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Relevant • Independent • Objective www.ceri.ca 1
The Changing Face of the Oil and Gas Industry in Canada
Canadian Energy Research Institute
Peter Howard, P.Eng President and CEO
Canadian Energy Research Institute
August 2012 Washington DC
Relevant • Independent • Objective www.ceri.ca 2
Agenda
Who We Are and What We Do
Let’s Talk About Canadian Oil and Oil Sands
Let’s Talk About Pipelines
But…
Let’s Talk About Western Canadian Natural Gas
Be Careful What You Wish For!
Relevant • Independent • Objective www.ceri.ca 3
Canadian Energy Research Institute Overview
Founded in 1975, the Canadian Energy Research Institute (CERI) is an independent, non-profit research institute specializing in the analysis of energy economics and related environmental policy issues in the energy production, transportation, and consumption sectors. Our mission is to provide relevant, independent, and objective economic research in energy and related environmental issues. A central goal of CERI is to bring the insights of scientific research, economic analysis, and practical experience to the attention of government policy-makers, business sector decision-makers, the media, and citizens in Canada and abroad. Core members of the Institute include the Canadian Government, the Government of the Province of Alberta, the University of Calgary, the Canadian Association of Petroleum Producers (CAPP) and the Small Explorers and Producers Association (SEPAC). In-kind support is also provided by the Energy Resources Conservation Board (ERCB).
All of CERI’s research is publically available on our website at www.ceri.ca
Relevant • Independent • Objective www.ceri.ca 4
2011-2012 Reports Released
Canadian Oil Sands Supply Costs and Development Projects (2011-2045) (March 2012) Canadian Energy: Pacific Access – Foreign Investment in the Oil Sands and British Columbia Shale Gas (March 2012) Canadian Energy: Pacific Access – Oil Spills and First Nations: Exploring Environmental Land Issues Surrounding the Northern Gateway Pipeline (February 2012) Canadian Energy: Pacific Access – Overview of Transportation Options (January 2012) Overview of Eastern and Atlantic Canada’s Petroleum Industry and Economic Impacts of Offshore Atlantic Projects (November 2011) Applicability Abatement Potential for the Alberta Oil Sands Industry and Carbon Capture and Storage (CCS) Applicability to Coal-fired Electricity Generation and Oil Sands (October 2011) North American Natural Gas Market Dynamics: Global LNG – A Review (June 2011) Economic Impacts of Drilling, Completing and Operation of Gas Wells in Western Canada (June 2011) Economic Impacts of Drilling, Completing and Operating Conventional Oil Wells in Western Canada (June 2011)
Relevant • Independent • Objective www.ceri.ca 5
2012 Reports Released (July/August 2012)
Pacific Access Part I – Linking Oil Sands Supply to New and Existing Markets Pacific Access Part II – Asia-Directed Oil Pathways and Their Economic Impacts Pacific Access Part III – Economic Impacts of Exporting Horn River Natural Gas to Asia as LNG Natural Gas Liquids in North America: Overview and Outlook to 2035
Relevant • Independent • Objective www.ceri.ca 6
2012-2013 Current Work
Potential Impact of Shale Gas Development in Quebec North American Natural Gas Demand Pathways (ICF/MARBEK, whatIf? Technologies) Energy Metrics Handbook Potential Transportation Options for Alberta Land-Locked Oil
For a list of all CERI publications, please visit our website at www.ceri.ca
Relevant • Independent • Objective www.ceri.ca 7
CERI Conferences
CERI hosts three major conferences each year (Oil, Natural Gas and Petrochemicals) attended by over 100 delegates from across North America.
Dates and venues for our 2013 conferences can be found on our website. For further information, contact our Conference Manager, Deanne Landry, at 403-220-2395 or [email protected].
