Canadian Energy Research Institute
The Changing Face of the Oil and Gas
Industry in Western Canada
Peter Howard
Canadian Energy Research Institute
June 2014
1
Relevant • Independent • Objective
www.ceri.ca
Canadian Energy Research Institute
Overview
Founded in 1975, the Canadian Energy Research Institute (CERI) is an independent, nonprofit 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, and the Canadian Association of Petroleum Producers (CAPP).
In-kind support is also provided by the Alberta Energy Regulator (AER) and the University
of Calgary.
All of CERI’s research is publically available on our website at
www.ceri.ca
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Agenda
 Contributions of the Oil and Gas Sector to the Canadian Economy
 Are we Competitive in the North American and Global Markets?
 The Road Forward for Canadian Crude Oil and Oil Sands
 The Road Forward for Canadian Gas, LNG, and NGLs
 Opportunities and Challenges
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The Canadian Energy Research Institute’s
Newly Released and Forthcoming Studies
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Our Work
Current Work:
•
•
•
•
•
Natural Gas Liquids in North America: An Update (Part V): Future Outlook
Canadian Oil Sands Supply Costs and Development Projects (2013-2047)
North American Oil Pathways
Value-Added Potentials and Constraints
Others…
Recently Released Reports:
•
Natural Gas Liquids in North America: (Parts I – IV): Upstream, Infrastructure, Market
Fundamentals, and Global Opportunities
•
•
•
An Economic Analysis of TransCanada’s Energy East Pipeline Project
Conventional Natural Gas Supply Costs in Western Canada
Others…
Periodicals/Monthly Reports:
•
•
•
Crude Oil Commodity Report
Natural Gas Commodity Report
Geopolitics of Energy (Subscription Service)
Annual Conferences:
•
•
•
Petrochemical Conference (June 1-3, 2014)
Natural Gas Conference (February 2015)
Oil Conference (April 2015)
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Relevant • Independent • Objective
www.ceri.ca
Contributions of the Oil and Gas Sector to the
Canadian Economy
“By the Numbers”
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Relevant • Independent • Objective
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Oil Reserves and Natural Gas Resources
Total Remaining Marketable Gas Resources in
Canada = 1093 Tcf (at end of 2012)
Crude Oil Remaining Established Reserves in Canada =
171.3 Billion barrels (at end of 2012)
Oil Sands,
167.1
Mining, 32.8
Frontiers,
223
In Situ, 134.2
Conventional
Oil, 4.3
WCSB, 432
Tight Gas, 530
Conventional,
74
Shale Gas,
222
CBM, 35
Maritimes, 1
Quebec, 7
Ontario, 1
Source: ERCB ST-98. “Alberta’s Energy Reserves 2013 and
Supply/Demand Outlook 2014-2023”, June 2014.
Source: National Energy Board (NEB), “Canada’s Energy Future 2013:
Energy Supply and Demand Projections to 2035”, November 2013
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Oil Proved Reserves by Country
(billion barrels and % of total at end-2012)
(bln barrels)
World Oil Proved Reserves - 1,669 Billion barrels (at end of 2012)
80 % are state-owned or controlled
350.0
20.0%
18.0%
17.8%
300.0
16.0%
15.9%
96% (167.1 billion barrels) of Canadian reserves are in the
oil sands
250.0
12.0%
200.0
10.4%
9.4%
150.0
14.0%
10.0%
9.0%
297.6
8.0%
265.9
6.1%
5.9%
5.2%
100.0
173.9
157.0
150.0
4.0%
101.5
50.0
6.0%
97.8
87.2
0.0
2.0%
0.0%
Venezuela
Saudi Arabia
Canada
Iran
Iraq
Kuwait
United Arab
Emirates
Russian
Federation
Source: BP Statistical Review of World Energy, June 2013.
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World Oil Production by Country
(million barrels per day and % of total world crude production)
(MMbpd)
14.0
14.0%
World Oil Production- 86.2 Million barrels per day (at end of 2012)
13.3%
12.0
12.0%
12.8%
10.0
10.0%
9.6%
Canada is the 5th largest oil
producer in the world
8.0
6.0
4.0
2.0
11.53
8.0%
6.0%
10.64
5.0%
4.4%
8.91
4.16
3.74
0.0
4.2%
3.68
4.0%
3.5%
3.4%
2.91
2.73
2.0%
0.0%
Source: BP Statistical Review of World Energy, June 2013.
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Relevant • Independent • Objective
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World Gas Production by Country
(billion cubic feet per day and % of total world gas production)
(Bcfpd)
70.0
25.0%
20.4%
World Gas Production- 325 Billion cubic feet per day (at end of 2012)
17.6%
60.0
20.0%
50.0
Canada is the 5th largest gas
producer in the world
40.0
15.0%
65.7
30.0
57.1
10.0%
20.0
4.8%
4.7%
4.6%
5.0%
10.0
15.5
0.0
15.2
15.1
0.0%
Source: BP Statistical Review of World Energy, June 2013.
