Canadian Energy Research Institute
The Changing Face of the Oil and Gas
Industry in Canada
Peter Howard, P.Eng
President and CEO
Canadian Energy Research Institute
August 2012
Washington DC
1
Relevant • Independent • Objective
www.ceri.ca
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!
2
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
3
Relevant • Independent • Objective
www.ceri.ca
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)
4
Relevant • Independent • Objective
www.ceri.ca
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
5
Relevant • Independent • Objective
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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
6
Relevant • Independent • Objective
www.ceri.ca
CERI Conferences
CERI hosts three major conferences each year (Oil, Natural Gas and Petrochemicals)
attended by over 100 delegates from across North America.
CERI 2012 Petrochemical Conference
“Pathways to the Future”
June 3-5, 2012
CERI 2012 Oil Conference
“Achieving Super Power Status”
April 23-24, 2012
CERI 2012 Natural Gas Conference
“Going Global – Shifting the Focus of
the Natural Gas Industry”
February 27-28, 2012
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 dlandry@ceri.ca.
7
Relevant • Independent • Objective
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“Western Canada’s Upstream Oil
and Gas Industry”
8
Relevant • Independent • Objective
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Western Canada’s Oil and Gas Industry
2009 Expenditures: $41.4 billion
Royalties
2009 Expenditures: $25.1 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
9
Oil Sands Developments
“Let’s Talk About Canadian
Oil and Oil Sands”
10
Relevant • Independent • Objective
www.ceri.ca
2011 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
561,929 bbls/day
846,112 bbls/day
128,498 bbls/day
421,618 bbls/day
758,919 bbls/day
271,778 bbls/day
2,988,854 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)
171,182 bbls/day
1,439,447 bbls/day
111,358 bbls/day
213,709 bbls/day
167,295 bbls/day
35,261 bbls/day
2,138,260 bbls/day
Imports:
• Atlantic Canada Conventional Crude
% of Capacity
333,990 bbls/day (80%)
298,775 bbls/day (84%)
52,836 bbls/day (15%)
685,560 bbls/day
• Quebec Conventional Crude
• Ontario Conventional Crude
• Total Canadian Imports
11
Relevant • Independent • Objective
www.ceri.ca
WCSB Conventional Oil Production Forecast
Realistic Scenario (2010-2035)
1,400,000
Production (bbls/day)
1,200,000
+ 150,000 bbls/day
1,000,000
800,000
600,000
400,000
200,000
0
British Columbia Existing Wells
British Columbia New Wells
Alberta Existing Wells
Alberta New Wells
Saskatchewan Existing Wells
Saskatchewan New Wells
Manitoba Production
NWT Production
12
Relevant • Independent • Objective
www.ceri.ca
Western Canadian Oil Sands Potential
('000 bpd)
3,500
3,000
SAGD and CSS Projects
Potential 3.3 mbpd
2,500
2,000
Mining Projects
Potential 2.1 mbpd
1,500
1,000
500
0
2007
2009
2011
2013
2015
2017
2019
2021
2023
2025
Total In Situ Bitumen Volumes
13
2027
2029
2031
2033
2035
2037
2039
2041
2043
2045
Total Mined Bitumen Volumes
Relevant • Independent • Objective
www.ceri.ca
Western Canadian Oil Sands Potential
('000 b/d)
6,000
5,500
5,000
Announced
Awaiting Approval
Approved
Suspended
Under Construction
Onstream
4,500
4,000
3,500
3,000
2,500
2,000
1,500
1,000
500
2007
2009
2011
2013
2015
2017
