Business Description

Canadian Oil Sands Trust is an open-ended investment trust that generates income from its oil sands investment in the Syncrude Joint Venture (“Syncrude”), the largest oil sands facility in the world. Our interest in Syncrude throughout 2006 and 2005 was 35.49%, but increased to 36.74% on January 2, 2007 following the acquisition of an additional 1.25% working interest. Our investment represents the largest ownership and only pure public investment opportunity in Syncrude. Syncrude, which has been in operation since 1978, is operated and administered by Syncrude Canada Ltd. (“Syncrude Canada”) on behalf of the Syncrude owners. While Syncrude Canada is responsible for the daily operations of the joint venture, a Management Committee and other various committees of Syncrude Canada’s Board of Directors, staffed by the Syncrude owners, oversee and approve significant Syncrude expenditures and long-term strategies.

Syncrude produces a high quality, light, sweet crude oil referred to as “Syncrude™ Sweet Blend” (“SSB”) from oil sands sourced from its Base, North and Aurora North mines located in the Athabasca region of Northern Alberta. When combined with Syncrude’s Aurora South lease, which has not yet been developed, Canadian Oil Sands’ estimated proved plus probable reserves total 1.8 billion barrels. Syncrude’s current resource estimate of approximately nine billion barrels, or three billion barrels net to the Trust, includes the proved plus probable reserves as well as contingent resources.

Syncrude’s extensive oil sands leases provide a long-term source of bitumen for the production of SSB, which has an average gravity of about 32˚API and less than 0.2% sulphur content. Each Syncrude owner receives its share of SSB production-in-kind and is responsible for its own marketing activities. SSB is transported by various pipelines to refineries throughout most of Canada and the United States (“U.S.”).

In 2006, Syncrude’s productive capacity of its bitumen extraction plants and upgrading facilities increased by 100,000 barrels per day to approximately 350,000 barrels per day, or 128 million barrels annually. The increase in capacity reflects the completion of the third phase, referred to as Stage 3, of Syncrude’s multi-staged expansion plan that is aimed at achieving productive capacity in excess of 500,000 barrels per day. The Stage 3 facilities came on-line in August 2006. With the new facilities, Syncrude’s estimated proved plus probable reserves life is approximately 40 years.

Syncrude’s post-Stage 3 facilities have the design capability to produce approximately 375,000 barrels per day when operating at full capacity under optimal conditions and with no downtime for maintenance or turnarounds. This daily production capacity is referred to as “barrels per stream day”. However, under normal operating conditions, scheduled downtime is required for maintenance and turnaround activities and unscheduled downtime will occur as a result of mechanical problems, unanticipated repairs and other shutdowns. When allowances for such downtime are included, the daily productive capacity of Syncrude’s post-Stage 3 facilities is approximately 350,000 barrels per day on average and is referred to as “barrels per calendar day”. Unless stated otherwise, all references to Syncrude’s productive capacity in the following discussions refer to barrels per calendar day.