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Relevant • Independent • Objective
www.ceri.ca
Canadian Economy Annualized GDP by Industry or Sector
(as of January 2014)
At Glance….
• Real estate and rental and leasing
is the largest segment of Canada's
economy.
• Manufacturing is still a very large
portion of GDP and is the second
largest component at 10%.
• The oil and gas sector has long
been a significant contributor to
Canada’s economy accounting for
8% of GDP and 550,000 direct and
indirect jobs.
Source: Statistics Canada.
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Relevant • Independent • Objective
www.ceri.ca
What Does Canada Export?
At Glance….
• Goods exports amount to 30% of
GDP (service exports ~5% of GDP)
• The largest category of goods
exports is Energy Products (oil,
natural gas and other) at 24% of
total exports.
• The United States still accounts for
the vast majority of Canadian
exports at 75% share.
Source: Statistics Canada.
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Relevant • Independent • Objective
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Western Canada’s Energy Sector
2012 Expenditures: $66.20 billion
Royalties
2012 Expenditures: $50.97 billion
Royalties
Wages
Wages
Production
Production
Operation and Maintenance
Completion and Tie in
Operation and Maintenance
Construction
Conventional Drilling
Evaluation
Land Acquisition
Crown Land Sales
Land Acquisition
Crown Land Sales
Oil and Gas Drilling
13
Oil Sands Developments
2013 Facts about Canadian Crude
Production:
•
•
•
•
•
•
•
Western Canada (AB,BC,SK,NWT) Conventional LIGHT Crude
Western Canada (AB,BC,SK,NWT) Upgraded Bitumen
Western Canada (AB,BC,SK,NWT) Condensate (C5+)
Western Canada (AB,BC,SK,NWT) Conventional HEAVY Crude
Western Canada (AB,BC,SK,NWT) Non-Upgraded Bitumen
Eastern Canada (NF/LAB,ON) Conventional LIGHT Crude
Total 2011 Production of Crude Oil and Equivalent
694,775 bbls/day
961,084 bbls/day
147,770 bbls/day
451,618 bbls/day
1,019,810 bbls/day
235,566 bbls/day
3,510,643 bbls/day
Exports:*
•
•
•
•
•
•
•
PADD I
PADD II
PADD III
PADD IV
PADD V
Non-US
Total US
(74% Light, 26% Heavy)
(21% Light, 79% Heavy)
(12% Light, 78% Heavy)
(17% Light, 83% Heavy)
(61% Light, 39% Heavy)
(67% Light, 33% Heavy)
(28% Light, 82% Heavy)
196,327 bbls/day
1,737,246 bbls/day
124,790 bbls/day
230,137 bbls/day
199,027 bbls/day
84,119 bbls/day
2,571,165 bbls/day
Imports:*
• Eastern Canada Light
% of Imports
612,017 bbls/day (93%)
44,449 bbls/day (7%)
656,466 bbls/day
• Eastern Canada Heavy
• Total Canadian Imports
* 2013 Average January to September
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Relevant • Independent • Objective
www.ceri.ca
2013 Facts about Canadian Natural Gas, NGLs
All volumes expressed as average day
Production:
•
•
•
•
Western Canada (AB) Marketable Natural gas
Western Canada (BC) Marketable Natural gas
Canada (other Provinces) Marketable Natural Gas
Total 2013 Production
9,740 mmcf/day
3,759 mmcf/day
620 mmcf/day
14,119 mmcf/day
Exports:
• To United States
8,800 mmcf/day
Imports:
• Pipeline gas from the United States and LNG imports
2,600 mmcf/day
Natural Gas Liquids:
•
•
•
•
Recovered Ethane
Recovered Propane
Recovered Butane
Recovered Pentanes +
200,000 bbls/day
145,000 bbls/day
64,000 bbls/day
101,000 bbls/day
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Relevant • Independent • Objective
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6098 Bitumen Wells
4392 Oil Wells
3303 Gas Wells
40% BC
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Relevant • Independent • Objective
www.ceri.ca
How Competitive Are We?
