OLITRA INC Business Presentation July 4, 2007
Safe Harbour <ul><li>This document contains certain forward-looking statements with respect to the Corporation.  These for...
Mission <ul><li>Olitra’s mission is to acquire SIGNIFICANT oil & gaz properties in high potential, under-explored regions ...
From metal mining exploration to oil and gas <ul><li>J.A.G. has more than 30 years of experience in mining exploration for...
Table of contents / Agenda <ul><li>Oil and gas models: geological keys </li></ul><ul><li>OLITRA Permits </li></ul><ul><li>...
Oil and Gas models / Geological keys
Canadian Oil & Gas
Quebec O&G Context
Geological keys to find gas <ul><li>Basal sedimentary rocks = geothermal aquifer  </li></ul><ul><li>Carbonate platform ove...
Trap near a fault or near an anticlinal Fault
OLITRA permits Three properties: Témiscouata Charlevoix Lac-St-Jean
Olitra oil and gas permits <ul><ul><li>T é miscouta: </li></ul></ul><ul><ul><ul><li>193 587 </li></ul></ul></ul><ul><ul><l...
OLITRA permits Three properties: Témiscouata Charlevoix Lac-St-Jean
Témiscouta : Olitra property <ul><li>193,587 hectares </li></ul><ul><li>Southern part of Gaspé sedimentary basin </li></ul...
Témiscouata: Olitra property
Témiscouata: context <ul><li>Devonian rocks </li></ul><ul><li>Devonian structural deformation </li></ul><ul><li>Important ...
Témiscouata: geological context <ul><li>Most of the property is covered with Devonian rocks from Temiscouata Formation, wh...
Strategy <ul><li>Exploration through: </li></ul><ul><ul><li>Mapping </li></ul></ul><ul><ul><li>Transects: magnetic anomali...
OLITRA permits Three properties: Témiscouata Charlevoix Lac-St-Jean
Charlevoix : Olitra property <ul><li>39, 258 hectares </li></ul><ul><li>In the St-Lawrence lowlands sedimentary basin </li...
Charlevoix: Olitra property
Charlevoix: Structural evidences  <ul><li>In this case, the structural aspect is related to the meteoritic impact that lef...
Charlevoix: Stratigraphy
Charlevoix: geological context <ul><li>Siluro-devonian: porous environment </li></ul><ul><li>Important depth of quaternary...
Strategy (1/2) <ul><li>Because we are in presence of an important unexploited basin that is underwater, it gives us differ...
Strategy (2/2) <ul><li>A signature will be made that would be used throughout the region  </li></ul><ul><li>Finally magnet...
OLITRA permits Three properties: Témiscouata Charlevoix Lac-St-Jean
Lac St-Jean: Olitra property <ul><li>99,945 hectares </li></ul><ul><li>In the St-Lawrence lowlands sedimentary basin </li>...
Lac St-Jean : Olitra property
Lac St-Jean: Stratigraphy
Lac St-Jean: Hydrocarbon potential <ul><li>Previous work have been made in 1954, 1962 and 1974, indicating secondary evide...
Strategy <ul><li>Geophysical and geomagnetic surveys have been made on 35% if the surface of the Lake in the winter of 200...
Slide sur la technique de cuisson
OLITRA business model Acquisition and smart exploration
Business Milestones
Annexes
Annex 1 The OLITRA way  A new methodology: Using more accurate data and avoiding extra cost
Exploration objectives <ul><li>Recognition and definition of petrologenic  potential of the rocks on the property. </li></...
Exploration Planning (1) <ul><li>Phase 1 </li></ul><ul><li>On each property: </li></ul><ul><ul><li>- Define if the rocks h...
Exploration Planning (2) <ul><li>Phase 2 </li></ul><ul><ul><li>On the best potential areas delimited in phase 1, conventio...
Exploration – Budget Phase 1 1,503,000 1,325,000 178,000 Total exploration budget 200,000 149,000 51,000 Charlevoix 360,00...
Témiscouta Exploration Program <ul><li>Budget Phase 1 </li></ul><ul><li>Year 1-  $104,000 </li></ul><ul><li>Year 2 -  $1,0...
Charlevoix Exploration Program <ul><li>Budget Phase 1 </li></ul><ul><li>Year 1-  $ 23,000 </li></ul><ul><li>Year 2 -  $ 13...
Lac St-Jean Exploration Program <ul><li>Budget Phase 1 </li></ul><ul><li>Year 1-  $ 51,000 </li></ul><ul><li>Year 2 -  $ 1...
Exploration Budget –phase 2 <ul><li>Budget Phase 2 </li></ul><ul><ul><li>depending on phase 1 findings </li></ul></ul><ul>...
Advisory Team (to be confirmed or modified) <ul><li>Marc Richer Laflèche, Ph.D (Geology)  </li></ul><ul><li>- Professor wi...
