NORTHEAST B.C. COAL & ENERGY FORUM | OCTOBER 9, 2014
Recent Developments That Affect
North American Gas Supply
Brian Morse
Manager, Gas Supply
Safe Harbor Statement
Some of the statements in this document concerning future company
performance will be forward-looking within the meanings of the securities
laws. Actual results may materially differ from those discussed in these
forward-looking statements, and you should refer to the additional
information contained in Spectra Energy’s Form 10-K and other filings made
with the SEC concerning factors that could cause those results to be different
than contemplated in today's discussion.
Reg G Disclosure
In addition, today’s discussion includes certain non-GAAP financial measures
as defined under SEC Regulation G. A reconciliation of those measures to the
most directly comparable GAAP measures is available on our website.
NORTHEAST B.C. COAL & ENERGY FORUM | 2
Recap: U.S. Gas Supply & Demand
US Gas Production and Consumption
80
Dry Production
Marketable, Bcf/day
70
Demand
60
50
40
30
20
10
0
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Source: EIA and other public data sources
NORTHEAST B.C. COAL & ENERGY FORUM | 3
Canadian Gas Exports to the U.S. (2007 vs. 2013)
Sumas
Alliance
Northern & North
Border
Dakota Minnesota
GTN
Iroquois
Niagara
1,000
Sumas (MMcf/d)
2,400
Northern Border (MMcf/d)
2,000
800
1,600
600
1,200
400
800
200
400
0
0
2007
2013
2,400
2007
GTN (MMcf/d)
1,600
2,000
Alliance & North Dakota
1,400
1,200
1,000
800
600
400
200
0
2013
Minnesota (MMcf/d)
(MMcf/d)
2007
800
1,200
800
400
400
0
0
2007
2013
2007
Niagara (MMcf/d)
2013
Iroquois (MMcf/d)
2007
2013
1,600
1,400
1,200
1,000
800
600
400
200
0
1,200
1,600
1,400
1,200
1,000
800
600
400
200
0
2013
2007
2013
Source: Energy Information Administration
NORTHEAST B.C. COAL & ENERGY FORUM | 4
Recap: Western Canada Production
Gas Production
24
AB
22
BC
Raw Gas Production, Bcf/d
20
18
16
14
13 Bcf/d
12
10
8
6
4
5 Bcf/d
2
0
2007
2008
2009
2010
2011
2012
2013
2014
Source: Alberta and B.C. Governments
NORTHEAST B.C. COAL & ENERGY FORUM | 5
Perspective on Horizontal Wells
215 m
Calgary Skyline
Montney
Horn River
Duvernay
NORTHEAST B.C. COAL & ENERGY FORUM | 6
B.C. Resource Estimates
Gas In Place Estimates - 2013
Gas In Place Estimates - 2014
Horn River
Horn River
Montney
Montney
Cordova
Cordova
Liard
Liard
Conventional
Conventional
0
500
0
1,000
Tcf
1,500
2,000
500
1,000
Tcf
1,500
2,000
Montney (liquids-rich) gas production is
growing in all three sub-regions of
Western Canada, in step with gathering,
processing and liquids extraction
infrastructure development.
Source: Energy Briefing Note – The Ultimate Potential for Unconventional Petroleum from the Montney Formation of British Columbia and Alberta
NORTHEAST B.C. COAL & ENERGY FORUM | 7
2,000
Fort Nelson Asset Area
Cumulative Feet Drilled, Thousands
Cumulative Feet Drilled, Thousands
B.C. Drilling Response to Lower Gas Exports
2008
2009
1,500
2010
2011
2012
1,000
2013
2014
500
0
7,000
6,000
5,000
4,000
3,000
Fort St. John Asset Area
2008
2009
2010
2011
2012
2013
2014
2,000
1,000
0
Jan Feb Mar Apr May Jun
Jul Aug Sep Oct Nov Dec
Cumulative Feet Drilled, Thousands
400
Source: B.C. Government
350
300
250
Jan Feb Mar Apr May Jun
Jul Aug Sep Oct Nov Dec
Grizzly Valley Asset Area
2008
2009
2010
2011
200
150
100
50
0
Jan Feb Mar Apr May Jun
Jul Aug Sep Oct Nov Dec
NORTHEAST B.C. COAL & ENERGY FORUM | 8
Montney Production Responds to Drilling
Tight Gas Production
Montney TightMontney
Gas Production
MMcf/d
Production,MMcf/d
GasProduction,
RawGas
Raw
4,000
4,000
3,500
3,500
3,000
3,000
2,500
2,500
North
Fairway
BCBC
North
Fairway
650 MMcf/d
South
Fairway
BCBC
South
Fairway
ABAB
Fairway
Fairway
2,000
2,000
1,630 MMcf/d
1,500
1,500
1,000
1,000
500
500
0
0
2007
2007
900 MMcf/d
2008
2008
2009
2009
2010
2011
2012
2013
2014
2010
2011
2012
2013
2014
Source: Alberta and B.C. Governments
NORTHEAST B.C. COAL & ENERGY FORUM | 9
North-South Split Forecast
7
BC Montney Forecast
Marketable Gas, Bcf/d
6
5
3.7 Bcf/d
NEB BC Tight
Gas Forecast
57% of B.C.