17
Relevant • Independent • Objective
www.ceri.ca
Full-Cycle Supply Costs: US Tight Oil vs. Oil Sands
18
Relevant • Independent • Objective
www.ceri.ca
North American Natural Gas Demand Pathways
West Coast Competition: Canada versus the United States
18
Cheaper Field Gate Cost
Shorter Distance
Greenfield Project
2013 Average Spot Price Japan
16
Average Oil-Linked Price Japan
@ 90$/Bbl oil
14
Regasification Low
12
Charter Japan
USD $/MMBtu
10.49
10.68
Combined
10.48
9.88
10
9.39
Liquefaction
Pipeline Toll Approx
Spot HUB Price
8
Dedicated Pipeline Toll
Field Gate Supply Cost
6
2013 Average Spot Price Japan
Average Oil-Linked Price Japan @ 90$/Bbl oil
4
Total
Higher Field Gate Cost
Longer Distance
Brownfield Project
2
0
Oregon LNG
Jordan Cove LNG
Canada LNG
Kitimat LNG
19
Sabine Pass with
Panama Canal
Relevant • Independent • Objective
www.ceri.ca
Economic Viability of Gas Developments in the WCSB
Supply Cost Results
Supply cost - gas portion
Liquid content
(bbls/mmcf)
Supply Csot ($/mcf)
$10
120
100
$8
80
$6
60
$4
40
Average Market Price 2013 (AECO C)
$2
20
$0
0
20
Average Liquids Content (bbls/mmcf)
$12
Relevant • Independent • Objective
www.ceri.ca
Total Vertical Supply Costs
WTI 2012
21
Hardisty Heavy 2012
PIA03-9999-OIL
PIA17-7580-OIL
PIA38-9999-OIL
PIA50-9999-OIL
PIA12-9999-CBP
PIA52-9999-OIL
PIA55-9999-OIL
PIA17-9999-OIL
PIA17-9999-CBP
PIA18-9999-OIL
PIA07-9999-OIL
PIA02-9999-OIL
PIA56-9999-OIL
PIA14-9999-OIL
PIA51-9999-OIL
PIA01-9999-OIL
PIA10-1740-OIL
PIA15-5290-OIL
PIA04-6425-OIL
PIA20-9999-OIL
PIA08-9999-OIL
PIA11-9999-OIL
PIA23-9999-OIL
PIA12-9999-OIL
PIA09-9999-OIL
PIA15-9999-OIL
PIA06-9999-OIL
PIA18-9999-CBP
PIA16-9999-OIL
PIA08-2140-OIL
PIA10-9999-OIL
PIA19-9999-CBP
PIA04-9999-OIL
PIA39-9999-OIL
PIA13-9999-OIL
$/bbl
Horizontal
$120
$80
50
$60
$-
bbls/day
Economic Viability of Oil Developments in the WCSB
A Supply Cost Comparison
100
$140
90
80
$100
70
60
40
$40
30
20
$20
10
0
Average bbls/day
Relevant • Independent • Objective
www.ceri.ca
Western Canada
The Oil and Oil Sands Road Forward
“Pipes are Paramount”
22
Relevant • Independent • Objective
www.ceri.ca
Crude Oil Production (excl Oil Sands) bbls/day
CERI’s WCSB Oil Production Forecast
1,600,000
1,500,000
1,400,000
1,300,000
1,200,000
1,100,000
1,000,000
900,000
800,000
700,000
600,000
500,000
400,000
300,000
200,000
100,000
0
1,600,000
Conventional
and Unconventional
grow by 300,000 bpd
1,400,000
1,200,000
1,000,000
800,000
600,000
400,000
200,000
0
AB Oil Forecast (Conv)
SK Oil Forecast
NWT Oil Forecast
BC Oil Forecast
MB Oil Forecast
CAPP June 2014 WCSB Conventional
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Relevant • Independent • Objective
www.ceri.ca
CERI’s Oil Sands Production Forecast
('000 bpd)
7,000
Total Mining Volume
Total In Situ Volume
6,000
5,000
Oil Sands Production
grows to 5.7 MMBpd
by 2045
4,000
3,000
2,000
1,000
0
2007 2009 2011 2013 2015 2017 2019 2021 2023 2025 2027 2029 2031 2033 2035 2037 2039 2041 2043 2045
24
Relevant • Independent • Objective
www.ceri.ca
Western Canada
The Oil and Oil Sands Road Forward
“What is the Downside?”