CERI 2012 Oil Conference “Achieving Super Power Status” April 23-24, 2012
CERI 2012 Petrochemical Conference “Pathways to the Future” June 3-5, 2012
CERI 2012 Natural Gas Conference “Going Global – Shifting the Focus of the Natural Gas Industry” February 27-28, 2012
Relevant • Independent • Objective www.ceri.ca 8
“Western Canada’s Upstream Oil and Gas Industry”
Land Acquisition Crown Land Sales
Evaluation
Construction
Operation and Maintenance
Production
Wages
Royalties
Western Canada’s Oil and Gas Industry
Land Acquisition Crown Land Sales
Conventional Drilling
Completion and Tie in
Operation and Maintenance
Production
Wages
Royalties
2009 Expenditures: $41.4 billion 2009 Expenditures: $25.1 billion
Oil and Gas Drilling Oil Sands Developments 9
Relevant • Independent • Objective www.ceri.ca 10
“Let’s Talk About Canadian Oil and Oil Sands”
Relevant • Independent • Objective www.ceri.ca 11
2011 Facts about Canadian Crude
Production: • Western Canada (AB,BC,SK,NWT) Conventional LIGHT Crude 561,929 bbls/day • Western Canada (AB,BC,SK,NWT) Upgraded Bitumen 846,112 bbls/day • Western Canada (AB,BC,SK,NWT) Condensate (C5+) 128,498 bbls/day • Western Canada (AB,BC,SK,NWT) Conventional HEAVY Crude 421,618 bbls/day • Western Canada (AB,BC,SK,NWT) Non Upgraded Bitumen 758,919 bbls/day • Eastern Canada (NF/LAB,ON) Conventional LIGHT Crude 271,778 bbls/day • Total 2011 Production of Crude Oil and Equivalent 2,988,854 bbls/day
Exports: • PADD I (74% Light, 26% Heavy) 171,182 bbls/day • PADD II (21% Light, 79% Heavy) 1,439,447 bbls/day • PADD III (12% Light, 78% Heavy) 111,358 bbls/day • PADD IV (17% Light, 83% Heavy) 213,709 bbls/day • PADD V (61% Light, 39% Heavy) 167,295 bbls/day • Non-US (67% Light, 33% Heavy) 35,261 bbls/day • Total US (28% Light, 82% Heavy) 2,138,260 bbls/day
Imports: % of Capacity
• Atlantic Canada Conventional Crude 333,990 bbls/day (80%) • Quebec Conventional Crude 298,775 bbls/day (84%) • Ontario Conventional Crude 52,836 bbls/day (15%) • Total Canadian Imports 685,560 bbls/day
Relevant • Independent • Objective www.ceri.ca 12
$0.00
$0.20
$0.40
$0.60
$0.80
$1.00
$1.20
$1.40
$1.60
$1.80
$2.00
$2.20
$2.40
$2.60
$2.80
$3.00
$3.20
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Cdn/US Multiplier
Normalized
WCSB Conventional Oil Production Forecast Realistic Scenario (2010-2035)
0
200,000
400,000
600,000
800,000
1,000,000
1,200,000
1,400,000
Pro
du
ctio
n (
bb
ls/d
ay)
British Columbia Existing Wells British Columbia New Wells Alberta Existing Wells
Alberta New Wells Saskatchewan Existing Wells Saskatchewan New Wells
Manitoba Production NWT Production
+ 150,000 bbls/day
Relevant • Independent • Objective www.ceri.ca 13
Western Canadian Oil Sands Potential
0
500
1,000
1,500
2,000
2,500
3,000
3,500
2007 2009 2011 2013 2015 2017 2019 2021 2023 2025 2027 2029 2031 2033 2035 2037 2039 2041 2043 2045
('000 bpd)
Total In Situ Bitumen Volumes Total Mined Bitumen Volumes
SAGD and CSS Projects Potential 3.3 mbpd
Mining Projects Potential 2.1 mbpd
Relevant • Independent • Objective www.ceri.ca 14
Western Canadian Oil Sands Potential
2007 2009 2011 2013 2015 2017 2019 2021 2023 2025 2027 2029 2031 2033 2035 2037 2039 2041 2043 2045
-
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
5,000
5,500
6,000
('000 b/d)
Announced Awaiting Approval
Approved Suspended
Under Construction Onstream
Relevant • Independent • Objective www.ceri.ca 15
Options for Canadian Crude By Pipeline
Source: Canadian Association of Petroleum Producers, Crude Oil Forecast, Markets & Pipelines, June 2011
Churchill
Relevant • Independent • Objective www.ceri.ca 16
Economic Impacts of Alberta’s Oil Sands “No Expansion” Scenario
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,0002
00
7
20
08
20
09
20
10
20
11
20
12
20
13
20
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20
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20
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20
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20
29
20
30
20
31
20
32
20
33
20
34
20
35
'000 bbl/d
AB Conventional Prodn SK Conventional BC Conventional
