Focus on Geopolitics N.A. Shale & Export Options - A Canadian View
Focus on Geopolitics N.A. Shale & Export Options - A Canadian View International Gas Union October 17, 2012 – Ottawa, ON Dave Collyer, President, CAPP
North American Natural Gas – Supply Outlook• Shale gas supply a game-changer …100+ years supply.• Technology success (horizontal drilling, fracturing, completions).• Implications: Abundant, affordable energy. Significant shift in S / D dynamics Changes in p/ l flows. Emerging stakeholder challenges (env. & social).
Western Canada – Resource Plays 100 Years + SupplySource: TransCanada
Canadian Natural Gas Production –Two Price Scenarios (bcfd)2220 Price Recovery Case1816 Eastern Canada1412 Alberta Shale10 Horn & Cordova 8 6 Montney Note: Prices recover to at least a level of $5.50/GJ 4 CBM 2 0 Conventional 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Continued Low Prices Case Note: Prices do not exceed $4.00/GJ over the forecast period CAPP 2012
$0 $1 $2 $3 $4 $5 $6 $7 Pinedale (Crest) Marcellus Wet (core) Pinedale& CAPP (Forward Strip Price) Marcellus Dry (core) Fayetteville (3.4 Bcf) Granite Wash (Horizontal) (September 14, 2012) Montney (10 stage frac) Source: Morgan Stanley Research August 19, 2010 Huron Shale Deep Bossier (E. Texas) Eagle Ford (Condensate Zone) 2 year forward strip: $3.66/MMBTU Cana-Woodford (Core) Piceance (Valley - Core) Barnett (Tier 1) Horn River Natural Gas Supply Costs Appalachian -CBM Haynesville Nikanassin Marcellus dry (tier 2) Eagle Ford (Gas) Fayetteville (2.8 Bcf) Jonah Woodford (Arkoma) Wattenberg (Core) (Representative Single Well Economics – Established Plays) Uinta (Shallow) Canada is resource rich, Piceance (Highlands) competitively challenged. Raton (CBM) Alberta Shallow Gas Required NYMEX Natural Gas Strip for 10% IRR Warwick (W. Tx Overthrust) Montney (4 stage frac) Barnett (Tier 2) Powder River (CBM) Alberta Deep Basin Jean Marie (Tight Gas) Horseshoe Canyon (CBM) 5
Canadian Natural Gas Exports, 2011 Impact of Shale Gas on N.A Gas Flows 2011 Canadian Exports Horn River, Montney 8.9 bcf / d LNG Northeast 1.4 bcf / d West 2.4 bcf / d U.S. Rockies Mid-West Marcellus 5.1 bcf / d• Existing infrastructure serves N.A. markets.• Changing S/D dynamics necessitate market growth: New Supply Areas Haynesville, • N.A. (transportation, Fayetteville, etc. power) Increased Flow • Exports (LNG for price & takeaway)
Projected Net Natural Gas Imports(Bcf/d) Source: EIA 2011 International Energy Outlook
World Natural Gas Prices 20.00 18.00 16.00 14.00 12.00$US/MMbtu 10.00 8.00 6.00 4.00 2.00 0.00 North America Europe Japan Source: World Bank
Favourable Project Economics Associated with Serving Asian Natural Gas Markets 18 Japan LNG Price 2012 16 14 Japan LNG Price 2011 12 10 Japan LNG Price 2010 8$/MMbtu 6 4 2 0 Gas Price Western Transportation Cost Liquefaction Cost Shipping Cost Canada to Coast
Proposed Canadian West Coast LNG Terminals Positives Asian market growth Proximity to Asia Deep water port(s) Robust supply Gov’t & stakeholder support Potential Challenges Multiple competing projects Global scale Cost escalation Market window Sponsors Location Timing Capacity StatusKitimat LNG Apache; EOG; Encana Kitimat BC 2017 1.4 Bcfd Permits Received Phase 1 & 2 total Awaiting Final Investment DecisionDouglas Channel LNG Partners & Haisla Kitimat BC Q4 2013/Q1 0.25 Bcfd Export Permit ReceivedEnergy Partnership Nation Limited 2014 PartnershipLNG Canada Shell Canada, Korea Gas, Kitimat BC 2020 2.0 Bcfd Early Project Development stage, Mitsubishi and applied for export license PetroChinaPetronas Progress; Petronas Prince 2018 1.0 Bcfd Conducting Feasibility RupertNexen/Inpex Nexen/Inpex TBD TBD TBD Conducting Feasibility
Summary - What’s Needed to Make It Happen?● Competitiveness Aligned policy (federal & provincial)….sense of urgency. Efficient regulatory framework (upstream, infrastructure, export licenses). Stable, competitive fiscal regime. Timely enabling infrastructure development. Win – win relationship among producers and markets.● Social License Continuous performance improvement – environmental & social. Recognition of environmental benefits of use in export markets. Addressing local “on the ground” issues. FN & stakeholder support.…… A significant opportunity for Canada requiring shift fromN.A. to global competition to realize market window.