Fairway acreage
4
North Montney
3
2
South Montney
2.8 Bcf/d
1
43% of B.C.
Fairway acreage
0
2012 2014 2016 2018 2020 2022 2024 2026 2028 2030 2032 2034
Source: National Energy Board (NEB), 2013
NORTHEAST B.C. COAL & ENERGY FORUM | 10
Utica is Established
Marcellus Region Production
18,000
16,000
Raw Gas, MMcf/d
14,000
12,000
10,000
8,000
6,000
4,000
2,000
2007
2008
2009
2010
2011
2012
2013
2014
Utica Region Gas Production
1,600
Raw Gas, MMcf/d
1,400
1,200
1,000
800
Marcellus
Utica
600
400
200
2007
Source: EIA
2008
2009
2010
2011
2012
2013
2014
NORTHEAST B.C. COAL & ENERGY FORUM | 11
Relative Ranking of Established Gas Supply
Sources in North America
Eagle Ford Marcellus
Montney
Barnett
Haynesville
Horn River
Duvernay
*Supply Cost: Includes capital costs, operating costs, transportation, government take and a 10% return under full field development
Source: Wood Mackenzie, October 2011 via Nexen Investor Presentation 2012-07
NORTHEAST B.C. COAL & ENERGY FORUM | 12
Gas Price vs. Gas Supply
North America Gas Supply Cost Curve
• North American gas
supplies are large and
have widely varying
associated costs
Breakeven Gas Price $/MMBtu
$25.00
$20.00
• The recent shale gas
supply surge has added
large sources of supply
with relatively low
development costs
$15.00
$10.00
$5.00
$0.00
0
200
400
600
800 1,000 1,200 1,400 1,600 1,800 2,000 2,200 2,400 2,600
Tcf of Gas Available
Tcf of Gas Available
• There are
approximately 900 Tcf
available at a cost of
supply of $4.00/Mcf,
or less
Quantity is not the issue... price is
Source: 2011 MIT Study on the Future of Natural Gas, Figure 2.10
NORTHEAST B.C. COAL & ENERGY FORUM | 13
How Much is 900 Tcf?
• 900 Tcf available at
$4.00/Mcf or less
• Compared to U.S. and
Canada’s cumulative gas
demand
• Includes LNG exports and
domestic growth in
residential, commercial,
industrial, and power
generation demand
• Cumulative consumption
does not reach 900 Tcf in
the next 25 years
* LNG Exports assumes first exports of 6 Bcf/day in 2015, increasing to 20 Bcf/d in 2022, then flat
Source: U.S. Energy Information Administration and Canadian National Energy Board 2011 Forecast
NORTHEAST B.C. COAL & ENERGY FORUM | 14
NEB Export Permit
Pending
NEB Export Permit Obtained
Proposed West Coast LNG Projects
Size
Bcf/d
Location
Imperial Oil/ExxonMobil Canada
3.8
Prince Rupert
Nexen (CNOOC), INPEX, and JGC
3.1
Prince Rupert
LNG Canada
Prince Rupert
LNG
Pacific
Northwest LNG
Jordan Cove
Energy Project
Shell Canada, PetroChina Company,
Korea Gas Corp and Mitsubishi Corp
BG Group
Progress Energy, PETRONAS and Japan
Petroleum Exploration Company
3.1
Kitimat
2.7
Prince Rupert
Ridley Island
2.7
Prince Rupert
Lelu Island
Veresen Inc.
1.6
Coos Bay,
Oregon
North Spit
Kitimat LNG
Apache Canada Limited and Chevron
Canada Limited
1.3
Oregon LNG
Leucadia National Corporation
AltaGas Limited, Idemitsu Canada
Corporation
1.3
Woodfibre LNG Limited
Douglas Channel Gas Services, Haisla
Nation, Golar LNG, LNG Partners LLC
Canada Stewart Energy Group Ltd
0.3
Woodside Energy Ltd.