MB Conventional NWT Conventional Diluent for Primary/Eor
Existing&Under Construction US Bakken prodn Existing Export Operational Capacity
Note(s): 1) Operational Capacity is 95% of total design capacity. 2) Conventional crude volumes are net production volumes available for export (i.e., net of domestic demand). 3) Oil Sands volumes comprise of net bitumen SCO available for export and diluent volumes required to move bitumen as per pipeline specifications. February 2, 2012
Mainline Expansion (2014) Enbridge Line 61 +160,000 bpd Enbridge Line 5 +50,000 bpd Rail volumes (+50,000 to +200,000 bpd)
Relevant • Independent • Objective www.ceri.ca 17
Economic Impacts of Alberta’s Oil Sands “No Expansion” Scenario
0
50
100
150
200
250
300
350
400
450
20
11
20
13
20
15
20
17
20
19
20
21
20
23
20
25
20
27
20
29
20
31
20
33
20
35
Induced
Indirect
Direct
0
10
20
30
40
50
60
70
80
Canada Direct employment 90,000 (2011)
growing to 125,000 jobs (2022)
Total Direct, Indirect, Induced employment 270,000 (2011) to 370,000 (2022)
United States Total Indirect and Induced
employment 54,000 (2011) growing to 71,000 jobs (2022)
Source: CERI, Pacific Access: Part I Linking Oil Sands Supply to New and Existing Markets
Relevant • Independent • Objective www.ceri.ca 18
Thousand
Person Years
GDP Compensation of
Employees
Employment
PADD I 38,742 19,604 447
PADD II 50,550 24,983 580
PADD III 19,844 7,814 195
PADD IV 8,028 3,740 88
PADD V 24,474 11,412 258
Total US 141,638 67,554 1,568
2011-2035$CAD Million
Alberta $1,440 Billion
0
200
400
600
800
1000
1200
1400
1600
GDP
$C
DN
Bill
ion
s
Rest of Canada $80.9 Billion
Ontario 55% British
Columbia 24%
Quebec 12%
Saskatchewan
4%
Manitoba 3%
Rest of Canada
2%
Total GDP Increase as a result of Oil Sands Investment & Operations 2011-2035 1. Ontario $44.30 billion 4. Saskatchewan $3.05 billion 2. BC $19.45 billion 5. Manitoba $2.93 billion 3. Quebec $9.59 billion 6. ROC $1.56 billion
Economic Impacts of Alberta’s Oil Sands “No Expansion” Scenario
Canadian GDP Impacts
United States Impacts by PADD
Source: CERI, Pacific Access: Part I Linking Oil Sands Supply to New and Existing Markets
Relevant • Independent • Objective www.ceri.ca 19
Thousand
Person Years
GDP Compensation of
Employees
Employment
Alabama 1,291 647 19
Alaska 521 113 3
Arizona 1,729 849 22
Arkansas 754 355 11
California 15,091 7,012 151
Colorado 3,305 1,563 35
Connecticut 1,703 839 15
Delaware 474 176 4
District of Columbia 475 292 4
Florida 5,139 2,498 69
Georgia 2,827 1,471 38
Hawaii 395 181 5
Idaho 378 193 6
Illinois 17,303 8,442 173
Indiana 2,446 1,216 30
Iowa 1,072 471 14
Kansas 2,008 977 24
Kentucky 1,216 599 18
Louisiana 3,493 1,115 27
Maine 340 178 6
Maryland 1,740 895 21
Massachusetts 2,567 1,463 28
Michigan 4,468 2,371 54
Minnesota 2,046 1,063 26
Mississippi 761 367 12
Missouri 1,728 918 25
Montana 3,176 1,504 32
Nebraska 593 280 9
Nevada 903 433 12
New Hampshire 430 238 6
New Jersey 3,545 1,801 35
New Mexico 610 214 7
New York 7,713 3,902 71
North Carolina 3,121 1,389 37
North Dakota 209 89 3
Ohio 6,662 3,358 77
Oklahoma 1,368 556 16
Oregon 1,382 650 18
Pennsylvania 4,058 2,097 50
Rhode Island 337 165 4
South Carolina 1,120 602 18
South Dakota 252 98 4
Tennessee 1,870 957 27
Texas 12,935 5,116 119
Utah 787 382 11
Vermont 173 90 3
Virginia 2,577 1,313 31
Washington 4,451 2,174 48
West Virginia 401 195 6
Wisconsin 7,308 3,590 79
Wyoming 382 98 3
Total US 141,638 67,554 1,568
$CAD Million
Economic Impacts of Alberta’s Oil Sands “No Expansion” Scenario
United States Impacts by State
Source: CERI, Pacific Access: Part I Linking Oil Sands Supply to New and Existing Markets (Appendix A)
Relevant • Independent • Objective www.ceri.ca 20
“Let’s Talk About Pipelines”
Relevant • Independent • Objective www.ceri.ca 21
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
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20
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20
29
20
30
20
31
20
32
20
33
20
34
20
35
'000 bbl/d
AB Conventional Prodn SK Conventional BC Conventional
MB Conventional NWT Conventional Diluent for Primary/Eor
Existing&Under Construction US Bakken prodn Approved