Annex 2 Why O&G in Quebec?  When the reality goes beyond expectations:  A promising and unsuspected potential
Canadian Oil & Gas
Quebec O&G Context
Why choose Quebec for exploration? <ul><li>Canada is a country of natural resources </li></ul><ul><ul><li>Quebec mining in...
Why Quebec? <ul><li>Accuracy and availability of the data </li></ul><ul><ul><li>Government of Quebec provides accurate, re...
Why Quebec? <ul><li>Accessible zones and access to the markets </li></ul><ul><ul><ul><li>Added to geological potential, Qu...
Why Quebec? <ul><li>An advantageous tax system </li></ul><ul><ul><li>Corporate tax rate.  Quebec taxation act fixes at 9,0...
Why Quebec? <ul><li>Refundable tax credit </li></ul><ul><ul><li>Base rate of 20%.  Increased to 40% of admissible costs wh...
Where in Quebec? <ul><li>The sedimentary zone conducive to oil and gas exploration covers 200 000km ² which represents 13%...
Where in Quebec? <ul><li>Exploration activities </li></ul><ul><ul><li>Up to now, most of the work has been conducted  in t...
Results to-date <ul><li>Recent studies demonstrate the existence of a sedimentary basin potential that needs to be evaluat...
Past or on-going production
Current Activities <ul><li>Moreover, since 1990, there has been a resumption of oil and gas exploration in Québec.  </li><...
Concrete results <ul><li>To-date, pan-Québec O&G exploration has led to the discovery of three economic natural gas deposi...
Exploration activities assessment Bow Valley Energy Period Deep structural deformation associated  to plateform faults Aft...
Annex 3 Fiscal and legal aspects
Quebec Leases <ul><li>Oil and Natural Gas Prospecting Licence </li></ul><ul><ul><li>The holder of a prospecting licence ob...
Lease Obligations <ul><li>The prospecting licence holder must carry out geological, geophysical or drilling work. The valu...
Operating Lease <ul><li>The holder of an exploration licence who discovers a quantity of gas or oil that may be developed ...
Quebec Royalties <ul><li>Production Royalties </li></ul><ul><ul><li>The holder of an oil or natural gas operating lease pa...
Quebec Financing Options <ul><li>Flow-Through Shares   </li></ul><ul><li>A flow-through share is a security issued by an e...
Quebec Financing Options <ul><li>Flow Through Shares - Federal Income Tax </li></ul><ul><li>At the federal level, accordin...
Oil & Natural Gas Prospecting License <ul><li>The holder of a prospecting license obtains the exclusive right to carry out...
License Obligations <ul><li>The prospecting license holder must carry out geological, geophysical or drilling work.  </li>...
Operating Lease <ul><li>The holder of an exploration license who discovers a quantity of gas or oil that may be developed ...
References <ul><li>http://www.mrn.gouv.qc.ca/english/publications/energy/Discovered.pdf </li></ul><ul><li>Oil and Gas Expl...
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JML - Jag Mines Presentation

  1. 1. OLITRA INC Business Presentation July 4, 2007
  2. 2. Safe Harbour <ul><li>This document contains certain forward-looking statements with respect to the Corporation. These forward-looking statements, by their nature, necessarily involve risks and uncertainties that could cause actual results to differ materially from those contemplated by these forward-looking statements. We consider the assumptions on which these forward-looking statements are based to be reasonable, but caution the reader that these assumptions regarding future events, many of which are beyond our control, may ultimately prove to be incorrect since they are subject to risks and uncertainties that affect us. These risks and uncertainties include risks associated with market acceptance, competitive developments and other factors. Except for ongoing obligations under securities laws to disclose all material information to investors, we disclaim any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. </li></ul>
  3. 3. Mission <ul><li>Olitra’s mission is to acquire SIGNIFICANT oil & gaz properties in high potential, under-explored regions and EFFICIENTLY conduct their exploration by combining different new and advanced geologic methods to rapidly increase the value of the company for the benefit of its shareholders. </li></ul>
  4. 4. From metal mining exploration to oil and gas <ul><li>J.A.G. has more than 30 years of experience in mining exploration for precious and base metals </li></ul><ul><li>J.A.G. also owns 16 oil and natural gas permits on three properties in Quebec </li></ul>Preparing to conduct exploration on these permits
  5. 5. Table of contents / Agenda <ul><li>Oil and gas models: geological keys </li></ul><ul><li>OLITRA Permits </li></ul><ul><li>The OLITRA way /Business model </li></ul><ul><li>Annexes </li></ul><ul><li>The Olitra way / Exploration program </li></ul><ul><li>Why Quebec for oil & gas? </li></ul><ul><li>Fiscal and legal aspects </li></ul>
  6. 6. Oil and Gas models / Geological keys
  7. 7. Canadian Oil & Gas
  8. 8. Quebec O&G Context
  9. 9. Geological keys to find gas <ul><li>Basal sedimentary rocks = geothermal aquifer </li></ul><ul><li>Carbonate platform overlying the sedimentary rocks </li></ul><ul><li>Trans-tensional fault to open and connect carbonate to the sedimentary rocks aquifer </li></ul><ul><li>Shale seal = trap to natural gas </li></ul>
  10. 10. Trap near a fault or near an anticlinal Fault
  11. 11. OLITRA permits Three properties: Témiscouata Charlevoix Lac-St-Jean
  12. 12. Olitra oil and gas permits <ul><ul><li>T é miscouta: </li></ul></ul><ul><ul><ul><li>193 587 </li></ul></ul></ul><ul><ul><li>Charlevoix: </li></ul></ul><ul><ul><ul><li>99 945 </li></ul></ul></ul><ul><ul><li>Lac St-Jean: </li></ul></ul><ul><ul><ul><li>39 258 </li></ul></ul></ul>Cover a total area of 332,790 hectares.
  13. 13. OLITRA permits Three properties: Témiscouata Charlevoix Lac-St-Jean
  14. 14. Témiscouta : Olitra property <ul><li>193,587 hectares </li></ul><ul><li>Southern part of Gaspé sedimentary basin </li></ul><ul><li>Cambrian and Devonian-age sediments </li></ul>
  15. 15. Témiscouata: Olitra property
  16. 16. Témiscouata: context <ul><li>Devonian rocks </li></ul><ul><li>Devonian structural deformation </li></ul><ul><li>Important Schistosity </li></ul><ul><li>Priorized sectors: 846-850 around Cabano </li></ul><ul><ul><li>Historical evidences of hydrocarbon: </li></ul></ul><ul><ul><ul><li>Domestic wells contaminated </li></ul></ul></ul><ul><ul><ul><li>Fishermen have seen gas bubbles in the river </li></ul></ul></ul><ul><ul><ul><li>For years, it is known that natural gas is used from the underground </li></ul></ul></ul><ul><li>Accessibility </li></ul>
  17. 17. Témiscouata: geological context <ul><li>Most of the property is covered with Devonian rocks from Temiscouata Formation, which are a succession of siliciclastic rocks (shales and mudrocks), calcareous rocks and conglomerates. In this region, Formation Témiscouata is juxtaposed to “Groupe de Chaleurs” rocks and to Groupe Cabano along a NE-SW reverse fault. </li></ul><ul><li>Part of the Gaspé Belt and close to Humber zone, this region presents a distribution of hydrocarbon inclusions to host both oil and gas accumulation depending on the thermal conditions.* </li></ul><ul><li>*Hydrocarbon inclusions entrapped in diagenetic minerals in Paleozoïc basins in eastern Canada – Implications for hydrocarbon exploration, Guoxiang Chi and Denis Lavoie, GSC and Rudolf Bertrand, INRS-Géoressources, 2001 </li></ul>
  18. 18. Strategy <ul><li>Exploration through: </li></ul><ul><ul><li>Mapping </li></ul></ul><ul><ul><li>Transects: magnetic anomalies (airborne will not provide the same details) </li></ul></ul><ul><ul><li>Uranium measured in water, followed by source identification (biogenic or thermogenic) </li></ul></ul><ul><ul><li>Characterization of the type of hydrocarbon we are looking for. </li></ul></ul>
  19. 19. OLITRA permits Three properties: Témiscouata Charlevoix Lac-St-Jean
  20. 20. Charlevoix : Olitra property <ul><li>39, 258 hectares </li></ul><ul><li>In the St-Lawrence lowlands sedimentary basin </li></ul><ul><li>Ordovician-age sediments </li></ul><ul><ul><li>Methane-rich alteration halos discovered in local soils </li></ul></ul>
  21. 21. Charlevoix: Olitra property
  22. 22. Charlevoix: Structural evidences <ul><li>In this case, the structural aspect is related to the meteoritic impact that left after isostatic movements a favorable context: grabens type </li></ul><ul><li>Olitra would like to explore the hydrocarbon potential in the sedimentary sequences that have been preserved from erosion; sequences similar to the ones that are found in the St-Lawrence lowlands and that are exploited for natural gas like St-Flavien and Pointe-du-Lac. </li></ul>
  23. 23. Charlevoix: Stratigraphy
  24. 24. Charlevoix: geological context <ul><li>Siluro-devonian: porous environment </li></ul><ul><li>Important depth of quaternary deposits </li></ul><ul><ul><li>Few outcrop </li></ul></ul><ul><li>Organic calcareous rocks, sandstones and brecchia type rocks with a porosity favourable to hosting oil. </li></ul><ul><li>Cap-à-l’Aigle: Black calcareous rocks that smell gas </li></ul><ul><li>Hydrothermal veins </li></ul><ul><li>Swelling of tar on the rocks in St-Simeon </li></ul>Looking for oil
  25. 25. Strategy (1/2) <ul><li>Because we are in presence of an important unexploited basin that is underwater, it gives us different approaches that will be used in parallel or one after the other: </li></ul><ul><ul><li>Sampling (easier during the winter) </li></ul></ul><ul><ul><li>Hematite and goethite are changed in magnetite during hydrocarbon migration: magnetism will be measured. </li></ul></ul><ul><ul><li>In reducing conditions, uranium precipitation phenomenon occurs: gamma rays will be used to measure Uranium (U) and Potassium (K) </li></ul></ul><ul><ul><li>Vanadium and cobalt will be used as trace elements </li></ul></ul><ul><li>Sampling and measurement of methane, butane and propane will be made in order to determinate the gas source (propane and butane: thermogenic ; methane: biogenic) </li></ul>
  26. 26. Strategy (2/2) <ul><li>A signature will be made that would be used throughout the region </li></ul><ul><li>Finally magnetotellurism control source will be made (CSAMT) </li></ul><ul><li>This methodology has the advantage to help finding massive sulphides and uranium which appears also in that same type of environment. </li></ul><ul><li>Because seismic methodology is hard to interpret and is expensive, using this strategy lowers the cost and improves the accuracy of the results </li></ul>
  27. 27. OLITRA permits Three properties: Témiscouata Charlevoix Lac-St-Jean
  28. 28. Lac St-Jean: Olitra property <ul><li>99,945 hectares </li></ul><ul><li>In the St-Lawrence lowlands sedimentary basin </li></ul><ul><li>Ordovician-age sediments, including Pointe-Bleue bituminous schist (surrounded by the Canadian shield) </li></ul><ul><ul><ul><li>Oil seepage seen in limestone near Metabetchouan-Chambord in 1962 </li></ul></ul></ul><ul><ul><ul><li>Schist of the Utica are so rich in bitumen that they have been seen as a potential source of petroleum in the 1930’s (works done by Parks) </li></ul></ul></ul>
  29. 29. Lac St-Jean : Olitra property
  30. 30. Lac St-Jean: Stratigraphy
  31. 31. Lac St-Jean: Hydrocarbon potential <ul><li>Previous work have been made in 1954, 1962 and 1974, indicating secondary evidences of the presence of hydrocarbons. </li></ul><ul><li>In the 1980’s, surveys from researchers of INRS-Géoressources have given an evaluation of the hydrocarbon potential of two samples of Pointe-Bleue schist being close to 120 litres of hydrocarbon per ton of bituminous schist. Corresponding ratio 2 on 5 </li></ul><ul><li>* Commercial grades of oil shales: ratio 0.75 to 1,5 on 5. </li></ul><ul><li>Rudolph Bertrand, personal communication </li></ul>
  32. 32. Strategy <ul><li>Geophysical and geomagnetic surveys have been made on 35% if the surface of the Lake in the winter of 2006-2007. </li></ul><ul><li>During summer of 2007, the work will be done by Zodiac </li></ul><ul><li>Sediments sampling and small drillings will generate a map of anomalous zones </li></ul><ul><li>Soil geochemistry, magnetic anomalies and imagery should complete the first phases </li></ul><ul><li>The production of gas will be made through “cooking” of the rocks. </li></ul>
  33. 33. Slide sur la technique de cuisson
  34. 34. OLITRA business model Acquisition and smart exploration
  35. 35. Business Milestones
  36. 36. Annexes
  37. 37. Annex 1 The OLITRA way A new methodology: Using more accurate data and avoiding extra cost
  38. 38. Exploration objectives <ul><li>Recognition and definition of petrologenic potential of the rocks on the property. </li></ul><ul><li>Location of alteration halos caused by hydrocarbon seepage. </li></ul><ul><li>Definition of low-depth (near surface) structures. </li></ul>
  39. 39. Exploration Planning (1) <ul><li>Phase 1 </li></ul><ul><li>On each property: </li></ul><ul><ul><li>- Define if the rocks have been formed in the right conditions to generate significant quantities of oil and/or gas: evaluation of the potential of the basal rock in maturating of organic matter by kerogen petrography and geochemistry analysis. </li></ul></ul><ul><ul><li>- Regional geochemistry of the soil surveys </li></ul></ul><ul><ul><li>-Radon measurement </li></ul></ul><ul><ul><li>- Geophysical surveys including sea seismic surveys </li></ul></ul><ul><ul><li>- Inorganic geochemistry </li></ul></ul>
  40. 40. Exploration Planning (2) <ul><li>Phase 2 </li></ul><ul><ul><li>On the best potential areas delimited in phase 1, conventional ways will be used including more precise seismic surveys (150 to 200 km) </li></ul></ul><ul><ul><li>Drilling of a deep well (2500m) on Temiscouata property and of two low-depth wells on the other two properties. </li></ul></ul>
  41. 41. Exploration – Budget Phase 1 1,503,000 1,325,000 178,000 Total exploration budget 200,000 149,000 51,000 Charlevoix 360,000 337,000 23,000 Lac St-Jean 943,000 839,000 104,000 Témiscouata Total $ 2007-08 $ 2006 $ Property
  42. 42. Témiscouta Exploration Program <ul><li>Budget Phase 1 </li></ul><ul><li>Year 1- $104,000 </li></ul><ul><li>Year 2 - $1,039,000 </li></ul><ul><li> $1,143,000 </li></ul><ul><li>Exploration Program : </li></ul><ul><ul><li>1- Regional soil geochemistry survey (835 K$) including hydrocarbon analysis (C1-C5); PH, conductivity and magnetic susceptibility measurements, and also radiometric survey (U, Th, K); </li></ul></ul><ul><ul><li>2- Magnetometric, gradiometric and electromagnetic induction surveys (220 K$); </li></ul></ul><ul><ul><li>3- petrologenic potential and thermal maturation of sedimentary rocks analysis (30 K$); </li></ul></ul><ul><ul><li>4- sea reflection seismic survey on lakes properties (25 K$); and </li></ul></ul><ul><ul><li>5- usual geological surveys and geoscientist compilation works (30 K$). </li></ul></ul>
  43. 43. Charlevoix Exploration Program <ul><li>Budget Phase 1 </li></ul><ul><li>Year 1- $ 23,000 </li></ul><ul><li>Year 2 - $ 137,000 </li></ul><ul><li> $ 160,000 </li></ul><ul><li>Exploration Program : </li></ul><ul><ul><li>1- Regional soil geochemistry survey (100 K$) including hydrocarbon analysis (C1-C5); PH, conductivity and magnetic susceptibility measurements, and also radiometric survey (U, Th, K); </li></ul></ul><ul><ul><li>2- Magnetometric, gradiometric and electromagnetic induction surveys (36 K$); </li></ul></ul><ul><ul><li>3- petrologenic potential and thermal maturation of sedimentary rocks analysis (7 K$); and </li></ul></ul><ul><ul><li>4- usual geological surveys and geoscientist compilation works (17 K$). </li></ul></ul>
  44. 44. Lac St-Jean Exploration Program <ul><li>Budget Phase 1 </li></ul><ul><li>Year 1- $ 51,000 </li></ul><ul><li>Year 2 - $ 149,000 </li></ul><ul><li> $ 200,000 </li></ul><ul><li>Exploration Program : </li></ul><ul><ul><li>1- Regional soil geochemistry survey (95 K$) including hydrocarbon analysis (C1-C5); PH, conductivity and magnetic susceptibility measurements, and also radiometric survey (U, Th, K); </li></ul></ul><ul><ul><li>2- Magnetometric, gradiometric and electromagnetic induction surveys (50 K$); </li></ul></ul><ul><ul><li>3- petrologenic potential and thermal maturation of sedimentary rocks analysis (20 K$); </li></ul></ul><ul><ul><li>4- sea reflection seismic survey on lakes properties (20 K$); and </li></ul></ul><ul><ul><li>5- usual geological surveys and geoscientist compilation works (15K$). </li></ul></ul>
  45. 45. Exploration Budget –phase 2 <ul><li>Budget Phase 2 </li></ul><ul><ul><li>depending on phase 1 findings </li></ul></ul><ul><ul><li>3,5M$ on wells </li></ul></ul>
  46. 46. Advisory Team (to be confirmed or modified) <ul><li>Marc Richer Laflèche, Ph.D (Geology) </li></ul><ul><li>- Professor with INRS. Field supervision </li></ul><ul><li>Rudolph Bertrand, Ph.D. (Geology) </li></ul><ul><li>– Strong reputation in oil and natural gas exploration in Quebec. 30 years of experience with SOQUIP and INRS. </li></ul><ul><li>Geneviève Camiré,  Ph.D. (Geology), MBA </li></ul><ul><li>- In charge  of oil and natural gas exploration for JAG. </li></ul>
  47. 47. Annex 2 Why O&G in Quebec? When the reality goes beyond expectations: A promising and unsuspected potential
  48. 48. Canadian Oil & Gas
  49. 49. Quebec O&G Context
  50. 50. Why choose Quebec for exploration? <ul><li>Canada is a country of natural resources </li></ul><ul><ul><li>Quebec mining industry represents XXX% of PIB </li></ul></ul><ul><ul><li>Its legislation takes in account the viability of the sector. Not surprising, it ranks number one in the world, when it comes to administration, interpretation and enforcement of existing regulations. Less than 3% of the exploration companies surveyed by the Fraser institute consider this a deterrent.* </li></ul></ul><ul><ul><li>Besides, Quebec is among the three best locations to do exploration if we take in count the regulatory duplication and inconsistencies that can occur.* </li></ul></ul><ul><ul><li>Exploration companies in mining or in oil and gas industries need regulations that won’t change all the time. Quebec provides a safe and sustainable avenue to exploration. </li></ul></ul>*Source: Fraser Institute Annual Survey of Mining companies 2006/2007
  51. 51. Why Quebec? <ul><li>Accuracy and availability of the data </li></ul><ul><ul><li>Government of Quebec provides accurate, recent information that is easily available </li></ul></ul><ul><ul><li>Recently published: </li></ul></ul><ul><ul><ul><li>“ Perspectives and concepts of oil and gas exploration in Quebec: Discover the horizon! Demonstrating the huge potential of this resource in Quebec. </li></ul></ul></ul><ul><ul><ul><li>document also provides targets by region </li></ul></ul></ul><ul><ul><li>Furthermore, SOQUIP has transferred to the MRNF, the seismic patrimony, data that would be gradually available through SIGPEG (Oil and gas geoscience information system) </li></ul></ul>Source: Perspectives et concepts d’exploration en hydrocarbures du Québec: un horizon de découvertes, par Laliberté et Thériault, MNRF, 2006
