Last year we set the goal of marketing our Syncrude production directly. We believed that internalizing the marketing function would allow us greater insight into our customers’ needs, enhance our understanding of crude oil markets and assist in the development of distribution strategies. Beginning in September 2006 we successfully achieved this goal and already are realizing many of the benefits.

Our strongest motivation for internalizing marketing was to strengthen our ability to build long lasting relationships within the North American refining industry. With the increase in Syncrude’s productive capacity to 350,000 barrels per day through Stage 3, we knew that strong relationships would be critical to our future success in achieving optimum value for our share of that production.

Profile building in the industry was another key undertaking for the new marketing team. Members of the marketing group assumed positions on the crude oil, pipeline expansion and markets and transportation committees of the Canadian Association of Petroleum Producers, focusing on ensuring that policy decisions reflect the unique needs of light oil producers. Our marketing group also has been instrumental in developing the transportation alternatives described in the Round Table Section of this annual report, which should reduce the risk of pipeline constraints in the coming years.

Customer education is an important objective for the marketing group as we expect to transition all of our production to a higher quality light crude. This enhanced SSP product promises even greater market potential with markedly higher distillate cetane and smoke point characteristics, and lower distillate sulphur and nitrogen content. These qualities should assist North American refiners to meet more stringent environmental requirements and will greatly assist in feedstock selection. Our customers can then rely on the consistency of this quality. Syncrude’s strict quality control standards ensure that its crude falls within a narrow, predictable set of parameters. This dependability has value for refiners, as it allows them to run their operations more smoothly and efficiently.

Through our marketing efforts and the move to a higher quality blend, we believe that we are well positioned to achieve optimum pricing for our production, within the driving force of supply and demand. Our enhanced understanding of the crude oil market will also help us communicate market demand trends to Syncrude, thereby helping to shape the direction of our future production streams.