Approved-on Hold Awaiting Approval Announced
KXL Addition Expansion of Enbridge mainline Existing Export Operational Capacity
Note(s): 1)Operational Capacity is 95% of total design capacity. 2) Conventional crude volumes are net production volumes available for export (i.e., net of domestic demand). 3) Oil Sands volumes comprise of net bitumen and SCO available for export and diluent volumes req'ed to move bitumen as per pipeline specifications. August 23, 2012
Keystone XL (2015)
Mainline Expansion (2014)
Alberta Oil Sands Projects Coupled with WCSB Conventional Oil Inclusion of the Keystone XL Pipeline
Relevant • Independent • Objective www.ceri.ca 22
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
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25
20
26
20
27
20
28
20
29
20
30
20
31
20
32
20
33
20
34
20
35
'000 bbl/d
AB Conventional Prodn SK Conventional BC ConventionalMB Conventional NWT Conventional Diluent for Primary/EorExisting&Under Construction US Bakken prodn ApprovedApproved-on Hold Awaiting Approval AnnouncedTMX Expansion KXL Addition Expansion of Enbridge mainlineExisting Export Operational Capacity
Note(s): 1)Operational Capacity is 95% of total design capacity. 2) Conventional crude volumes are net production volumes available for export (i.e., net of domestic demand). 3) Oil Sands volumes comprise of net bitumen and SCO available for export and diluent volumes req'ed to move bitumen as per pipeline specifications. August 23, 2012
TMX (2017)
Keystone XL (2015)
Mainline Expansion (2014)
Alberta Oil Sands Projects Coupled with WCSB Conventional Oil Inclusion of TMX Expansion
Relevant • Independent • Objective www.ceri.ca 23
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
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20
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20
34
20
35
'000 bbl/d
AB Conventional Prodn SK Conventional BC ConventionalMB Conventional NWT Conventional Diluent for Primary/EorExisting&Under Construction US Bakken prodn ApprovedApproved-on Hold Awaiting Approval AnnouncedNorthern Gateway Addition TMX Expansion KXL AdditionExpansion of Enbridge mainline Existing Export Operational Capacity
Note(s): 1)Operational Capacity is 95% of total design capacity. 2) Conventional crude volumes are net production volumes available for export (i.e., net of domestic demand). 3) Oil Sands volumes comprise of net bitumen and SCO available for export and diluent volumes req'ed to move bitumen as per pipeline specifications. August 23, 2012
TMX (2017)
Keystone XL (2015)
Northern Gateway (2018)
Mainline Expansion (2014)
Alberta Oil Sands Projects Coupled with WCSB Conventional Oil Inclusion of Northern Gateway
Relevant • Independent • Objective www.ceri.ca 24
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
20
07
20
08
20
09
20
10
20
11
20
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'000 bbl/d
AB Conventional Prodn SK Conventional BC ConventionalMB Conventional NWT Conventional Diluent for Primary/EorExisting&Under Construction US Bakken prodn ApprovedApproved-on Hold Awaiting Approval AnnouncedNorthern Gateway Addition TMX Expansion KXL AdditionExpansion of Enbridge mainline Existing Export Operational Capacity
Note(s): 1)Operational Capacity is 95% of total design capacity. 2) Conventional crude volumes are net production volumes available for export (i.e., net of domestic demand). 3) Oil Sands volumes comprise of net bitumen and SCO available for export and diluent volumes req'ed to move bitumen as per pipeline specifications. August 23, 2012
TMX (2017)
Keystone XL (2015)
Northern Gateway (2018) Looping/Expanding Existing Pipelines
Mainline Expansion (2014)
Alberta Oil Sands Projects Coupled with WCSB Conventional Oil Full Potential
Relevant • Independent • Objective www.ceri.ca 25
“BUT”
Relevant • Independent • Objective www.ceri.ca 26
1. Canadian exports currently feed one market (flat demand and increasing domestic supply).
2. Western Canadian oil/oil sands are land-locked and need transportation options in order to grow either new barrels to the US or Asia.