2019
2021
2023
2025
14
2027
2029
2031
2033
2035
2037
2039
2041
2043
2045
Relevant • Independent • Objective
www.ceri.ca
Options for Canadian Crude By Pipeline
Churchill
Source: Canadian Association of Petroleum Producers, Crude Oil Forecast, Markets & Pipelines, June 2011
15
Relevant • Independent • Objective
www.ceri.ca
Economic Impacts of Alberta’s Oil Sands
“No Expansion” Scenario
'000 bbl/d
8,000
7,000
Mainline Expansion (2014)
Enbridge Line 61 +160,000 bpd
Enbridge Line 5 +50,000 bpd
6,000
Rail volumes (+50,000 to +200,000 bpd)
5,000
4,000
3,000
2,000
1,000
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
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
0
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
16
Relevant • Independent • Objective
www.ceri.ca
Economic Impacts of Alberta’s Oil Sands
“No Expansion” Scenario
450
400
350
300
250
Induced
200
Indirect
150
Direct
Canada
Direct employment 90,000 (2011)
growing to 125,000 jobs (2022)
100
50
Total Direct, Indirect, Induced employment
270,000 (2011) to 370,000 (2022)
2035
2033
2031
2029
2027
2025
2023
2021
2019
2017
2015
2013
2011
0
80
70
United States
Total Indirect and Induced
employment 54,000 (2011)
growing to 71,000 jobs (2022)
60
50
40
30
20
10
0
Source: CERI, Pacific Access: Part I Linking Oil Sands Supply to New and Existing Markets
17
Relevant • Independent • Objective
www.ceri.ca
Economic Impacts of Alberta’s Oil Sands
“No Expansion” Scenario
Canadian GDP Impacts
1600
12%
1400
$CDN Billions
1200
1000
800
600
Saskatchewa
n
4%
Quebec
Rest of
Manitoba Canada
3%
2%
Rest of Canada
$80.9 Billion
Ontario
55%
British
Columbia
24%
Alberta
$1,440
Billion
400
200
Total GDP Increase as a result of Oil Sands Investment & Operations 2011-2035
0
1. Ontario
2. BC
3. Quebec
GDP
$44.30 billion
$19.45 billion
$9.59 billion
2011-2035
United States Impacts by PADD
Source: CERI, Pacific Access: Part I Linking Oil Sands Supply to New and Existing Markets
PADD I
4. Saskatchewan $3.05 billion
5. Manitoba
$2.93 billion
6. ROC
$1.56 billion
Thousand
$CAD Million
Person Years
GDP
Compensation of Employment
Employees
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
18
Relevant • Independent • Objective
www.ceri.ca
Economic Impacts of Alberta’s Oil Sands
“No Expansion” Scenario
GDP
A labama
A laska
A rizona
United States Impacts
by State
1,291
647
521
113
3
1,729
849
22
19
754
355
California
15,091
7,012
151
Colorado
3,305
Connecticut
11
1,563
35
1,703
839
15
Delaware
474
176
4
District of Columbia
475
292
Florida
5,139
2,498
69
Georgia
38
4
2,827
1,471
Hawaii
395
181
Idaho
378
193
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
6
5
6
340
178
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
New Jersey
430
238
3,545
1,801
6
35
610
214
New York
7,713
3,902
71
North Carolina
3,121
1,389
37
New Mexico
7
209
89
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
1,120
602
18
North Dakota
South Carolina
South Dakota
Tennessee
252
98
1,870
957
3
4
27
12,935
5,116
Utah
787
382
Vermont
173
90
Virginia
2,577
1,313
31
Washington
4,451
2,174
48
401
195
7,308
3,590
Texas
West Virginia
Wisconsin
Wyoming
Total US
19
Thousand
Person Years
Employment
A rkansas
Maine
Source: CERI, Pacific Access: Part I Linking Oil Sands Supply to New and
Existing Markets (Appendix A)
$CA D Million
Compensation of
Employees
382
98
141,638
67,554
119
11
3
6
79
3
1,568
Relevant • Independent • Objective
