Canadian Energy Research Institute
Canadian Production and
Infrastructure Outlook
Platts 8th Annual Pipeline Development & Expansion Conference
Dinara Millington
Canadian Energy Research Institute
September 17-18, 2013
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, 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
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Relevant • Independent • Objective
www.ceri.ca
Our Work:
Current Work (2013 – 2014):
•
Natural Gas Liquids in North America: Overview, Emerging Trends, and Updated Outlook
•
North American Natural Gas Demand Pathways (ICF/ Marbek, what-if?, S2S)
•
Many more…
Recently Released Reports (2012 – 2013):
•
Canadian Oil Sands Supply Costs and Development Projects (2012 – 2046)
•
Potential Economic Impacts of Developing Quebec’s Shale Gas
•
Global LNG: Now, Never, or Later?
•
Natural Gas Liquids in North America: Overview and Outlook to 2035
•
Many more…
Periodicals/ Monthly Reports:
•
Crude Oil Commodity Report
•
Natural Gas Commodity Report
•
Geopolitics of Energy (Subscription Service)
Annual Conferences:
•
Natural Gas Conference (February 2014)
•
Oil Conference (April 2014)
•
Petrochemical Conference (June 2014)
Kananaskis = Golf!
3
Example Reports
Global LNG: Now, Never, or Later?
Released January 2013
Potential Economic Impacts of Developing
Quebec’s Shale Gas
Released March 2013
North American Natural Gas Demand
Pathways
Released August 2013
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Relevant • Independent • Objective
www.ceri.ca
Agenda
 Canadian Crude and Oil Sands Production Outlook
 Western Canadian conventional oil
 Alberta’s Oil Sands
 Oil Pipeline Infrastructure
 New pipelines
 Expansion of existing
 Conversions and Reversals
 Canadian Natural Gas Production Outlook
 Western Canadian natural gas production
 Canadian Exports
 LNG Development in Canada
 Terminals
 Connecting infrastructure
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Relevant • Independent • Objective
www.ceri.ca
2012 Facts about Canadian Crude
•
•
•
•
•
•
•
2012 Average Day Volumes
Western Canada Conventional Light/Medium Production
Eastern Canada Conventional Light/Medium Production
Canadian Condensate Production (C5+)
Canadian Conventional Heavy Production
Canadian Upgraded Bitumen Production (SCO)
Canadian Non-Upgraded Bitumen Production (Bitumen)
Estimated Production of Crude Oil and Equivalent
In December 2012
• Estimated Production of Crude Oil and Equivalent
= 658,054 bbls/day
= 198,990 bbls/day
= 138,627 bbls/day
= 451,363 bbls/day
= 892,193 bbls/day
= 895,012 bbls/day
= 3,234,229 bbls/day
= 3,418,544 bbls/day
2012 Average Day Export Volumes
• Estimate Exports of Crude Oil and Equivalent
= 2,316,038 bbls/day
• Estimate of Total Crude Oil Exports to PADD II
= 1,599,308 bbls/day (70%)
• Estimate of Total Crude Oil Exports to PADD III
= 164,710 bbls/day (7%)
Source: National Energy Board
Note: Some of the year-end volumes have not been finalized and thus are estimates
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Relevant • Independent • Objective
www.ceri.ca
Canadian Oil Industry
Alberta connected oil wells by year
2012 Alberta Oil Licences
• Horizontal Wells (78%)
• Vertical Wells ( 9%)
• Deviated and Slant (13%)
8000
7000
Connected Oil and Bitumen Wells
90.0%
80.0%
70.0%
6000
60.0%
5000
50.0%
4000
40.0%
3000
30.0%
2000
20.0%
1000
10.0%
Percentage Horizontal Wells
9000
0.0%
0
2003
2004
2005
Total Complete Vertical Oil Wells
2006
2007
2008
Total Completed Horizontal Oil Wells
2009
2010
2011
Percentage Horizontal Oil Wells
Source: ERCB data, CERI analysis
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Relevant • Independent • Objective
www.ceri.ca
CERI’s WCSB Oil Well Count Forecast
Reference Case (2013 Q2)
15,000
Forecast
14,000
13,000
12,000
11,000
9,000
8,000
7,000
6,000
5,000
4,000
3,000
2,000
AB Conventional Vertical Wells
AB Conventional Horizontal Wells
BC Conventional Vertical Wells
BC Conventional Horizontal Wells
SK Conventional Vertical Wells
SK Conventional Horizontal Wells
AB D&A Wells
BC D&A Wells
SK D&A Wells
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2037
2036
2035
2034
2033
2032
2031
2030
2029
2028
2027
2026
2025
2024
2023
2022
2021
2020
2019
2018
2017
2016
2015
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
0
2004
1,000
2003
Well Count
10,000
Relevant • Independent • Objective
www.ceri.ca
CERI’s WCSB Oil Production Forecast
Crude Oil Production (excl Oil Sands) bbls/day
Reference Case (2013 Q2)
1,600,000
1,600,000
1,500,000
1,500,000
1,400,000
1,400,000
1,300,000
1,300,000
1,200,000
1,200,000
1,100,000
1,100,000
1,000,000
1,000,000
900,000
900,000
800,000
800,000
700,000
700,000
600,000
600,000
500,000
500,000
400,000
400,000
300,000
300,000
200,000
200,000
100,000
100,000
0
0
Alberta Conventional Oil
North West Territories conventional oil
Manitoba conventional Oil
Saskatchewan Conventional Oil
British Columbia Conventional Oil
CAPP June 2013 WCSB Conventional
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Relevant • Independent • Objective
www.ceri.ca
CERI’s Oil Sands Capital Investment
(Million CDN$)
$300,000
Strategic Capital
Sustaining Capital
$275,000
$250,000
$225,000
$200,000
$175,000
$150,000
$125,000
$100,000
$75,000
$50,000
$25,000
$0
Total In situ Thermal & Solvent
Total Primary and EOR projects
Total Mining
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Total Upgrading
Relevant • Independent • Objective
www.ceri.ca
CERI’s Oil Sands Production Forecast (2012-2046)
('000 b/d)
7,000
Forecast
6,000
5,000
4,000
3,000
2,000
1,000
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
2036
2037
2038
2039
2040
2041
2042
2043
2044
2045
2046
0
Mining Projects
Thermal & Solvent In Situ Projects
11
Primary/EOR Projects
CAPP Forecast June 2013
Relevant • Independent • Objective
www.ceri.ca
CERI’s Oil Sands Supply Cost Estimates
$110
$99.02
$100
$90
$80
$70
$60
$47.57
$50
$40
$30.32
$30
Real 2011CDN$/bbl
$68.30
$20
$10
Fixed Capital (Initial & Sustaining)
Operating Working Capital
Fuel (Natural Gas)
Other Op. Costs (Fixed, Variable, Elec)
Royalties
Income Taxes
Emissions Compliance Costs
Abandonment Costs
Primary
Recovery 10%
ROR (a)
$14.31
$8.38
$6.40
$1.23
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SAGD 10%
ROR (a)
$19.87
$0.45
$3.23
$11.44
$8.83
$2.98
$0.73
$0.03
Mining &
Upgrading 10%
ROR (a)
$51.03
$1.01
$2.55
$23.62
$12.89
$7.20
$0.65
$0.07
$0
Mining 10%
ROR (a)
$32.00
$0.69
$1.60
$17.00
$12.76
$4.31
$0.40
$0.05
Relevant • Independent • Objective
www.ceri.ca
Canadian Oil Price Differentials
WTI-WCS Differential
120.00
• Canadian Exports feed one market.
• Light/heavy spread has been affected by
the availability of pipeline capacity.
• With refinery configuration changes
pending, the spread should hold tighter in
2013-2014.
100.00
80.00
60.00
40.00
20.00
120.00
WTI-WCS Differential
100.00
Cushing, OK WTI Spot Price FOB (Dollars per Barrel)
80.00
Mar-13
May-13
Jan 2013
Nov 2012
Sep 2012
Jul 2012
May 2012
Mar 2012
Jan 2012
Nov 2011
Jul 2011
Sep 2011
May 2011
Mar 2011
Jan 2011
Sep 2010
Jul 2010
Nov 2010
140.00
May 2010
Brent/WTI Differential
Mar 2010
Jan 2010
0.00
WCS , Hardisty (USD/bbl)
60.00
40.00
20.00
Mar-13
May-13
Jan 2013
Nov 2012
Sep 2012
Jul 2012
May 2012
Mar 2012
Jan 2012
Sep 2011
Nov 2011
Jul 2011
May 2011
Mar 2011
Jan 2011
Nov 2010
Sep 2010
Jul 2010
Mar 2010
May 2010
-20.00
Jan 2010
0.00
WTI-Brent
Cushing, OK WTI Spot Price FOB (Dollars per Barrel)
Europe Brent Spot Price FOB (Dollars per Barrel)
13
• Increased availability of pipeline and rail
capacity should generate higher netbacks
for oil sands producers by 2014.
• The Cushing bottleneck will be relieved and
differential will tighten.
Relevant • Independent • Objective
www.ceri.ca
Jan 2010
Feb 2010
Mar 2010
Apr 2010
May 2010
Jun 2010
Jul 2010
Aug 2010
Sep 2010
Oct 2010
Nov 2010
Dec 2010
Jan 2011
Feb 2011
Mar 2011
Apr 2011
May 2011
Jun 2011
Jul 2011
Aug 2011
Sep 2011
Oct 2011
Nov 2011
Dec 2011
Jan 2012
Feb 2012
Mar 2012
Apr 2012
May 2012
Jun 2012
Jul 2012
Aug 2012
Sep 2012
Oct 2012
Nov 2012
Dec 2012
Jan 2013
Feb-13
Mar-13
Apr-13
May-13
Jun-13
Pricing Volatility
Heavy Crudes:
US$/bbl
40.00
5.00
WTI-WCS Differential
Arab Heavy/Dubai
30.00
25.00
14
Avg
Avg
35.00
Vol. σ: 7.23
20.00
15.00
10.00
Vol. σ: 1.90
0.00
-5.00
-10.00
Source: Argus Media Ltd., OPEC
Relevant • Independent • Objective
www.ceri.ca
Options for Canadian Crude By Pipeline
Source: Canadian Association of Petroleum Producers, Crude Oil Forecast, Markets & Pipelines, June 2011
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Relevant • Independent • Objective
www.ceri.ca
WCSB Oil Sands (Bitumen + SCO) Production Forecast
8,000
8,000
7,000
7,000
6,000
6,000
5,000
5,000
4,000
4,000
3,000
3,000
2,000
2,000
1,000
1,000
0
Operational Pipeline Capacity (1000 bblc/day)
Net Export Flow Volume (1000 bbls/day)
Reference Case (2013 Q1)
-
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
WCSB Net Export Volumes
Oil Sands: Onstream
Bakken Production (KXL, Enbridge)
Oil Sands: Under Construction
Oil Sands: Approved
Oil Sands: Awaiting Approval
Oil Sands: Announced
Alberta Clipper Expansion I
Rail Export Capacity
Operating Export Capacity
Note: Pipeline Capacity stated as Operational capacity with a 95% efficiency applied
Oil Sands volumes include required diluent to reac pipeline specification
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Relevant • Independent • Objective
www.ceri.ca
WCSB Oil Sands (Bitumen + SCO) Production Forecast
8,000
8,000
7,000
7,000
6,000
6,000
5,000
5,000
4,000
4,000
3,000
3,000
2,000
2,000
1,000
1,000
0
Operational Pipeline Capacity (1000 bblc/day)
Net Export Flow Volume (1000 bbls/day)
Reference Case (2013 Q1)
-
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
WCSB Net Export Volumes
Oil Sands: Onstream
Bakken Production (KXL, Enbridge)
Oil Sands: Under Construction
Oil Sands: Approved
Oil Sands: Awaiting Approval
Oil Sands: Announced
Alberta Clipper Expansion I
TCPL Keystove XL
Alberta Clipper Expansion II
Rail Export Capacity
Operating Export Capacity
Note: Pipeline Capacity stated as Operational capacity with a 95% load factor applied
Oil Sands volumes include required diluent to reach pipeline specification
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Relevant • Independent • Objective
www.ceri.ca
WCSB Oil Sands (Bitumen + SCO) Production Forecast
8,000
8,000
7,000
7,000
6,000
5,000
Future Pipes
Enbridge Northern Gateway
Kinder Morgan TMX Expansion
TCPL Eastern Energy Project
6,000
5,000
4,000
4,000
3,000
3,000
2,000
2,000
1,000
1,000
0
Operational Pipeline Capacity (1000 bblc/day)
Net Export Flow Volume (1000 bbls/day)
What is Next (2013 Q1)
-
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
WCSB Net Export Volumes
Oil Sands: Onstream
Bakken Production (KXL, Enbridge)
Oil Sands: Under Construction
Oil Sands: Approved
Oil Sands: Awaiting Approval
Oil Sands: Announced
Alberta Clipper Expansion I
TCPL Keystone XL Expansion
TCPL Eastern Energy Project
TCPL Keystove XL
Alberta Clipper Expansion II
Rail Export Capacity
Operating Export Capacity
Note: Pipeline Capacity stated as Operational capacity with a 95% load factor applied
Oil Sands volumes include required diluent to reach pipeline specification
18
Relevant • Independent • Objective
www.ceri.ca
Natural Gas Markets: Canada & Alberta
(1) Declining production volumes in AB driven by lower demand for exports in the US
(2) AB Export volumes to the US declining the fastest in PADDs I (East Coast) and IV (Rockies), PADD II
(Midwest) still significant but on decline, PADD V (West Coast) remains somewhat stable
(3) AB Export volumes to ON and QC on decline, competing with US volumes.
Export volumes to BC SK MB are up
(4) Demand in AB is providing upside relief to market driven by industrial demand
1
2
3
4
Figures and Analysis by CERI, with data from ERCB and EIA
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North American Natural Gas Demand Pathways
US and Canada Gas Production
•
•
•
Deep recession in Nowhere Fast
results in lowest gas production
levels over time.
Full Speed Ahead exhibits
aggressive growth in gas
production.
Canada gas production that has
been declining reverses its trend
and grows in the future as a
result of unconventional gas
development.
–
But, the level of growth is very
sensitive to future market
environment – very modest
growth in Nowhere Fast and
robust growth in Full Speed
Ahead.
Source: CERI,ICF International
20
Relevant • Independent • Objective
www.ceri.ca
North American Natural Gas Demand Pathways
Alberta, British Columbia: 2013 Gas Directed Licences (January – August 2013)
Montney
Duvernay
Wilrich
Glauconitic
21
Notikewan, Rock Creek etc
Milk River, Medicine Hat
Relevant • Independent • Objective
www.ceri.ca
Factors Affecting WCSB NG Production
Physical: Emerging supply sources and inter-basin gas on gas competition
Images from US EIA and Ziff/ NEB
22
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%
4000
20.0%
2000
10.0%
0
2012 Alberta Gas Well Licenses
• 774 Horizontal Wells (66%)
• 283 Slant/Deviated (23%)
• 127 Vertical (11%)
Percentage Horizontal Wells
2013 Alberta Gas Well Licences (Jan-Aug)
• 851 Wells
0.0%
2003 2004 2005 2006 2007 2008 2009 2010 2011
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
• NGL’s 30-35 bbls/mmcf
• 4,5,6 wells per pad
• 90% horizontal
Gas Production (mmcf/day)
Connected Gas Wells
“A Tale of Two Countries”
23
24,000
22,000
20,000
18,000
16,000
14,000
12,000
10,000
8,000
6,000
4,000
2,000
0
17 to 22 Bcf/day
2005 2007 2009 2011 2013 2015 2017 2019 2021 2023 2025 2027 2029
Marcellus Supply: Full Speed Ahead
Marcellus Supply: Nowhere Fast
Relevant • Independent • Objective
www.ceri.ca
North American Natural Gas Demand Pathways
Canada Pipeline Net Exports
•
Perhaps surprisingly,
Nowhere Fast shows the
highest exports of gas from
Canada to the US.
–
•
•
Gas has little option but to
flow to US markets even
though the gas prices are
not very attractive for the
gas.
In Nowhere Fast and Power
Wave, Canada continues to
be a net exporter to the US.
In LNG Tsunami and Full
Speed Ahead, the net
pipeline exports to the US
decline significantly, mostly
because western Canada gas
is exported to Asia as LNG.
–
Canada becomes a net
importer of pipeline gas in
2021 in LNG Tsunami and in
2026 in Full Speed Ahead.
Source: CERI,ICF International
24
Relevant • Independent • Objective
www.ceri.ca
North American Natural Gas Demand Pathways
Gas Directed (2013 Jan-Aug)
Prince Rupert Gas
Transmission
2.0 Bcf/day
Montney
Pacific North-West LNG
1.6 Bcf/day
TCPL Groundbirch Pipeline
Shell
Encana
Paramount
Progress
CNRL
Arc Res
Apache
Peyto
Bonavista
Duvernay, Wilrich
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
25
Glauconitic
Relevant • Independent • Objective
www.ceri.ca
North American Natural Gas Demand Pathways
BC LNG Projects
Pacific Trail Pipeline 1 BCFPD
Coastal GasLink Pipeline 1.7 BCFPD (initial)
Prince Rupert Gas Transmission 2 BCFPD
BG/Spectra Pipeline (System 4.2 BCFPD)
Pacific Northern Gas Looping
NE British Columbia
versus
NW Alberta
Kitisault Energy Project
Imperial Oil/Exxon LNG
Pacific North-West LNG1.6 BCFPD
Prince Rupert LNG 1.8 BCFPD
BC LNG Co-Op 0.1 BCFPD
Kitimat LNG 0.7 BCFPD
LNG Canada 1.6 BCFPD
LNG Canada Expansion 1.6 BCFPD
Altagas LNG (West Coast)
Nexen LNG (West Coast)
Woodfibre LNG
1
26
Relevant • Independent • Objective
www.ceri.ca
North American Natural Gas Demand Pathways
Reference Case: LNG Export Potential to the Pacific Basin
50
45
Asia Pacific
LNG
Pinch Point
40
35
Other supply sources
30
United States Potential Liquefaction
BCFPD
United States Liquefaction
Canada Liquefaction
25
East Africa Potential Liquefaction
Australian Liquefaction
20
Middle East Liquefaction
Asian LNG Demand
15
10
5
0
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
27
Relevant • Independent • Objective
www.ceri.ca
Canadian Energy Research Institute
Thank you for your time
Please visit us at
www.ceri.ca
28
Relevant • Independent • Objective
www.ceri.ca