25
Relevant • Independent • Objective
www.ceri.ca
CERI Oil Pathways
WCSB Transport Optionality
8,000
7,500
7,000
Some or all of
this potential
is at risk
6,500
6,000
Volume (bbls/day)
5,500
5,000
4,500
4,000
3,500
3,000
2,500
2,000
1,500
1,000
500
0
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
Existing Export Capacity
Rail Systems
AB Clipper Exp I
AB Clipper Exp II
TCPL Keystone XL
Kinder Morgan TMX Exp
Northern Gateway
TCPL Energy East
WCSB Export Volume (CERI Realistic)
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Relevant • Independent • Objective
www.ceri.ca
CERI Oil Pathways
WCSB Market Price Differential with and w/o Market Access
WSC vs. WTI Price Differential
$$(5)
$(10)
Historical Average WCS/WTI Differential
US2011$/barrel
$(15)
$(20)
$(25)
$(30)
AEO WCS minus AEO WTI
1: Open Doors
$(35)
$(40)
2: Driving w/o License
3: Lost Opportunity
4: License No Wheels
$(45)
2010
2015
2020
2025
2030
2035
Year
27
Relevant • Independent • Objective
www.ceri.ca
From Oil Where
“Pipes are Paramount”
To Gas Where
“Markets are a Must”
28
Relevant • Independent • Objective
www.ceri.ca
Factors Affecting WCSB Natural Gas Production
Physical: Emerging supply sources and inter-basin gas on gas competition
Images from US EIA and Ziff/NEB
29
Relevant • Independent • Objective
www.ceri.ca
North American Natural Gas Demand Pathways
WCSB Export Volumes: LNG Tsunami (without LNG)
9,000
8,000
Delivered Volume (mmcf/day)
7,000
6,000
Export Pipeline
volumes will decline
by 4.8 bcf/day
5,000
4,000
3,000
2,000
1,000
0
Export:Kingsgate
Export:Northern Border
30
Export:Alliance
Export: TCPL Mainline
Relevant • Independent • Objective
www.ceri.ca
North American Natural Gas Industry
18000
100.0%
16000
90.0%
14000
80.0%
70.0%
12000
60.0%
10000
50.0%
8000
40.0%
6000
30.0%
2013 Alberta Gas Well Licenses
• 1,077 Horizontal Wells (76%)
• 244 Slant/Deviated (17%)
• 89 Vertical (6%)
Percentage Horizontal Wells
Total 1,410 Gas Directed Well Licences
30 +
Bcf/day
4000
20.0%
2000
10.0%
24,000
0.0%
22,000
0
2003 2004 2005 2006 2007 2008 2009 2010 2011
20,000
Total Completed Horizontal Gas Wells
Total Complete Vertical Gas Wells
Percentage Horizontal Gas Wells
2012 Marcellus
• 2,000 capped gas wells
• 2,100-2,300 new wells per year
• NGLs 30-35 bbls/mmcf
• 4,5,6 wells per pad
• 90% horizontal
Gas Production (mmcf/day)
Connected Gas Wells
“A Tale of Two Countries”
31
18,000
17 -22
Bcf/day
16,000
14,000
12,000
10,000
8,000
6,000
4,000
2,000
0
2005 2007 2009 2011 2013 2015 2017 2019 2021 2023 2025 2027 2029
Relevant • Independent • Objective
www.ceri.ca
Gas Markets are Crucial
BUT
Competition is Concerning
32
Relevant • Independent • Objective
www.ceri.ca
Canadian West Coast LNG Export Projects in Development
Kitimat LNG (Chevron, Apache)
• 1.4 Bcf/d
• Permits received (including Export License); awaiting investment decision
BC LNG Export Co-operative
• 0.125 Bcf/d
• Permits received (including Export License)
LNG Canada (Shell, KOGAS, Mitsubishi, PetroChina)
• 2.0 – 3.2 Bcf/d
• Feasibility stage; applied for some permits; Export License granted
Pacific Northwest LNG (Petronas, Japex, Indian Oil Corp., Pet. Brunei, SINOPEC)
• 2.6 Bcf/d (at full build out)
• Applying for environmental permits, Export License granted
Aurora LNG (Nexen/Inpex)
13 Projects on West Coast
• Conducting feasibility; Export License granted
• 16 bcf/day
Prince Rupert LNG (BG Group)
2 Projects on the East Coast
• 3.0 Bcf/d
• Advancing feasibility, Export License granted, applying for environmental permits
Triton LNG (AltaGas/Idemitsu Kosan)
• 0.3 Bcf/d
• Conducting feasibility; Export License granted
ExxonMobil/Imperial Oil (WCC LNG Ltd.)
• 4.0 Bcf/d
• Granted Export License
Woodfibre LNG
• 0.3 Bcf/d
• Granted Export License
Note: Other announced projects include Kitsault LNG,
Woodside (Grassy Point LNG)
Stewart LNG, Quicksilver
• 1.8 Bcf/d
• Conducting feasibility
Source: CAPP
33
Relevant • Independent • Objective
www.ceri.ca
Canadian or US Rockies gas supply?
Oregon LNG
Canadian or US Rockies gas supply?
Oregon LNG
West-Coast projects, very similar
to B.C. in terms of costs and
advantages
Jordan Cove
East-Coast
Projects are well
situated to access
Europe.
