North American Shale Gas Revolution
Presentation to APEC
By Dan Cowan – Petroleum Resources Branch, Natural Resources Canada
May 10, 2011
Canada’s Natural Resources – Now and for the Future
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Outline
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Natural gas and energy in Canada
Energy policy and jurisdiction
North American gas market
Shale gas at a glance
How has “the game” changed?
Cdn. unconventional resources
Challenge of commercializing resource
Canadian supply forecast
Canada’s Natural Resources – Now and for the Future
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Energy - important to Canada’s
economic prosperity
 3rd largest producer & exporter of
natural gas
Energy as a Percentage of Canadian Total (2009)
25%
 Only OECD country with growing
oil production
 Stable and secure energy supplier
 $84 billion exports in 2009,
primarily oil and gas:
 23.4% of total exports
23.4%
20.6%
20%
15%
10%
6.7%
5%
1.8%
 In 2009, energy represented 6.7%
of GDP, with direct employment of
about 263,000 people
0%
Canada’s Natural Resources – Now and for the Future
Investment
Exports
GDP
Employment
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Federal Energy Framework and
Jurisdiction
 Reliance on competitive markets for determining
supply, demand, prices, and trade
 Shared jurisdiction over natural resources
Provincial Jurisdiction
Federal Jurisdiction
•Resource ownership,
management and royalties
•Land-use planning and
allocation
•Laws regarding the exploration,
development, conservation and
use of natural resources within
provincial boundaries
•International and interprovincial
issues
•North, offshore and Crown lands
•Works declared to be for the
general benefit of Canada (e.g.
science and technology)
•Nuclear, uranium
Canada’s Natural Resources – Now and for the Future
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North American Natural Gas
Market
 74 Bcf/d - fully integrated market
 Supply and demand centers connected via
extensive pipeline network
 Canada is a major producer and net exporter
 Provides 85% of US imports
 Majority of reserves located in Western Canada
 Far from premium markets incl. Boston and H.H.
 Surging U.S. shale gas production
 Prices expected to remain relatively low
 Ongoing efforts to build and diversify markets
Canada’s Natural Resources – Now and for the Future
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Technology is unlocking shale
gas potential
 Shale is an
unconventional natural
gas
 Resource development
not previously
economical due to low
flow rates
 Combining long-reach
horizontal drilling with
multi-stage hydraulic
fracturing has made the
resource viable
Canada’s Natural Resources – Now and for the Future
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Shale Gas - Production and
Resource Profile
 Shale gas development began in the US where production
grew from <1 bcf/d in 2000 to about 15 Bcf/d today
 More than 20% of North American production
 Shale gas widely expected to compose a third of North
American natural gas production by 2020
 Canadian Society for Unconventional Gas estimates 700 to
1300 Tcf of natural gas in Canada (largely unconventional)
 At unconstrained prices, North America estimated to now have
100-200 years of supply
Canada’s Natural Resources – Now and for the Future
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How is shale gas changing
the game?
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2000-2007
Supply-limited market
High drilling levels,
concern about supply
High prod’n costs, high
and volatile prices,
linked to oil
Falling WCSB
conventional prod’n
Falling exports to US
Canada looking to
import LNG
Canada’s Natural Resources – Now and for the Future
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2008- Present
Demand-driven market,
lower drilling, 100-200
years supply
Lower prod’n costs and
prices, reduced volatility
Decoupling from oil prices
Redrawing the energy
map
Surplus LNG import
capacity
Industry advancing LNG
export projects
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$27
$140
$24
$21
$120
WTI
$18
$100
$15
$80
$12
$60
H.H.
$9
$40
$US 2008 / MMBtu
$160
$6
Oil Price Range
Natural Gas Price Range
20
25
20
20
$0
20
15
$0
20
10
$3
20
05
$20
20
00
$US 2008 / Per Barrel
Forecast Oil (WTI) and Natural Gas
(Henry Hub) Prices
Average Price
Source: Various private consultants on retainer to the department and publically available forecasts.
Natural Gas prices converted into per barrel equivalent using a value of 1 barrel oil = 5.8 MMBtu
Canada’s Natural Resources – Now and for the Future
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Major Unconventional
Gas Basins
 Canada has major
unconventional gas
resources
 50% of currently defined
potential exists within Horn
River and Montney
 Both among lowest cost
basins in North America
 Challenged by distance to
domestic markets and
current low prices
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Producer Challenge:
How to increase netbacks?
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Cost reductions, stimulate demand etc.
Focus on the liquids rich plays
Exploring gas-to-liquids opportunities
Diversify export markets (via LNG)
AECO
$3.84
LNG
>$11.00
Oil-based LNG
NBP
$8.99
H.H.
$4.11
Canada’s Natural Resources – Now and for the Future
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Canadian Gas Supply Forecast –
February 2011
Shale Gas
Tight Gas
Source: CAPP, Price assumption: $5.50/mcf
Canada’s Natural Resources – Now and for the Future
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Conclusions
 Surging US unconventional natural gas prod’n
caused significant over-supply in North America
 Canada has enormous shale gas potential
 Industry aggressively developing shales in BC
and other provinces
 Industry exploring new business models
including boosting demand, gas-to-liquids
technology, and diversifying export markets via
LNG.
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