right of way provisions as well as all the engineering and associated environmental considerations involved in building a pipeline across country.

b.) Elimination of the net cost, purchase less sales cost, of the diluent required to blend with the heavy oil. Diluent current costs are up to $10 /bbl more than heavy oil.

c.) Potential for the replacement of natural gas as an energy source in field operations where SAGD (steam assisted gravity drainage) wells are employed.

d.) Potential for the reduction of natural gas to operate field treaters that are normally placed before the EADIEMAC equipment.

e.) Potential for the improved operation of field treaters due to the recycling of light material back into the treater in the EADIEMAC process.

f.) Effective increase in heavy oil product pipeline capacity by the reduction or elimination of diluent.

g.) Increase in value of the heavy oil product by a small amount of upgrading in the field (about 4API unless the very heavy ends are removed in which case the API change can be significantly higher).

h.) Potential to split the heavy oil product stream into two where there is more than one pipleline available. A much higher grade stream can be separated out and can command a higher value.

It needs to be understood that heavy oil in Alberta has been selling at up to a 50% discount ($24/bbl discount last December) due to the lack of available heavy oil upgrading/refinery facilities in North America. The net revenue to producers in the field was less thus each extra $1.00 counts.

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