3. Alberta needs oil hydrocarbon growth in the face of a tanking gas market (Growth = GDP, Employment, Taxes, Royalties).
4. The Cushing Oklahoma bottleneck is affecting PADD II and Canadian market prices “negatively”.
5. Tightening Canadian pipeline capacity will Affect Edmonton/Hardisty basis differential ($$$ left on the table) Potentially slow development of the Oil Sands Potentially slow development of Conventional Oil
6. Oil on Oil Competition for pipeline space and access to refineries Competition with Alberta/Saskatchewan conventional oil developments Competition with North Dakota Bakken oil developments Competition with US Shales (Niobrara, Eagle Ford, etc.)
What are the Problems for WCSB OIL?
Relevant • Independent • Objective www.ceri.ca 27
Competition from the US Bakken Oil Production Forecast and Transportation
Relevant • Independent • Objective www.ceri.ca 28
$(28.00)
$(26.00)
$(24.00)
$(22.00)
$(20.00)
$(18.00)
$(16.00)
$(14.00)
$(12.00)
$(10.00)
$(8.00)
$(6.00)
$(4.00)
$(2.00)
$-
$2.00
$4.00
$6.00
$8.00
$35.00
$40.00
$45.00
$50.00
$55.00
$60.00
$65.00
$70.00
$75.00
$80.00
$85.00
$90.00
$95.00
$100.00
$105.00
$110.00
$115.00
$120.00
$125.00
$130.00
$135.00Ja
n-2
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5
Ap
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Jul-
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Oct
-20
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WTI - Brent Differential ($/b)
Europe Brent Spot Price FOB ($/b)
West Texas Intermediate (WTI) @ Cushing ($/b)
Differential Problem WTI-Brent
Relevant • Independent • Objective www.ceri.ca 29
$0.00
$0.20
$0.40
$0.60
$0.80
$1.00
$1.20
$1.40
$1.60
$1.80
$2.00
$2.20
$2.40
$2.60
$2.80
$3.00
$3.20
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Cdn/US Multiplier
Normalized
Problem WTI-Brent Differential
Q3 2011
• WTI discount averaged $23 to Brent • Canadian Crude (Conventional, SCO, Bitumen) Exports
• 1,477,000 bbls/day to PADD II • 105,000 bbls/day to PADD III • 216,000 bbls/day to PADD IV • 157,000 bbls/day to PADD V
Simple Math: 2,152,000 bbls/day times $15/bbl = $32 million per day (discounted Value)
2012-2013 “The Pipeline Solution” • Enterprise/ETP (Cushing to Houston) 400,000 b/d Q4 2012 • Enbridge/Wrangler (Cushing to Houston) (light crude) 2013 • Enbridge Monarch (Cushing to Houston) 350,000 b/d Q4 2013 • Houston to El Paso reversal (bypass Cushing) 200,000 b/d Q2 2013 • TCPL Keystone Market Link (Cushing to Houston) 150,000 b/d Q2 2013
Relevant • Independent • Objective www.ceri.ca 30
$0.00
$0.20
$0.40
$0.60
$0.80
$1.00
$1.20
$1.40
$1.60
$1.80
$2.00
$2.20
$2.40
$2.60
$2.80
$3.00
$3.20
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Cdn/US Multiplier
Normalized
Future Problem WTI-Brent Differential
0
500,000
1,000,000
1,500,000
2,000,000
2,500,000
3,000,000
3,500,000
2011 2012 2013 2014 2015 2016
Cap
acit
y B
PD
Year
Pipeline Capacity Into and Out of Cushing
Total Flow Into Cushing
Total Flow Out of Cushing
RISK
Relevant • Independent • Objective www.ceri.ca 31
$0.00
$0.20
$0.40
$0.60
$0.80
$1.00
$1.20
$1.40
$1.60
$1.80
$2.00
$2.20
$2.40
$2.60
$2.80