Neptune
Everett
Northeast Gateway
Gulf-Coast projects, especially
brownfield regasification conversions
are cost-effective if the Panama Canal
expansion occurs.
Cove Point
Lake Charles LNG
Magnolia LNG Venture Global LNG
Cameron
Gulf LNG Energy
Elba Island
Sabine Pass
Golden Pass LNG
Louisiana LNG Energy
Main Pass Hub
Freeport LNG
CE FLNG
South Texas LNG
Delfin LNG Waller LNG
Gasfin LNG
Corpus Christi LNG
Gulf Coast LNG
Excelerate FLNG
Annova LNG
Barca LNG
Altamira
Texas LNG EOS LNG
Existing Regas
Potential Export Site
Majority proposed to be operational between
2016-2021
Existing
Regas and
Valdez LNG
Alaska SC LNG
Source: yellowmaps.com, CERI
Proposed Export Site
Under Construction Export
35
North American Natural Gas Demand Pathways
Australia's Supply Growth
bcfpd
Mt
Operating
120
Under construction
Another 7 projects
in the feasibility
stage - an
additional 40 Mt or
4.6 bcfpd
Planned
100
Ichthys
80
Wheatstone
9 Mt
1.2 bcfpd
60
8.1 Bcf/day
40
0
Darwin
North
West
Shelf
1989
16 Mt
2.1 bcfpd
3.7 Mt
0.5 bcfpd
Pluto
4.3 Mt
0.6 bcfpd
8.9 Mt
1.2 bcfpd
14
12
8.4 Mt
1.1 bcfpd
10
8
3.6 Mt
0.5 bcfpd
Gladstone
Gorgon
3.2 Bcf/day
20
APLNG
Prelude
7.8 Mt
1.0 bcfpd
16
Fisherman's
landing
Tassie shoal
Sunrise
Scarborough
Gorgon exp.
Browse
Arrow
6
15 Mt
2.0 bcfpd
QCLNG
4
8.5 Mt
1.1 bcfpd
2
0
2006
2012
2014
2015
2016
2017
2018+
Source: Bureau of Resource and Energy Economics
36
Relevant • Independent • Objective
www.ceri.ca
Russia
Chukotka LNG?
Yamal Peninsula
Baltic LNG
Kamchatka LNG?
Sakhalin LNG
Power of Siberia Gas Transmission
Vladivostok LNG
6.4 Bcf/day with the potential of More!
Operational
Planning
Speculative
Source: Gazprom
37
Relevant • Independent • Objective
www.ceri.ca
North American Natural Gas Demand Pathways
Reference Case: LNG Export Potential to the Pacific Basin
60
50
BCFPD
40
Other supply sources
17.2 bcf/day
(120 mta LNG)
30
United States Potential Liquefaction
United States Liquefaction
Canada Liquefaction
East Africa Potential Liquefaction
Australian Liquefaction
Middle East Liquefaction
20
Asian LNG Demand
Total Demand
10
UC = Under Construction
AA = Awaiting Final Approvals
0
38
Relevant • Independent • Objective
www.ceri.ca
Western Canada
The Gas Road Forward
“A View from the Cheap Seats”
39
Relevant • Independent • Objective
www.ceri.ca
Competition to Supply LNG in the Asia-Pacific Basin
Qatar LNG
(8 Operating)
(Total 9.5 bcf/day)
(now 7.5 bcf/day)
Mozambique
Anadarko
Shell
Up to
(6.5 bcf/day)
Russia
Sakhalin Island LNG
(now 1.1 bcf/day)
Pipeline: 3.2 – 6.4 bcf/day
China
Korea
Japan
India
West Africa
Indonesia
Malaysia
Australia Operating
Australia Under Construction
(now 7.4 bcf/day)
Australia Proposed
(now 2.5 bcf/day)
3.2 – 13.5 – 16.0 bcf/day
40
Alaska LNG
Up to 4.5 bcf/day
Kitimat LNG
LNG Canada
Pacific Northwest LNG
West Coast LNG
Prince Rupert LNG
Woodfibre LNG
Up to 17 bcf/day
Jordon Cove
Oregon LNG
Sabine Pass
Freeport LNG
Cameron LNG
Dominion Cove LNG
Lake Charles LNG
Corpus Christi LNG
Up to 30 bcf/day
Relevant • Independent • Objective
www.ceri.ca
North American Natural Gas Demand Pathways
Reference Case: LNG Export Potential to the Pacific Basin
60
50
BCFPD
40
Lower 48
Sabine Pass (UC)
Freeport (AA)
Cameron LNG (AA)
Oregon LNG (AA)
Up to 4 bcf/day
Other supply sources
17.2 bcf/day
(120 mta LNG)
30
United States Potential Liquefaction
United States Liquefaction
Canada Liquefaction
East Africa Potential Liquefaction
Australian Liquefaction
Middle East Liquefaction
20
Asian LNG Demand
Total Demand
10
UC = Under Construction
AA = Awaiting Final Approvals
0
41
Relevant • Independent • Objective
www.ceri.ca
North American Natural Gas Demand Pathways
Reference Case: LNG Export Potential to the Pacific Basin
60
BC LNG Projects
50
1 additional Project or
Expansion of existing
“Asian Pinch Point”
Maybe!!!!
BC LNG Projects
BCFPD
40
2 Projects (AFID)
Up to 3.2 bcf/day
Other supply sources
United States Potential Liquefaction
East Africa Potential Liquefaction
30
Canada Liquefaction
United States Liquefaction
Australian Liquefaction
Middle East Liquefaction
20
Asian LNG Demand
10
ADIF= Awaiting Final
Investment Decision
0
42
Relevant • Independent • Objective
www.ceri.ca
North American Natural Gas Demand Pathways
Reference Case: LNG Export Potential to the Pacific Basin
60
50
40
Lower 48
Sabine Pass (UC)
Freeport (AA)
Cameron LNG (AA)
Oregon LNG (AA)
Jordan Cove LNG (AA)
Others
Up to 10 bcf/day
“GAS Olympics”
United States Potential Liquefaction
BCFPD
Other supply sources
East Africa Potential Liquefaction
30
Canada Liquefaction
United States Liquefaction
Australian Liquefaction
Middle East Liquefaction
20
Asian LNG Demand
10
0
43
Relevant • Independent • Objective
www.ceri.ca
Western Canada
The Gas Road Forward
“BC LNG: The Emerging Story”
44
Relevant • Independent • Objective
www.ceri.ca
2013 Gas Directed
Licences
1 Montney :AB (277)
Montney :BC (754)
2 Wilrich
(125)
3 Milk River (113)
4 Glauconitic (97)
5 Duvernay (88)
6 Falher
(86)
7 Bluesky
(56)
8 Notikewan (50)
45
Relevant • Independent • Objective
www.ceri.ca
Progress Energy Drilling Area
Prince Rupert Gas
Transmission
2.0 Bcf/day
Pacific North-West LNG
1.6 Bcf/day
Prince Rupert
Shell Drilling area
LNG Canada
Kitimat
1.6 Bcf/day initial
3.2 Bcf/day ultimate
Coastal GasLink
1.7 Bcf/day initial
3.2 Bcf/day ultimate
46
Relevant • Independent • Objective
www.ceri.ca
Pacific Northwest
LNG Project
Energy project metrics:
North
American
NGLProgress
Pathways
LNG
$40 + Billion
CDN
Exports:
Pacific
•
•
•
•
880 wells (2013-2019)
3028 wells (2020-2040)
Gathering Systems
Field Processing plants
Northwest LNG
Assuming Montney Horizontal Well
•
•
•
•
•
Vertical Depth: 1850 m
Horizontal Length: 1650 m
Rig Crew: 12-15
Rig-in to Tear out: 28 days
Cost per well: $6.9 million (2014 $)
Field Expenditures
• $5-7 billion for wells(2013-2019)
• $2-3 billion for field facilities (2013-2019)
• $14-16 billion for wells (2020-2040)
• $5-7 billion for field facilities(2020-2040)
Prince Rupert Gas Transmission
Pacific Northwest LNG
TransCanada Pipelines
Capital Cost $6.5 billion
•
Petronas
•
Japex
•
Indian Oil Corp.