www.ceri.ca
“Let’s Talk About
Pipelines”
20
Relevant • Independent • Objective
www.ceri.ca
Alberta Oil Sands Projects Coupled with WCSB Conventional Oil
Inclusion of the Keystone XL Pipeline
'000 bbl/d
8,000
7,000
6,000
Keystone XL (2015)
5,000
Mainline Expansion (2014)
4,000
3,000
2,000
1,000
BC Conventional
Diluent for Primary/Eor
Approved
Announced
Existing Export Operational Capacity
2035
2034
2033
2032
2031
2030
2029
2028
2027
2026
2025
SK Conventional
NWT Conventional
US Bakken prodn
Awaiting Approval
Expansion of Enbridge mainline
2024
2023
2022
2021
2020
2019
2018
2017
2016
2015
AB Conventional Prodn
MB Conventional
Existing&Under Construction
Approved-on Hold
KXL Addition
2014
2013
2012
2011
2010
2009
2008
2007
0
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
21
Relevant • Independent • Objective
www.ceri.ca
Alberta Oil Sands Projects Coupled with WCSB Conventional Oil
Inclusion of TMX Expansion
'000 bbl/d
8,000
7,000
TMX (2017)
6,000
Keystone XL (2015)
5,000
Mainline Expansion (2014)
4,000
3,000
2,000
1,000
2035
BC Conventional
Diluent for Primary/Eor
Approved
Announced
Expansion of Enbridge mainline
2034
2033
2032
2031
2030
2029
2028
2027
2026
2025
2024
2023
SK Conventional
NWT Conventional
US Bakken prodn
Awaiting Approval
KXL Addition
2022
2021
2020
2019
2018
2017
2016
AB Conventional Prodn
MB Conventional
Existing&Under Construction
Approved-on Hold
TMX Expansion
Existing Export Operational Capacity
2015
2014
2013
2012
2011
2010
2009
2008
2007
0
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
22
Relevant • Independent • Objective
www.ceri.ca
Alberta Oil Sands Projects Coupled with WCSB Conventional Oil
Inclusion of Northern Gateway
'000 bbl/d
8,000
Northern Gateway (2018)
7,000
TMX (2017)
6,000
Keystone XL (2015)
5,000
Mainline Expansion (2014)
4,000
3,000
2,000
1,000
2035
2034
2033
BC Conventional
Diluent for Primary/Eor
Approved
Announced
KXL Addition
2032
2031
2030
2029
2028
2027
2026
SK Conventional
NWT Conventional
US Bakken prodn
Awaiting Approval
TMX Expansion
Existing Export Operational Capacity
2025
2024
2023
2022
2021
2020
2019
2018
2017
2016
2015
AB Conventional Prodn
MB Conventional
Existing&Under Construction
Approved-on Hold
Northern Gateway Addition
Expansion of Enbridge mainline
2014
2013
2012
2011
2010
2009
2008
2007
0
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
23
Relevant • Independent • Objective
www.ceri.ca
Alberta Oil Sands Projects Coupled with WCSB Conventional Oil
Full Potential
'000 bbl/d
8,000
Looping/Expanding Existing Pipelines
Northern Gateway (2018)
7,000
TMX (2017)
6,000
Keystone XL (2015)
5,000
Mainline Expansion (2014)
4,000
3,000
2,000
1,000
2035
2034
2033
BC Conventional
Diluent for Primary/Eor
Approved
Announced
KXL Addition
2032
2031
2030
2029
2028
2027
2026
SK Conventional
NWT Conventional
US Bakken prodn
Awaiting Approval
TMX Expansion
Existing Export Operational Capacity
2025
2024
2023
2022
2021
2020
2019
2018
2017
2016
2015
AB Conventional Prodn
MB Conventional
Existing&Under Construction
Approved-on Hold
Northern Gateway Addition
Expansion of Enbridge mainline
2014
2013
2012
2011
2010
2009
2008
2007
0
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
24
Relevant • Independent • Objective
www.ceri.ca
“BUT”
25
Relevant • Independent • Objective
www.ceri.ca
What are the Problems for WCSB OIL?
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.)