2.8
Kitsault Energy
Quicksilver Resources
Steelhead LNG Corp. and
Huu-ay-aht First Nation
WesPac Midstream
Watson Island LNG Corp and City of
Prince Rupert
2.6
2.6
Name
Participants
West Coast
Canada LNG
Aurora LNG
Triton LNG
Woodfibre LNG
Project
Douglas Channel
LNG
Stewart Energy
LNG
Grassy Point LNG
Kitsault Energy
Discovery LNG
Steelhead LNG
WesPac
Watson Island
LNG
0.3
0.2
3.8
Specific
Pipeline
Grassy Point or Tuck
Inlet
Grassy Point or Digby
Island
Douglas Channel
Not determined
Kitimat
Bish Cove
Warrenton, Skipanon Peninsula
Oregon
Kitimat or
Prince Rupert Floating facility
Squamish
Old pulp mill site
West bank of Douglas
Kitimat
Channel. Barge.
Stewart
Floating facility initially
Point (on shore
Prince Rupert Grassy
or floating)
Kitsault
Floating facility initially
Campbell River Elk Falls Mill site
Not determined
Coastal GasLink Pipeline (TCPL)
Westcoast Connector Gas
Transmission Project (Spectra Energy)
Prince Rupert Gas Transmission
Project (TCPL)
Existing Fortis & GTN then new Pacific
Connector Gas Pipeline (Williams &
Veresen)
Merrick Mainline (TCPL) and Pacific
Trail Pipeline (Chevron)
Oregon Pipeline to existing Williams
pipeline
Existing PNG
Fortis and Spectra
Existing PNG
Not determined
Not determined
Not determined
Not determined
0.8
0.4
Port Alberni
Delta
Sarita Bay
Tilbury Island
Not determined
Existing or expanded Fortis
small
Prince Rupert
Watson Island
Not determined
NORTHEAST B.C. COAL & ENERGY FORUM | 15
B.C. LNG Locations
Stewart
Kitsault
Prince Rupert
Kitimat
Campbell River
Squamish
Port Alberni
Delta
NORTHEAST B.C. COAL & ENERGY FORUM | 16
Oregon LNG Locations
GTN
Warrenton
NWP
Coos Bay
Malin
Proposed Connector
NORTHEAST B.C. COAL & ENERGY FORUM | 17
Reaction to China Russia
Gas Supply Announcement
Massive Russia-China gas deal to
shake up LNG markets
The Globe and Mail
Russia-China Natural Gas Deal to Set
LNG Price Floor
Bank of America
Russia-China gas deal puts heat on
BC’s LNG sector
Vancouver Sun
Russia-China gas deal could squeeze
economics of Canadian LNG projects
TD
Russia and China’s $400 billion
natural gas deal is bad news for BC
LNG.
Canadian Business
3.8 Bcf/d x 30 years
The world does not need Canadian
LNG
former Shell exec
China’s natural gas supply options
greatly exceed market requirements
CanadaWest Foundation
NORTHEAST B.C. COAL & ENERGY FORUM | 18
Russian Supply Perspective
Russian Gas Movement
90
80
Bcf/d, Marketable Gas
70
LNG Exports to Asia
Exports to Europe & FSU
Consumption
60
50
40
30
20
10
0
2012
2013
Russian Gas Deal
3.8 Bcf/d in 2018
Comparator:
N.A. Gas Production
2014
Source: Gazprom, Rosneft, Novatek, BP Statistical Review of World Energy
NORTHEAST B.C. COAL & ENERGY FORUM | 19
China Demand Perspective
China - Energy Consumption by Type
4,500
4,000
Million Tonnes Oil Equivalent
3,500
3,000
Renewables
Hydro
Nuclear
Coal
Gas
Oil
2,500
2,000
1,500
1,000
500
0
2012
2013
Russian Gas Deal
3.8 Bcf/d in 2018
2035
Comparator:
Total China Energy
US & Canada
Demand Forecast 2013 Consumption
Source: Energy Information Administration, BP Energy Outlook, International Energy Agency
NORTHEAST B.C. COAL & ENERGY FORUM | 20
New U.S. Demand Identified
GTL
• High returns with methane feedstock prices low and liquid
products prices high
• Smaller strategically placed projects expected to be funded
• Proposed locations in Marcellus-Utica, Gulf Coast and
Rockies currently
Methanol
• Used as a petrochemical feedstock and to produce gasoline
• Low cost gas feedstock and rising demand worldwide for
methanol attract investment
• Facilities planned in Gulf Coast area and West Coast for
export to China
Fertilizer
• Producing ammonia and nitrogen requires natural gas for
hydrogen content and heat energy
• Domestic demand is up and feedstock (gas) prices are down
• Planned locations more spread out than GTL or Methanol
Transportation
• Road, rail, and shipping industries gradually migrating to
natural gas fuel
• Proposed facilities dedicated to large airports
Magnitude
3 Bcf/d Demand Growth (to 2018)
Transportation
500 mmcf/d
17%
Fertilizer
1,100 MMcf/d
37%
GTL
400 MMcf/d
13%
Methanol
1,000 MMcf/d
33%
NORTHEAST B.C. COAL & ENERGY FORUM | 21
Recognized by: