Newfoundland and Labrador’s Offshore Oil and Gas Industry: Opportunities and Challenges

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Presentation to PEG-NL, June 14, 2013. Presentation by Paul Barnes, CAPP Atlantic Canada Manager.

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Newfoundland and Labrador’s Offshore Oil and Gas Industry: Opportunities and Challenges

  1. 1. Newfoundland and Labrador’sOffshore Oil and Gas Industry:Opportunities and ChallengesPresentation to PEG-NLJune 14, 20131
  2. 2. Overview● Who is CAPP● NL Offshore IndustryOverview● Opportunities andChallenges● Overcoming thechallenges● Conclusion2
  3. 3. Who is CAPP● The voice of Canada’s upstream oil and natural gas industry● CAPP works to enhance the economic sustainability of theCanadian upstream petroleum industry in a safe andenvironmentally and socially responsible manner● CAPP members produce more than 90% of Canada’s naturalgas and crude oil● Producer member companies explore for, develop andproduce natural gas, natural gas liquids, crude oil, syntheticcrude oil, bitumen and elemental sulphur throughout Canada● Offices located in St. John’s, NL, Ottawa, ON and Calgary, AB3
  4. 4. Newfoundland and Labrador’s Offshore● Three producing oil projects:Hibernia, Terra Nova, WhiteRose 29% of Canada’s conventional lightcrude production in 2011; 22% in 2012due primarily to maintenance programs● The Hebron project will be thefourth major oil development● 2012 land sale – over $116million in work expenditurebids● Significant activity plannedfor NL in 2013: Six exploration wells Planned seismic activity Other tie-back projects/expansionsunder development4
  5. 5. ● The Opportunity: Significant resource potential (oil and natural gas)• Total discovered and undiscovered estimated at over eight billion barrels of oiland greater than 60 trillion cubic feet (tcf) of natural gas* Established industry (demonstrated ability to complete projects in NL) Established supply/service sector Positive business climate● The Challenges: Increasing exploration levels/attracting investment• NL has been reasonably successful but exploration levels still small comparedto other offshore jurisdictions• Lack of infrastructure for natural gas development Labour supply challenges Technical challenges related to operating in the harsh North AtlanticOpportunities and Challenges – NL Offshore5* Source: www.gov.nl.ca
  6. 6. NL Offshore Needs to Compete Internationally● Fundamental attraction is no different than any otherworldwide basins Geological prospectivity Access to resources Access to markets Fiscal stability Managing lifecycle development costs● Regulatory efficiency and effectiveness Has material impact on costs Has material impact on business cycle times Is critical in determining investments6
  7. 7. Note: Excludes spending on mergers & acquisitions2011 2012E 2013F$0.3 $0.3 $0.5Northern Canada2011 2012E 2013F$22.7 $23 $23Oil Sands2011 2012E 2013F$37.6 $36 $38Western Canada2011 2012E 2013F$1.5 $1.5 $1.5East Coast OffshoreIndustry Capital Spending (C$B) - East Coast Offshorespending is small relative to the rest of Canada2011 2012E 2013F$62 $61 $63Canada Total7
  8. 8. Offshore NL – Future Potentialfor Natural Gas Development● Newfoundland andLabrador contains 10.85tcf of natural gas (reservesand resources) and 478million barrels of naturalgas liquids● The Government ofNewfoundland andLabrador estimates theprovince’s offshore naturalgas potential at over 60 tcf● Challenges associated withproducing gas include:• Harsh offshore environment• Distance from consumers• Lack of infrastructure totransport gasLabradorShelf>304.2GrandBanks22.46.6Laurentian18.6TOTAL>60 tcf10.858
  9. 9. Labour market trends● Labour shortage is anational issue and notunique to oil and gas Will affect us here in NL● What is driving thecurrent labour trends: New job creation Age related attrition● What is compoundinglabour shortages: Loss of experienced workers Turnover within the industry Leakage to other industries Domestic and globalcompetition for same skills9
  10. 10. Total Hiring Outlook to 2015 for Canada’s Oil and GasIndustryThe loss of workers to competing industries creates further hiring challenges - the industry willneed to fill approx. 15,000 jobs over the next four years (2012-2015). This does not include‘churn’ or movement of workers within the industry.-3,000-2,000-1,00001,0002,0003,0004,0005,0006,0002012F 2013F 2014F 2015FNumberofJobsYear-Over-Year Total Hiring Requirements for Canadas Oil and GasIndustryDue to Industry Activity Due to Age-related Attrition Due to Leakage4,887 3,662 2,914 3,48210
  11. 11. Petroleum Industry Labour Shortages 2012-2015Up to 36 per cent of the pending job vacancies may not get filled due to projected laboursupply/demand gaps.11
  12. 12. Labour Market Hot Spots6
  13. 13. ● Industry R&D efforts focusing on overcoming varioustechnical challenges related to operating offshore NL: Harsh, remote offshore environment• Improving ice management and performance• Developing trenching system for subsea pipelines• Investments in Centre for Arctic Research and Development Extending life of current fields• Announcement this week of a new enhanced oil recovery research facility atMemorial University Reducing health, safety and environmental risks for operation in Arcticand harsh environments• Cold water survival• Research related to aspects of PPE and performance, including goggles anddive masks• Technology to better determine wave heightTechnical Challenges13
  14. 14. Overcoming the Challenges● Initiatives related to improvingregulatory efficiency andeffectiveness and reducing costs willhelp increase exploration● Cooperation and collaboration key toovercoming labour market issues Initiatives happening provincially and federally andare both industry-led and government-led Increase available workforce key to strategy● R&D Key to Overcoming TechnicalChallenges14

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