26
Relevant • Independent • Objective
www.ceri.ca
Competition from the US Bakken
Oil Production Forecast and Transportation
27
Relevant • Independent • Objective
www.ceri.ca
Differential Problem WTI-Brent
$135.00
$8.00
$130.00
$6.00
$125.00
$4.00
$120.00
$2.00
$115.00
$-
$110.00
$(2.00)
$105.00
$(4.00)
$100.00
$95.00
$(6.00)
$90.00
$(8.00)
$85.00
$(10.00)
$80.00
$(12.00)
$75.00
$(14.00)
$70.00
$(16.00)
$65.00
$(18.00)
$60.00
$(20.00)
$55.00
$(22.00)
$50.00
WTI - Brent Differential ($/b)
$45.00
Europe Brent Spot Price FOB ($/b)
$40.00
West Texas Intermediate (WTI) @ Cushing ($/b)
$(24.00)
$(26.00)
28
Jul-2012
Apr-2012
Jan-2012
Oct-2011
Jul-2011
Apr-2011
Jan-2011
Oct-2010
Jul-2010
Apr-2010
Jan-2010
Oct-2009
Jul-2009
Apr-2009
Jan-2009
Oct-2008
Jul-2008
Apr-2008
Jan-2008
Oct-2007
Jul-2007
Apr-2007
Jan-2007
Oct-2006
Jul-2006
Apr-2006
Jan-2006
Oct-2005
Jul-2005
Apr-2005
$(28.00)
Jan-2005
$35.00
Relevant • Independent • Objective
www.ceri.ca
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
29
Relevant • Independent • Objective
www.ceri.ca
Future Problem WTI-Brent Differential
Pipeline Capacity Into and Out of Cushing
3,500,000
3,000,000
RISK
Capacity BPD
2,500,000
2,000,000
Total Flow Into Cushing
1,500,000
Total Flow Out of Cushing
1,000,000
500,000
0
2011
2012
2013
2014
Year
30
2015
2016
Relevant • Independent • Objective
www.ceri.ca
Western Canada WTI-WCS Differential
$135.00
$130.00
$125.00
$120.00
$115.00
$110.00
$105.00
$100.00
$95.00
$90.00
$85.00
$80.00
$75.00
$70.00
$65.00
$60.00
$55.00
$50.00
$45.00
$40.00
$35.00
$30.00
$25.00
$20.00
$15.00
$10.00
$5.00
WTI - WCS Differential ($/b)
Risk of widening differential
if new pipelines are delayed
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))
31
Jan-2012
Oct-2011
Jul-2011
Apr-2011
Jan-2011
Production
ramps up
Oct-2010
Jul-2010
Apr-2010
Jan-2010
Oct-2009
Jul-2009
Apr-2009
Jan-2009
Oct-2008
Jul-2008
Apr-2008
Jan-2008
Oct-2007
Jul-2007
Apr-2007
Jan-2007
Oct-2006
Jul-2006
Apr-2006
Jan-2006
Oct-2005
Jul-2005
Apr-2005
Jan-2005
Keystone Base and
Alberta Clipper new
capacity
Relevant • Independent • Objective
www.ceri.ca
“Canada has Energy”
“North South East or West”
“If the Market Wants the Energy,
Canada Needs the Pipes”
32
Relevant • Independent • Objective
www.ceri.ca
“Let’s Talk About
Western Canadian Natural Gas”
33
Relevant • Independent • Objective
www.ceri.ca
United States Gas Pipeline Import/Export Forecast
CERI “Realistic” Case (Feb. 2012)
10,000
8,000
8,000
6,000
6,000
4,000
4,000
2,000
2,000
0
0
-2,000
-2,000
Net Canadian Exports
- 5 BCF/d
-4,000
-6,000
-4,000
-6,000
-8,000
-8,000
Canadian Exports to US
Canadian Imports From US
2030
2029
2028
2027
2026
2025
2024
2023
2022
2021
2019
2018
2017
2016
2015
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
-12,000
2003
-12,000
2002
-10,000
2001
-10,000
2020
(MMcf/day)
Imports
10,000
Exports
12,000
Too much GAS not enough DEMAND
Net Import Volumes (MMcf/day)
12,000
Net Exports
“Where is the Problem?”
