UBCM Convention 2012: Opportunities & Challenges for Natural Gas in BC

1,144 views
962 views

Published on

Published in: Business, Technology
0 Comments
0 Likes
Statistics
Notes
  • Be the first to comment

  • Be the first to like this

No Downloads
Views
Total views
1,144
On SlideShare
0
From Embeds
0
Number of Embeds
584
Actions
Shares
0
Downloads
0
Comments
0
Likes
0
Embeds 0
No embeds

No notes for slide

UBCM Convention 2012: Opportunities & Challenges for Natural Gas in BC

  1. 1. Opportunities & Challenges for Natural Gas in British Columbia UBCM Convention 2012 Global Opportunities Septem ber 24, 2012 Geoff M orrison1
  2. 2. Canadian Association of Petroleum Producers Mission Statement:  To enhance the economic sustainability of the Canadian upstream petroleum industry in a safe and environmentally and socially responsible manner, through constructive engagement and communication with governments, the public and stakeholders in the communities in which we operate.  Balancing the “3 ‘Es” – Advancing environmental performance, economic growth, and energy and reliability to achieve balanced outcomes2
  3. 3. The global context Global Energy Demand● IEA expects global demand for energy to increase 40 per cent by 2035● Global demand for natural gas is expected to increase 55 per cent by 2035● IEA calls next two decades a “golden age” for natural gas Source: IEA 20113
  4. 4. Top 10 world natural gas producers in 2010 Source: BP Statistical Review 20114
  5. 5. North American supply outlook● Shale gas supply a game changer● Technology breakthroughs● New producing regions● Shifting supply/demand dynamics5
  6. 6. Pipeline infrastructure N.A. Natural Gas Pipelines & Proposed 2011 Cdn. Exports to U.S. (bcf/d)Kitimat LNG TransCanada Projects Alberta (NGTL) Westcoast ANG/ Foothills TransCanada Transmission Alliance Mainline Northwest East 1.4 bcf/d M&NE West Foothills TQ&M Northwest Northern Great 2.4 bcf/d PGT Lakes Border Mid West Iroquois PNGTS PG&E Kern River 5.1 bcf/d CNG Algonquin Trailblazer ANR NGPL Panhandle Transwestern Texas SoCal ANR El Paso NGPL Eastern Transcontinental El Paso 6
  7. 7. B.C.’s natural gas resource● B.C. home to some of North America’s most promising natural gas plays: Horn River and Montney● Resource estimated at up to 336 tcf● That’s enough supply to last at least 100 years at current demand levels● B.C. is Canada’s second-largest producer of natural gas, behind Alberta● Annual production is 1.3 tcf per year● More than 20,000 wells drilled in B.C. since the early 1900s Source: B.C. OGC7
  8. 8. Investment in B.C.’s natural gas sector ● $6 billion estimated for 2012 ● $6 billion invested in 2011 ● $70 billion invested up to 2010 ● $13 billion spent on acquisitions in B.C. gas plays by foreign companies from 2010 to date8
  9. 9. 9 $ millions 0 1 000 1 500 2 000 2 500 3 000 500 2000 2001 2002 2003 2004 2005 2006 2007 2008 British Columbia Crown Land Sales 2009 2010 2011 T T T T TT 2011 YTD 2012 YTD
  10. 10. Total Wells Drilled in Western Canada 2010 2011 2012F Alberta 7,090 7,087 6,707 British Columbia 552 560 425 28,000 Dry/Susp. Saskatchewan 2,517 2,980 3,012 Gas Manitoba 439 471 556 24,000 Oil 20,000 2008 = 16,100 16,000 2011 2010 = 11,115 2012 F 12,000 2009 =10,611 = 10,700 = 8,137 900 8,000 1,600 4,000 8,200 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012E Source – CAPP. Based on Rig Release
  11. 11. Natural gas production in B.C.Price recovery case – Bcfd: Prices recover to $5.50/GJ before 2015Cntd. low price case – Bcfd: Prices remain below $4.00/GJ for the forecast period11
  12. 12. Factors favouring Canadian LNG exports ● Large resource base near West Coast ● Growing world LNG market  Proximity to growing Asian markets  Opportunity for market diversification ● Price uplift – global versus North American market  Natural gas prices in Japan currently US$16.50 MMBtu and US$2.40 MMBtu in North America  Higher prices will incent higher activity levels, and enhance industry and provincial revenues  Positive project economics ● Infusion of foreign investment ● Broad government, First Nations and stakeholder support ● Need to act swiftly: other countries already responding to rising Asian demand12
  13. 13. Canada’s LNG export opportunity● Ports of Kitimat and Prince Rupert are closer to Asia than any other North American port  8 sailing days to Japan  9 sailing days to Korea  11 sailing days to China Source: Apache Corporation13
  14. 14. Canadian LNG export projects in development● Kitimat LNG (Apache, Encana, EOG)  1.4 Bcf/d  Awaiting investment decision● BC LNG Export Co-operative  0.25 Bcf/d  Permits received● LNG Canada (Shell, KOGAS, Mitsubishi, PetroChina)  1.8 Bcf/d  Final stages of discussion● Progress/Petronas  1.0 Bcf/d  Conducting feasibility● Nexen/Inpex  Conducting feasibility● BG Group/Spectra Energy Corp.  4.2 Bcf/d Total new capacity ~ 8.6 Bcf/d  Advancing feasibility study14
  15. 15. Government encourages investment B.C. government’s Natural Gas and LNG strategies: ● Recognize importance and promote competitiveness of B.C. natural gas sector ● Recognize natural gas as a foundational, cleaner-burning fuel with an important role in addressing global carbon reduction objectives ● Ensure the natural gas industry is a key contributor to job creation, as well as to royalties and taxes B.C. classifies natural gas as “clean energy” when supporting LNG development ● B.C.’s natural gas industry will see increasing demand for electricity as development proceeds ● Enables competitive electricity solutions15
  16. 16. Economic benefits Impact over next 25 years from natural gas development: ● 12,000 people directly employed in B.C. natural gas sector ● By 2035, direct employment could reach 40,000 people ● Taxes and royalties will exceed $160 billion (CERI 2011) Royalties & mineral rights payments: ● Largest source of natural resource revenue in 2011/2012 fiscal year16
  17. 17. Responsible Canadian Energy - water objectivesThrough the CAPP Responsible CanadianEnergy (RCE) program, Canada’s oil and gasindustry works to:● Reduce the amount of fresh water required per barrel equivalent of production● Safeguard the quality of regional surface and groundwater resourcesOur safety record:● 175,000 wells fractured safely in B.C. and Alberta without an incident of harm to groundwater, according to regulators● Robust regulations and industry best operating practices are key to earning our social licence to operate17
  18. 18. Guiding Principles for Hydraulic Fracturing We will safeguard the quality and quantity of regional surface and1 groundwater resources, through sound wellbore construction practices, sourcing fresh water alternatives where appropriate, and recycling water for reuse as much as practical. We will measure and disclose our water use with the goal of continuing to2 reduce our effect on the environment.3 We will support the development of fracturing fluid additives with the least environmental risks. We will support the disclosure of fracturing fluid additives4 We will continue to advance, collaborate on and communicate5 technologies and best practices that reduce the potential environmntal risks of hydraulic fracturing.
  19. 19. Operating Practices for Hydraulic Fracturing19
  20. 20. Practices put Principles into action Fracturing Fluid Additive Disclosure  Publicly disclose all information on fracturing fluid additives
  21. 21. Practices put Principles into action Wellbore Construction and Quality Assurance  Affirms compliance with Surface Casing regulatory requirements & (Conductor) good engineering practice  Specifies that a cement Cement barrier must exist from the top of the producing formation to surface Base of Ground Water Protection  Outlines wellbore testing requirements and specifies Production Casing remedial actions, when required Not to Scale Graphic from Shell Canada
  22. 22. Seismicity – August 2012 OGC report Report Findings: ● Indicates minor seismic activity (2ML to 3.8ML) associated with hydraulic fracturing ● None of the seismic events caused danger to people, structures, environment Expanded Seismic Array: ● MOU with OGC, Geoscience BC, NRCan and CAPP ● Shared industry funding ● Six new seismic monitors will be added in NEBC – total of eight ● Operational by end of 2012 Induced Seismicity Guidelines Under Development: ● Purpose is to outline procedures to assess, monitor and mitigate ● Guidelines will apply nationally and be incorporated into CAPP Hydraulic Fracturing Operating Practices22
  23. 23. Changing Oil Import Needs Net imports of oil in the New Policies Scenario 14 mb/d 2000 12 2010 10 2035 8 6 4 2 0 China India European United Japan Korea Union StatesSource: IEA World Energy Outlook 2011, EIA
  24. 24. Global GHG Emissions Global Emissions Canada’s 2% Agriculture Oil Sands 8.0% Waste 6.9% U.S. 3.2% Solvent & Other 18% Product Use European Union 0.0% 13% Industrial Processes 7.4% Other Oil & Gas Japan 15.2% 4% China Canada 24% 2% India 6% Australia/New Zealand 1% Energy Transport Other Energy - 28.0% Stationary Russian 31.2% Other Federation 26% 6% GHG emissions from oil sands:  just over 1/1000th of global GHG emissions  6.9% of Canada’s GHG emissionsSources:  26% reduction in intensity from 19901. United Nations Statistics Division (2008 Data)2. Environment Canada (2010 Data)
  25. 25. Full Cycle GHG Emissions GHG Emissions from 120 Production and Refining GHG Emissions from Gasoline Consumption 114 106 107 100 104 102 102 102 98 105 80 g CO2e/MJ gaso 60 40 20 0 Saudi Mexico Iraq Venezuela Nigeria US Gulf California Oil Sands Arabia Coast Thermal Wtd. AvgSource: Jacobs Consultancy, Life Cycle Assessment Comparison for North America and Imported Crudes, June 2009
  26. 26. North American GHG Emissions (2010) Oil Sands and Power Generation Legend AK 51-100+ mtonnes 16-50 mtonnes 0-15 mtonnes MT ND MN OR WY SD WI NH MI NY NE IA NV UT CO IN OH NJ KS MO VA KY Canadian oil sands IL WV AZ NC NM OK TN Canadian coal-fired power AR SC generating plants AL GA U.S. Coal fired power TX MS generating plants LA FLSources: U.S. DOE/EIA & Environment Canada
  27. 27. Land Use and Reclamation
  28. 28. Summary ● Huge opportunity for Canada ● Market diversification is key ● Need to be competitive ● Social licence to operate ● Principles and Practices  Guide development  Inform and complement regulations  Consistently deliver responsible operations across Canada  Continue to develop the resource safely28

×