  52. 52. Why Quebec? <ul><li>Accessible zones and access to the markets </li></ul><ul><ul><ul><li>Added to geological potential, Quebec possesses well-developed road and rail infrastructure that provide a good access to exploratory zones </li></ul></ul></ul><ul><ul><ul><li>Two of properties lie near existing pipelines connected to the large east coast markets. </li></ul></ul></ul><ul><ul><ul><ul><li>Temiscouata and Charlevoix </li></ul></ul></ul></ul>Source: Oil and Gas Exploration in Québec, document from Ministère des ressources naturelles, 2001-2003
  53. 53. Why Quebec? <ul><li>An advantageous tax system </li></ul><ul><ul><li>Corporate tax rate. Quebec taxation act fixes at 9,04% the corporate. </li></ul></ul><ul><ul><ul><li>However, resource deductions of 25% of the profit made from petroleum or natural gas exploration can reduce it to 6,8%. </li></ul></ul></ul><ul><ul><li>Furthermore, 100% of exploration costs can be deducted. </li></ul></ul>Source: Oil and Gas Exploration in Québec, document from Ministère des ressources naturelles, 2001-2003
  54. 54. Why Quebec? <ul><li>Refundable tax credit </li></ul><ul><ul><li>Base rate of 20%. Increased to 40% of admissible costs when a company is not operating any oil or gas natural wells. </li></ul></ul><ul><ul><li>refundable tax credit applies to oil and natural gas exploration expenses used to establish the existence of reservoir. </li></ul></ul><ul><ul><li>Eligible expenses: </li></ul></ul><ul><ul><ul><ul><li>Geological geophysical and geochimical surveys </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Drilling and completion of an oil or natural gas well </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Construction of temporary access road or well site </li></ul></ul></ul></ul>Source: Oil and Gas Exploration in Québec, document from Ministère des ressources naturelles, 2001-2003
  55. 55. Where in Quebec? <ul><li>The sedimentary zone conducive to oil and gas exploration covers 200 000km ² which represents 13% of the surface of the province. </li></ul><ul><ul><li>Drilling work in this zone has allowed delimitation of six basins with the best hydrocarbon potential: </li></ul></ul><ul><ul><ul><li>St-Lawrence lowlands </li></ul></ul></ul><ul><ul><ul><li>The lower St-Lawrence </li></ul></ul></ul><ul><ul><ul><li>The Gaspe Peninsula </li></ul></ul></ul><ul><ul><ul><li>The St-Lawrence Estuary (Anticosti Basin) </li></ul></ul></ul><ul><ul><ul><li>The Gulf of the St-Lawrence </li></ul></ul></ul><ul><ul><ul><li>Northern Quebec </li></ul></ul></ul>
  56. 56. Where in Quebec? <ul><li>Exploration activities </li></ul><ul><ul><li>Up to now, most of the work has been conducted in the St-Lawrence lowlands and the Eastern Gaspé Peninsula. </li></ul></ul><ul><ul><li>Three natural gas deposits have been discovered: </li></ul></ul><ul><ul><ul><li>Pointe-du-Lac (who?) </li></ul></ul></ul><ul><ul><ul><li>Saint-Flavien (Junex) </li></ul></ul></ul><ul><ul><ul><li>Galt (Pétrolia). </li></ul></ul></ul><ul><ul><li>To those, we can add Port-au-Port and McCully (in New-Brunswick) that are close in distance. </li></ul></ul>OLITRA oil and gas permits are located in very promising areas of Quebec OLITRA oil and gas permits are located in very promising areas of Quebec
  57. 57. Results to-date <ul><li>Recent studies demonstrate the existence of a sedimentary basin potential that needs to be evaluated. </li></ul><ul><li>In fact, the basins of the St. Lawrence Lowlands and the eastern Gaspé Peninsula have been subject to more sustained exploration activities over the last decades, during which time over 350 wells have been drilled. </li></ul>
  58. 58. Past or on-going production
  59. 59. Current Activities <ul><li>Moreover, since 1990, there has been a resumption of oil and gas exploration in Québec. </li></ul><ul><li>Over the last decade, nearly $100 million has been spent in the area of exploration. </li></ul><ul><ul><li>This revival, which is relatively modest compared to exploration activities carried out in provinces with recognized hydrocarbon potential, is attributable in part to the new discoveries made in nearby basins with geological settings similar to those observed in Québec. </li></ul></ul><ul><ul><li>Examples include discoveries made in the rich basins of Arkoma, Anadarko and Forth Worth in the southern United States. </li></ul></ul>