$3.00
$3.20
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Cdn/US Multiplier
Normalized
Western Canada WTI-WCS Differential
$5.00
$10.00
$15.00
$20.00
$25.00
$30.00
$35.00
$40.00
$45.00
$50.00
$55.00
$60.00
$65.00
$70.00
$75.00
$80.00
$85.00
$90.00
$95.00
$100.00
$105.00
$110.00
$115.00
$120.00
$125.00
$130.00
$135.00
Jan
-20
05
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WTI - WCS Differential ($/b)
West Texas Intermediate (WTI) @ Cushing ($/b)
Western Canadian Select (WCS) @ Hardisty ($/b)
Average Light - Heavy Differential ($/b)
2005 - 2006 Median Differential ($/b)
2007 - 2008 Median Differential ($/b)
2009 - 2010 Median Differential ($/b)
2011 Median Differential ($/b)
Linear (Average Light - Heavy Differential ($/b))
Risk of widening differential if new pipelines are delayed
Keystone Base and Alberta Clipper new capacity
Production ramps up
Relevant • Independent • Objective www.ceri.ca 32
“Canada has Energy”
“North South East or West”
“If the Market Wants the Energy, Canada Needs the Pipes”
Relevant • Independent • Objective www.ceri.ca 33
“Let’s Talk About Western Canadian Natural Gas”
Relevant • Independent • Objective www.ceri.ca 34
United States Gas Pipeline Import/Export Forecast CERI “Realistic” Case (Feb. 2012)
-12,000
-10,000
-8,000
-6,000
-4,000
-2,000
0
2,000
4,000
6,000
8,000
10,000
12,000
-12,000
-10,000
-8,000
-6,000
-4,000
-2,000
0
2,000
4,000
6,000
8,000
10,000
12,000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
Ne
t Im
po
rt V
olu
me
s (M
Mcf
/day
)
Exp
ort
s
(
MM
cf/d
ay)
Im
po
rts
Canadian Exports to US Canadian Imports From US Net Exports
Too much GAS not enough DEMAND
“Where is the Problem?”
Net Canadian Exports - 5 BCF/d
Relevant • Independent • Objective www.ceri.ca 35
0 2,000 4,000 6,000 8,000
10,000 12,000 14,000 16,000 18,000 20,000
2005 2010 2015 2020 2025
WCSB Marketable Gas Supply -1,000
0
1,000
2,000
3,000
4,000
5,000
6,000
2005 2010 2015 2020 2025
TCPL Northern Pipeline
0
1,000
2,000
3,000
4,000
2005 2010 2015 2020 2025
TCPL Sarnia Import Volumes
-2,000
-1,000
0
1,000
2,000
2005 2010 2015 2020 2025
TCPL Niagara Net Flows
-14,000 -12,000 -10,000
-8,000 -6,000 -4,000 -2,000
0
2005 2010 2015 2020 2025
WCSB Export Flows Ontario / Quebec
Ontario/Quebec Import/Export Forecast CERI “Realistic” Case
Mid Continent Gas Rockies Gas Connect to Sarnia
Marcellus Gas into Niagara Marcellus Gas connect to Iroquois to New York
OIL Potential for Stranded Gas Pipeline Assets Conversion to Oil Service
Relevant • Independent • Objective www.ceri.ca 36
$0.00
$0.20
$0.40
$0.60
$0.80
$1.00
$1.20
$1.40
$1.60
$1.80
$2.00
$2.20
$2.40
$2.60
$2.80
$3.00
$3.20
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Cdn/US Multiplier
Normalized
AECO C Gas Price Forecast
Average WCSB Well Supply Cost Range ($3-$5.75/mcf)
$0
$1
$2
$3
$4
$5
$6
$7
$8
$9
$10
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17
20
18
20
19
20
20
20
21
20
22
20
23
20
24
20
25
20
26
20
27
20
28
20
29
20
30
20
31
20
32
20
33
20
34
20
35
$/MMBtu AECO C Natural Gas Forecasts
AECO C(real2010$/MMbtu) EIA AEO 2012
CERI Speculative
External Consultant
