North West Redwater Partnership Announces Update to Facility Cost Estimate and Certain Revisions to the Bitumen Processing Agreements

CALGARY, Dec. 4, 2013 /CNW/ – North West Redwater Partnership (“NWR”), a partnership between North West Upgrading Inc. (“NWU”) and Canadian Natural Upgrading Limited (“CNUL”), a wholly owned subsidiary of Canadian Natural Resources Limited (“Canadian Natural”), announces today an update to its facility capital cost estimate and to certain revisions to its Bitumen Processing Agreements.

Phase 1 of the Sturgeon Refinery project (“Project”) is designed to process 50,000 barrels per day (“bbl/d”) of raw bitumen under 30 year fee-for-service Processing Agreements. Suppliers of the bitumen (toll payers) are 75% the Alberta Petroleum and Marketing Commission (“APMC”), and 25% Canadian Natural.

The Project obtained final project sanction in November 2012 based on a capital cost estimate at that time of approximately $5.7 billion. Over the past year, work has progressed, with detailed engineering well advanced on many process units, firm contractor quotes received, material take- offs finalized, certain larger contracts signed and the commencement of site preparation activities well underway. While the scope of the facility has not changed, due to a combination of cost inflation and the inability to fully capture certain cost savings initiatives, the cost estimate has been revised to

$8.5 billion. The original forecasted start-up of commercial operations targeted for mid-2016 has been revised to September 2017 in order to optimize work force productivity and ensure that the project remains cost, not schedule focused.

As toll payers, APMC and Canadian Natural continue to consider the financial, marketing and stakeholder merits of the project to be positive and therefore have agreed in principle, through a term sheet agreement, to restructure certain terms of the Project’s Processing Agreements to accommodate additional financial flexibility within a targeted investment grade rating. This term

sheet will result in the final definitive agreements being updated as soon as practicable. Changes to the Processing Agreements are contemplated as follows:

• The $6.5 billion Facility Capital Cost cap for tolling purposes has been removed to accommodate flexibility in the targeted financial structure, and to ensure that all amounts raised in the debt capital markets are financially supported by the toll payers. This change is anticipated to result in higher credit ratings and lower costs of borrowing.
• Canadian Natural and APMC have agreed to inject further capital as required to reach Project completion in the form of Subordinated Debt bearing interest at Prime + 6%. The Subordinated Debt will form part of the Equity Toll and is targeted to be repaid over a 10 year period commencing one year after start up. While the Subordinated Debt is outstanding, the APMC will hold a 25% voting right on certain elements of the refinery’s construction and operation. The holders of the Subordinated Debt also have a 25% participation right in the costs and benefits of any Excess Capacity opportunities at the refinery.
• As at November 30, 2013 the original equity had funded and accrued equity of approximately

$824 million that going forward will earn a reduced return of 5% paid annually with principal repayment now deferred until the full repayment of Subordinated Debt occurs.

As expected, and as is normal for the evolution of such projects the leadership of NWR is now transitioning from an engineering team to a construction delivery and execution team. To this end, Chris Covert has transitioned into the role of President of NWR, bringing with him over 30 years of directly related experience. He is currently building the remaining construction team required to complete this transition.

The toll payers believe, that upon successful completion of the Project, this refinery will strengthen their organizations through providing a competitive return on investment and by adding 50,000 bbl/d of bitumen conversion capacity in Alberta which will help improve pricing and reduce pricing volatility on all Western Canadian heavy crude oil that they produce or are entitled to market through royalties. This project will provide a local market for Alberta oil sands production that is not reliant on export pipelines, and a low carbon solution that will ensure that the CO2 footprint of the products produced by the refinery will be among the lowest in the world.

About North West Redwater Partnership

North West Redwater Partnership was formed in 2010 as a 50/50 partnership between NWU and CNUL, a wholly-owned subsidiary of Canadian Natural to build the world’s first bitumen refinery which will combine the already proven processes of gasification technology with an integrated

carbon capture and storage solution. The Sturgeon Refinery, which will be located 45 km north-east of Edmonton, is also the first refinery to sell its CO₂ for the purposes of enhanced oil recovery. NWR will convert 50,000 barrels of bitumen directly to fuels and other high value, low sulphur products required in the Alberta and world markets. Phase 1 received partner sanction November 8, 2012.

The process is also optimized to minimize the environmental footprint of the facility and make the bitumen upgrading/refining process sustainable in Alberta. For more information, please visit our website at www.nwrpartnership.com.

For more information on North West Upgrading Inc. or Canadian Natural Resources Limited, please see:

www.northwestupgrading.com

www.cnrl.com

SOURCE North West Redwater Partnership

For further information:

For more information regarding NWR, please contact:

Shauna MacDonald
Media Relations
North West Redwater Partnership
403-538-5645
media@nwrpartnership.com