  60. 60. Concrete results <ul><li>To-date, pan-Québec O&G exploration has led to the discovery of three economic natural gas deposits: </li></ul><ul><ul><li>Saint-Flavien, located approximately 50 kilometres west of Québec City; </li></ul></ul><ul><ul><ul><li>The field was in operation from 1980 till 1994, with a total production of 161 million m3 (5.7 bcf) of natural gas composed of 95% methane. </li></ul></ul></ul><ul><ul><li>Pointe-du-Lac, west of Trois-Rivières; </li></ul></ul><ul><ul><li>Galt, near the town of Gaspé. </li></ul></ul>
  61. 61. Exploration activities assessment Bow Valley Energy Period Deep structural deformation associated to plateform faults After Soquip period Shell / Corridor Period Hydrothermal dolomites Corridor, HQPG, Junex Period Hydrothermal dolomites Silurian Reefs Amque, Junex, Petrolia, Talisman Period Hydrothermal Dolomites “ Shale Gas” hectares In 2007, Olitra Period, a new way of finding: less cost, more efficiency
  62. 62. Annex 3 Fiscal and legal aspects
  63. 63. Quebec Leases <ul><li>Oil and Natural Gas Prospecting Licence </li></ul><ul><ul><li>The holder of a prospecting licence obtains the exclusive right to carry out oil and natural gas research. </li></ul></ul><ul><ul><li>The prospecting licence may cover a maximum area of 25,000 hectares. </li></ul></ul><ul><ul><li>The licence is valid for a period of five years. </li></ul></ul><ul><ul><li>The licence may be renewed for five more years, on a year-by-year basis. </li></ul></ul><ul><ul><li>The holder of several licences may group them together for the application of expenditures for assessment work. </li></ul></ul><ul><ul><li>The licence is issued on the basis of a uniform grid coordinate system. Each pre-split tract covers an area of approximately 2,000 hectares. </li></ul></ul>
  64. 64. Lease Obligations <ul><li>The prospecting licence holder must carry out geological, geophysical or drilling work. The value of the mandatory work is 50¢ per hectare in the first year and increases to $2.50 in the fifth year. </li></ul><ul><li>A payment of 10¢ per hectare is due at the beginning of each year during which the licence is in force. This is reduced to 5¢ in the case of annual duties applicable to 100,000 or more hectares in a maritime environment. </li></ul><ul><li>Such obligations serve to guarantee that an exploration licence will remain in force and that no territory will be monopolized. </li></ul>
  65. 65. Operating Lease <ul><li>The holder of an exploration licence who discovers a quantity of gas or oil that may be developed in an economically viable manner will be granted an operating lease. </li></ul><ul><li>The lease is valid for 20 years and may be renewed if a sufficient quantity of the resource is available. </li></ul><ul><li>The maximum deposit area that may legally be developed under such a lease varies from 200 to 2,000 hectares. </li></ul>
  66. 66. Quebec Royalties <ul><li>Production Royalties </li></ul><ul><ul><li>The holder of an oil or natural gas operating lease pays an annual rent of $2.50 per hectare. </li></ul></ul><ul><ul><li>The oil extraction royalty varies from 5 percent to 12.5 percent, according to production. </li></ul></ul><ul><ul><li>The natural gas extraction royalty varies from 10 to 12.5 percent, according to production. </li></ul></ul>
  67. 67. Quebec Financing Options <ul><li>Flow-Through Shares </li></ul><ul><li>A flow-through share is a security issued by an exploration company that waives its exploration deduction in favour of the investor. </li></ul><ul><li>… Taxation Act enables a private individual to benefit from a significant tax deduction when calculating his or her taxable income. </li></ul><ul><li>Québec system provides for a basic deduction equal to 100 percent of the cost of the flow-through shares. </li></ul><ul><ul><li>For shares acquired after March 30, 2004 the individual may deduct an additional 25% when exploration costs are incurred in Québec by a non-operating corporation. </li></ul></ul><ul><ul><li>A further 25% deduction is offered when work begins with surface explorations, for a total deduction of 150% of investment costs. </li></ul></ul><ul><li>As of March 31, 2004 when a flow-through share is sold, the investor may benefit an exemption of the deemed capital gain in other words the portion of the sale price between the purchase price of the shares and their adjusted cost base, which is zero. </li></ul><ul><ul><li>He can also deduct certain issue expenses that have been foregone in his favor, and this, over a period of five years </li></ul></ul>