•
Pet. Brunei
•
SINOPEC
Capital Cost $9-$11 Billion
47
Relevant • Independent • Objective
www.ceri.ca
North American Natural Gas Demand Pathways
BC Production Assuming No LNG Plant Development
12,000
Field Gate Gas Supply (mmcf/day)
10,000
8,000
6,000
4,000
2,000
0
Conventional Areas
Shale Areas: Domestic Gas Supply
48
Relevant • Independent • Objective
www.ceri.ca
North American Natural Gas Demand Pathways
BC Production Assuming 3 LNG Plants Developed
12,000
Field Gate Gas Supply (mmcf/day)
10,000
8,000
5 Bcf/day
6,000
4,000
2,000
0
Conventional Areas
Shale Areas: Domestic Gas Supply
49
Montney Area: LNG Terminal Gas Supply
Relevant • Independent • Objective
www.ceri.ca
North American Natural Gas Demand Pathways
BC Production Entering Alberta: LNG Tsunami
Inter Provincial Pipleine Flows (mmcf/day)
3,000
2,500
BC Gas is coming to Alberta
2,000
1,500
1,000
500
0
Direct connect pipelines to Alberta
Boundary Lake Gordondale
50
Alliance BC Receipts
Groundbirch Pipeline to Alberta
Relevant • Independent • Objective
www.ceri.ca
BC LNG: Producer Opportunity with
Optionality
51
Relevant • Independent • Objective
www.ceri.ca
North American NGL Pathways
Integrated LNG/LPG Producer
500
5,000
LNG Canada Field Development
450
4,500
Well Count
400
4,000
350
3,500
300
3,000
250
2,500
227
200 200
200
189
150 150 150
150
181 175
169 165
161 158 155
152 150 147
125
100
100
95
100
2,000
1,500
Production Voilume (MMcf/day)
2615 wells
877 wells
1,000
67
50
0
25
0
0
0
25
25
0
25
0
500
25
0
0
0
0
New Wells
0
Pre Build
52
0
0
0
0
Production Volume
Relevant • Independent • Objective
www.ceri.ca
North American NGL Pathways
Producer Options: LNG/LPG Exports (LNG Canada: shallow-cut plant)
Alberta Market (AECO)
Edmonton Diluent
Edmonton Butane
LNG Hot Gas
Edmonton Propane
LNG
AB Ethane Market
LPG (Butane)
Methanol
LPG (Propane)
Gas to Liquids
Ethane
Methanol
Corporate Value Chain
C2+ liquids
53
Relevant • Independent • Objective
www.ceri.ca
North American NGL Pathways
Producer Options: LNG/LPG Exports (LNG Canada: deep-cut plant)
Alberta Market (AECO)
Edmonton Diluent
Edmonton Butane
LNG Hot Gas
Edmonton Propane
LNG
AB Ethane Market
LPG (Butane)
Methanol
LPG (Propane)
Gas to Liquids
Ethane
Methanol
Corporate Value Chain
C2+ liquids to Edmonton
for Fractionation, New
Cracker potential
54
Relevant • Independent • Objective
www.ceri.ca
Western Canada
The Natural Gas Liquids Road Forward
“Going Global”
55
Relevant • Independent • Objective
www.ceri.ca
Natural Gas Liquids (NGLs) in North America: An Update
Ethane Recovered (bbls/day)
Part V – Western Canada Ethane S/D Forecast
400,000
400,000
350,000
350,000
300,000
300,000
250,000
250,000
Vantage Pipeline
Offgas Plants
Empress Straddle Plant
200,000
200,000
Cochrane Straddle Plant
Alberta Field extraction
150,000
150,000
BC Field extraction
Derivative capacity
Historical
100,000
100,000
50,000
50,000
0
0
56
Relevant • Independent • Objective
www.ceri.ca
Natural Gas Liquids (NGLs) in North America: An Update
Ethane Recovered (bbls/day)
Part V – Western Canada Ethane S/D Forecast
400,000
400,000
350,000
350,000
300,000
300,000
LNG Canada Ethane Volumes
LNG Canada Field Recoveries
250,000
250,000
Vantage Pipeline
Offgas Plants
200,000
200,000
Empress Straddle Plant
Cochrane Straddle Plant
Alberta Field extraction
150,000
150,000
BC Field extraction
Derivative capacity
100,000
100,000
50,000
50,000
0
Historical
0
57
Relevant • Independent • Objective
www.ceri.ca
Natural Gas Liquids (NGLs) in North America: An Update
Part V – Western Canada Propane Disposition Forecast
300,000
300,000
275,000
275,000
250,000
250,000
225,000
225,000
200,000
200,000
175,000
175,000
150,000
150,000
Export: Pembina, BC
Export: Altagas/Idemitsu, BC
125,000
125,000
100,000
100,000
Export:PetroGas Ferndale, WA
Other Transfers
Exports to US
75,000
75,000
50,000
50,000
25,000
25,000
Demand
Propane Supply (BC,AB,SK)
-
OffGas Plants
Refinery Capture
-
58
Relevant • Independent • Objective
www.ceri.ca
Natural Gas Liquids (NGLs) in North America: An Update
Part V – Western Canada Propane Disposition Forecast
300,000
300,000
275,000
275,000
250,000
250,000
225,000
225,000
LNG Canada C3 Volumes
200,000
200,000
175,000
175,000
150,000
150,000
Export: Pembina, BC
Export: Altagas/Idemitsu, BC
Export:PetroGas Ferndale, WA
125,000
125,000
100,000
100,000
75,000
75,000
Other Transfers
Exports to US
Demand
