PETRO-CANADA BEGINS MACKAY RIVER PROJECT CONSTRUCTION

In September 2000 Petro-Canada announced that construction had begun and that transportation arrangements are in place for its in situ oil sands development at MacKay River, near Fort McMurray, Alberta, Canada. The development is called a first step in a phased approach to building a strong oil sands business.

The bitumen production facility is to be onstream in late 2002. Due to technological improvements and confirmation of excellent reservoir quality, Petro-Canada is applying for an amendment to its regulatory approvals in order to produce 30,000 barrels per day from the MacKay River facility over a 25-year period--an increase from the original plan of 22,000 barrels per day. Even with higher production, the MacKay River plant will operate within all of the requirements of its existing operating permits. Capital expenditure for the MacKay River development is estimated at $290 million.

The MacKay River plant will use Steam-Assisted Gravity Drainage (SAGD) technology that has been successfully demonstrated over the past 10 years at a pilot plant adjacent to the MacKay property.

Beyond the MacKay River project, Petro-Canada says that it continues to evaluate its substantial inventory of prospective in situ oil sands leases, with the aim of expanding its in situ bitumen production to about 80,000 barrels per day before the end of the decade. The company will take a disciplined, step-by-step approach, learning from its experience at MacKay River, proceeding only when confident of superior economic returns.

Petro-Canada has reached agreement with Enbridge Inc. for the construction by Enbridge of a 40-kilometer connecting pipeline to feed the bitumen produced at the MacKay River plant into the Athabasca Pipeline for sale into the North American market. The pipeline will be insulated and will be ready for first oil in late 2002.

Petro-Canada is also assessing the economic potential for reconfiguring its Edmonton refinery over the coming decade to use from 80,000 barrels to as much as 150,000 barrels per day of bitumen, replacing light crude oil as its primary feedstock for refining into gasoline and other products. The company will install new sulfur reduction equipment for startup by 2004 to reduce sulfur in gasoline. The new sulfur reduction equipment will be designed so it could later form part of a bitumen upgrading process.