2008 Gas Wells Completed
2010 Gas Directed Licences
2011 Gas Directed Licences
Montney (34) Falher (17) Duvernay (11)
Cardium (24) Bluesky (17) Notikewin (10)
Glaucontic (49) Viking (16) Lower Mannville (10)
2012 Gas Directed Licences (Jan.-June)
Relevant • Independent • Objective www.ceri.ca 41
$0.00
$0.20
$0.40
$0.60
$0.80
$1.00
$1.20
$1.40
$1.60
$1.80
$2.00
$2.20
$2.40
$2.60
$2.80
$3.00
$3.20
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Cdn/US Multiplier
Normalized
Western Canada What Makes the Gas World Work BC Montney Supply Cost example
$3.8 $3.8 $3.9 $3.4
$3.0 $2.5
$2.1 $1.7
$1.3 $1.0
$0.7 $0.4 $0.2
$0.8 $-
$0.7 $1.3 $2.0 $2.6 $3.2 $3.8 $4.3 $4.9 $5.4 $5.8 $6.2 $6.5
$4.5
$3.8
$4.5 $4.7
$4.9 $5.1
$5.3 $5.5
$5.7 $5.8
$6.0 $6.2 $6.4 $6.5
$-
$0.5
$1.0
$1.5
$2.0
$2.5
$3.0
$3.5
$4.0
$4.5
$5.0
$5.5
$6.0
$6.5
$7.0
$/
mcf
Liquids Portion Gas Portion Revenue March 2012 Intra AB NIT Price ($/mcf)
With a Gas Price of $1.87/mcf a well needs a minimum of 60 bbls/mmcf (Liquids) to be economic
Relevant • Independent • Objective www.ceri.ca 42
$0.00
$0.20
$0.40
$0.60
$0.80
$1.00
$1.20
$1.40
$1.60
$1.80
$2.00
$2.20
$2.40
$2.60
$2.80
$3.00
$3.20
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Cdn/US Multiplier
Normalized
Western Canada Gas Well Development Forecast Realistic Scenario: Future Forecast
Summer 2012: Gas Prices are forecasted to drop below $2.00/mcf (Henry Hub)
0
2000
4000
6000
8000
10000
12000
14000
16000
18000
20000
22000
24000
26000
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17
20
18
20
19
20
20
20
21
20
22
20
23
20
24
20
25
20
26
20
27
20
28
20
29
20
30
20
31
20
32
20
33
20
34
20
35
Wel
l Co
un
t
AB Conventional Vertical Wells BC Conventional Vertical WellsSK Conventional Vertical Wells AB Conventional Horizontal WellsBC Conventional Horizontal Wells SK Conventional Horizontal WellsAB D&A Wells BC D&A WellsSK D&A Wells BC Horn RiverBC Montney AB CBM
Forecast Price Recovery ($2 to $6/mcf) Gas Directed Activity Focused on Liquids Rich Plays
Price Destruction ($14 to $3/mcf)
$1.87/mcf (March 2012)
XXXX
Relevant • Independent • Objective www.ceri.ca 43
Horn River to Kitimat LNG Potential (2013-2035)
103
59
50
175
107
94
86 82
78 76 73 71 70 68 67 66 65 64 63 62 61
0 0 0
20
40
0.0
100.0
200.0
300.0
400.0
500.0
600.0
700.0
800.0
900.0
1000.0
1100.0
1200.0
1300.0
1400.0
1500.0
1600.0
1700.0
1800.0
0
10
20
30
40
50
60
70
80
90
100
110
120
130
140
150
160
170
180
190
Pro
du
ctio
n V
oilu
me
(MM
cf/d
ay)
Wel
l Co
un
t
New Wells Pre Build Production Volume
Over the next 25 years: • $27 billion on upstream Investment • $15 billion in upstream operating cost • $ 5 billion in terminal investment • $ 3 billion in terminal operations • $ 2 billion in Pacific Trail pipeline • $ ? Billion in Spectra pipeline expansions
Relevant • Independent • Objective www.ceri.ca 44
“The Shale Gas Revolution!”
“The Conventional Oil Rebirth!”
“The Shale Oil Tsunami!”
“The Great NGL Surge”*
*Bentek Energy LLC
Be Careful What You Wish For!
Relevant • Independent • Objective www.ceri.ca 45
Canadian Energy Research Institute
Thank you for your time Please visit us at www.ceri.ca