LNG Field Plants Capture
Propane Supply (BC,AB,SK)
50,000
50,000
25,000
25,000
OffGas Plants
Refinery Capture
-
-
59
Relevant • Independent • Objective
www.ceri.ca
Natural Gas Liquids (NGLs) in North America: An Update
Pentanes + recovered (bbls/day)
Part V – WCSB Pentanes plus Supply Forecast
200,000
200,000
180,000
180,000
160,000
160,000
140,000
140,000
120,000
120,000
Empress Straddle Plant
100,000
100,000
Cochrane Straddle Plant
Alberta Field extraction
80,000
80,000
BC Field extraction
Historical
60,000
60,000
40,000
40,000
20,000
20,000
0
0
60
Relevant • Independent • Objective
www.ceri.ca
Natural Gas Liquids (NGLs) in North America: An Update
Pentanes + recovered (bbls/day)
Part V – WCSB Pentanes plus Supply Forecast
200,000
200,000
180,000
180,000
160,000
160,000
140,000
140,000
120,000
120,000
100,000
100,000
80,000
80,000
60,000
60,000
40,000
40,000
20,000
20,000
LNG Canada C5 Volumes
LNG Field Plants
Empress Straddle Plant
0
Cochrane Straddle Plant
Alberta Field extraction
BC Field extraction
Historical
0
61
Relevant • Independent • Objective
www.ceri.ca
Opportunities and Challenges
62
Relevant • Independent • Objective
www.ceri.ca
Key Challenges for Canadian Oil/Oil Sands
 Lack of export pipeline capacity and market diversification
 Competition from other heavy oil production (Mexico, Venezuela, Brazil,
Saudi Arabia)
 Skilled labour shortages
 Environmental impacts of oil sands development
 Rising oil sands costs:
 Canadian crudes are undervalued against other crude oils in the world. The
key challenges revolve around increasing margins, but most importantly,
reducing costs of oil sands projects.
63
Relevant • Independent • Objective
www.ceri.ca
Challenges for Canadian Natural Gas
 Rising US shale gas development decreasing Canadian exports of gas to the US
 Persistently low natural gas prices threaten future gas development
 Industrial demand for natural gas might be weaker than anticipated if oil sands
development doesn’t proceed
 Canada might miss the window of opportunity with LNG terminals
 Cost pressures for LNG sites
 Public and Aboriginal opposition to hydraulic fracturing
64
Relevant • Independent • Objective
www.ceri.ca
Key Opportunities
 Canada’s proved oil reserves are third only to Venezuela and Saudi Arabia and
marketable gas resources are within the Top 5
 Canada has transparent regulatory and legal regimes and a stable economy
with a long-term potential for energy development
 Canadian energy resources are not state-controlled
 Pipeline expansions and new pipelines will allow Canadian crude, gas and
NGLs to penetrate existing and new markets
 LNG development and subsequent production growth will allow gas producers
to capture higher gas prices in Asian markets
65
Relevant • Independent • Objective
www.ceri.ca
Canadian Energy Research Institute
Thank you for your time
Please visit us at
www.ceri.ca
66
Relevant • Independent • Objective
www.ceri.ca
Risks Associated with BC LNG Projects
High
Competition in the Asia-Pacific Basin
Capital Cost Overruns (Greenfield Projects)
Changing Market Prices (decoupling from Oil)
Fiscal Policies (Royalties, Carbon Tax, LNG Tax)
Transportation Costs (Tanker)
Upstream Development Costs
Low
67
Relevant • Independent • Objective
www.ceri.ca
Natural Gas Liquids (NGLs) in North America: An Update
Butane Recovered (bbls/day)
Part V – Canadian Butane Supply Forecast
130,000
130,000
120,000
120,000
110,000
110,000
100,000
100,000
90,000
90,000
80,000
80,000
Misc Imports /Stock changes
Offgas Plants
70,000
70,000
60,000
60,000
Refinery Capture
Empress Straddle Plant
Cochrane Straddle Plant
50,000
50,000
40,000
40,000
30,000
30,000
20,000
20,000
10,000
10,000
Alberta Field extraction
BC Field extraction
Historical
0
0
68
Relevant • Independent • Objective
www.ceri.ca
Natural Gas Liquids (NGLs) in North America: An Update
Butane Recovered (bbls/day)
Part V – Canadian Butane Supply Forecast
130,000
130,000
120,000
120,000
110,000
110,000
LNG Canada C4 Volumes
100,000
100,000
90,000
90,000
LNG Canada Field Recoveries
80,000
80,000
70,000
70,000
Misc Imports /Stock changes
Offgas Plants
Refinery Capture
60,000
60,000
50,000
50,000
Empress Straddle Plant
Cochrane Straddle Plant
Alberta Field extraction
40,000
40,000
BC Field extraction
30,000
30,000
Historical
20,000
20,000
10,000
10,000
0
0
69
Relevant • Independent • Objective
www.ceri.ca