34
Relevant • Independent • Objective
www.ceri.ca
Ontario/Quebec Import/Export Forecast
CERI “Realistic” Case
TCPL Northern Pipeline
6,000
5,000
4,000
3,000
2,000
1,000
0
-1,000
WCSB Marketable Gas Supply
Potential for Stranded
Gas Pipeline Assets
Conversion to Oil Service
OIL
2005 2010 2015 2020 2025
20,000
18,000
16,000
14,000
12,000
10,000
8,000
6,000
4,000
2,000
0
Marcellus Gas into Niagara
Ontario
/ Quebec Gas connect to
Marcellus
Iroquois to New York
WCSB Export Flows
2005 2010 2015 2020 2025
0
-2,000
-4,000
-6,000
-8,000
-10,000
-12,000
-14,000
TCPL Niagara Net Flows
TCPL Sarnia Import Volumes
4,000
2,000
2005 2010 2015 2020 2025
3,000
1,000
Mid Continent Gas
Rockies Gas
Connect to Sarnia
2,000
0
1,000
-1,000
35
0
-2,000
2005 2010 2015 2020 2025
2005 2010 2015 2020 2025
Relevant • Independent • Objective
www.ceri.ca
AECO C Gas Price Forecast
AECO C Natural Gas Forecasts
$/MMBtu
$10
$9
$8
$7
$6
Average WCSB
Well Supply Cost
Range
($3-$5.75/mcf)
$5
$4
AECO C(real2010$/MMbtu) EIA AEO 2012
$3
CERI Speculative
$2
External Consultant
$1
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
$0
36
Relevant • Independent • Objective
www.ceri.ca
2008 Gas
Wells
Completed
2010 Gas
Directed
Licences
2011 Gas
Directed
Licences
2012 Gas
Directed
Licences
(Jan.-June)
Montney (34)
Falher (17)
Duvernay (11)
Cardium (24)
Bluesky (17)
Notikewin (10)
Glaucontic (49)
Viking (16)
Lower Mannville (10)
Western Canada What Makes the Gas World Work
$/ mcf
BC Montney Supply Cost example
$7.0
$6.5
$6.0
$5.5
$5.0
$4.5
$4.0
$3.5
$3.0
$2.5
$2.0
$1.5
$1.0
$0.5
$-
$4.5
$0.8
$4.5
$3.8
$0.7
$-
$3.8
$3.8
$3.9
Liquids Portion
$4.7
$1.3
$3.4
$4.9
$2.0
$3.0
$5.1
$2.6
$2.5
$5.3
$3.2
$2.1
Gas Portion
$5.5
$3.8
$1.7
Revenue
$5.7
$4.3
$1.3
$5.8
$4.9
$1.0
$6.0
$6.2
$6.4
$5.4
$5.8
$6.2
$0.7
$0.4
$0.2
$6.5
$6.5
March 2012 Intra AB NIT Price ($/mcf)
With a Gas Price of $1.87/mcf a well needs a minimum of 60 bbls/mmcf (Liquids) to be economic
41
Relevant • Independent • Objective
www.ceri.ca
Western Canada Gas Well Development Forecast
Realistic Scenario: Future Forecast
26000
24000
22000
20000
Well Count
18000
Forecast
Price Destruction
($14 to $3/mcf)
16000
14000
12000
10000
Price Recovery
($2 to $6/mcf)
Gas Directed
Activity Focused
on Liquids Rich
Plays
8000
6000
4000
2000
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
2031
2032
2033
2034
2035
0
AB Conventional Vertical Wells
SK Conventional Vertical Wells
BC Conventional Horizontal Wells
AB D&A Wells
SK D&A Wells
BC Montney
BC Conventional Vertical Wells
AB Conventional Horizontal Wells
SK Conventional Horizontal Wells
BC D&A Wells
BC Horn River
AB CBM
$1.87/mcf (March 2012)
Summer 2012: Gas Prices are forecasted to drop below $2.00/mcf
XXXX (Henry Hub)
42
Relevant • Independent • Objective
www.ceri.ca
Horn River to Kitimat LNG Potential (2013-2035)
190
1800.0
175
1700.0
170
Over the next 25 years:
160
•
•
•
•
•
•
150
140
130
Well Count
120
110
107
103
100
94
86
90
70
82
76
71
70
68
1300.0
1200.0
1100.0
1000.0
900.0
67
66
65
64
700.0
63
62
61
600.0
500.0
40
40
1400.0
800.0
73
50
50
400.0
300.0
30
20
20
0
78
59
60
1500.0
$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
80
10
1600.0
Production Voilume (MMcf/day)
180
0
0
200.0
100.0
0
0.0
New Wells
Pre Build
43
Production Volume
Relevant • Independent • Objective
www.ceri.ca
Be Careful What You Wish For!
“The Shale Gas Revolution!”
“The Conventional Oil Rebirth!”
“The Shale Oil Tsunami!”
“The Great NGL Surge”*
*Bentek Energy LLC
44
Relevant • Independent • Objective
www.ceri.ca
Canadian Energy Research Institute
Thank you for your time
Please visit us at
www.ceri.ca
45
Relevant • Independent • Objective
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