  68. 68. Quebec Financing Options <ul><li>Flow Through Shares - Federal Income Tax </li></ul><ul><li>At the federal level, according to the Income Tax Act, a private individual may claim a basic deduction of 100 percent of the cost of the investment in the context of an issuing of flow-through shares. </li></ul><ul><li>Refundable tax credit related to resources The refundable tax credit for expenses related to petroleum and natural gas exploration was established to ensure effective support for Québec-based exploration. Up to 38.75% of eligible exploration expenses incurred by a non-operator in the Mid or Far North may be reimbursed, and up to 35% elsewhere in Québec. For an operator, the maximum amounts are 18.75% in the Mid or Far North and 15% elsewhere in Québec. </li></ul><ul><li>Eligible companies </li></ul><ul><li>Any company that owns an establishment and operates a business in Québec can benefit from this tax credit. A company that is part of a partnership also has the right to a tax credit for eligible activities or expenses incurred by that company. </li></ul><ul><li>Eligible expenses </li></ul><ul><li>Eligible expenses are those incurred by a company for the purposes of exploration and which, according to the current flow-through share regime, would allow an individual investor to receive a deduction of at least 125% </li></ul>
  69. 69. Oil & Natural Gas Prospecting License <ul><li>The holder of a prospecting license obtains the exclusive right to carry out oil and natural gas research. </li></ul><ul><li>The prospecting licence may cover a maximum area of 25,000 hectares. </li></ul><ul><li>The licence is valid for a period of five years. </li></ul><ul><li>The licence may be renewed for five more years, on a year-by-year basis. </li></ul><ul><li>The holder of several licences may group them together for the application of expenditures for assessment work. </li></ul><ul><li>The licence is issued on the basis of a uniform grid coordinate system. Each presplit tract covers an area of approximately 2,000 hectares. </li></ul>
  70. 70. License Obligations <ul><li>The prospecting license holder must carry out geological, geophysical or drilling work. </li></ul><ul><li>The value of the mandatory work is 50¢ per hectare in the first year and increases to $2.50 in the fifth year. </li></ul><ul><li>A payment of 10¢ per hectare is due at the beginning of each year during which the licence is in force. This is reduced to 5¢ in the case of annual duties applicable to 100,000 or more hectares in a maritime environment. </li></ul><ul><li>Such obligations serve to guarantee that an exploration licence will remain in force and that no territory will be monopolized. </li></ul>
  71. 71. Operating Lease <ul><li>The holder of an exploration license who discovers a quantity of gas or oil that may be developed in an economically viable manner will be granted an operating lease. </li></ul><ul><li>The lease is valid for 20 years and may be renewed if a sufficient quantity of the resource is available. </li></ul><ul><ul><li>The maximum deposit area that may legally be developed under such a lease varies from 200 to 2,000 hectares. </li></ul></ul><ul><li>Production Royalties </li></ul><ul><ul><li>The holder of an oil or natural gas operating lease pays an annual rent of $2.50 per hectare. </li></ul></ul><ul><ul><li>The oil extraction royalty varies from 5 percent to 12.5 percent, according to production. </li></ul></ul><ul><ul><li>The natural gas extraction royalty varies from 10 to 12.5 percent, according to production. </li></ul></ul>
  72. 72. References <ul><li>http://www.mrn.gouv.qc.ca/english/publications/energy/Discovered.pdf </li></ul><ul><li>Oil and Gas Exploration in Québec , document from Ministère des ressources naturelles, 2001-2003 </li></ul><ul><li>Laliberté et Thériault, Perspectives et concepts d’exploration en hydrocarbures du Québec: un horizon de découvertes , MNRF, 2006 </li></ul><ul><li>Fraser Institute Annual Survey of Mining companies 2006/2007 </li></ul><ul><li>Laroche, Paul, and Richer-Laflèche, Marc, Programme d’exploration proposé sur les permis de recherche de pétrole et gaz des propriétés Témiscouata, Lac St-Jean et Charlevoix , rapport 5501, 2006 </li></ul><ul><li>Hydrocarbon inclusions entrapped in diagenetic minerals in Paleozoïc basins in eastern Canada – Implications for hydrocarbon exploration , Guoxiang Chi and Denis Lavoie, GSC and Rudolf Bertrand, INRS-Géoressources, 2001 </li></ul>
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