Market Diversification & Infrastructure Oilm en’s Ex ecutive Business Forum – Banff, August 21, 2012 Dave Collyer, CAP P
The Canadian Oil and Natural Gas Industry -A Key Driving Force in the Canadian Economy ● Investing $55 billion in Canada in 2012 ● $21 billion to governments in 2011 ● 20-25% of the value on Toronto Stock Exchange ● Approx. 18% of Canada’s exports ● Employs more than 550,000 people in Canada Upstream Oil & Gas Auto Manufacturing Forestry Wheat & & Logging Barley Uranium
North American Natural Gas – Supply Outlook• Shale gas supply a game- changer• Technology breakthroughs• New producing regions• Shifting S/D dynamic• Emerging stakeholder environmental concerns (footprint, water – use & quality, seismicity)
N.A. Natural Gas Pipelines & 2011 Cdn. Exports to U.S.(Bcf/d) • Existing infrastructure serves N.A. markets. • Changing S/D dynamics necessitate market growth: • N.A. (transportation, Proposed Kitimat LNG TransCanada power) Alberta (NGTL) Projects Westcoast • Exports (LNG for price & takeaway) ANG/ Foothills TransCanada Transmission Alliance Mainline Northwest East 1.4 bcf/d M&NE West Foothills TQ&M Great 2.4 bcf/d PGTNorthwest Northern Lakes Border Mid West Iroquois PNGTS PG&E Kern River 5.1 bcf/d CNG Algonquin Trailblazer ANR NGPL Panhandle Transwestern Texas SoCal ANR El Paso NGPL Eastern Transcontinental El Paso 4
Projected Net Natural Gas Imports(Bcf/d) Source: EIA 2011 International Energy Outlook
Global Natural Gas Prices 18.00 16.00 14.00 12.00 10.00$US/MMbtu 8.00 6.00 4.00 2.00 0.00 North America Europe Japan Source: World Bank
Potential West Coast LNG Terminals 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 ChinaCanadian LNG Export Project Development ActivityCompanies Location Capacity Est. Status• Apache / EOG / Encana Bish Cove, Kitimat, BC 1.4 Bcf/d 2017 Awaiting Investment Decision• BC LNG Export Cooperative Kitimat, BC 0.25 Bcf/d 2013 Permits received• Shell /China National / Korea Gas Kitimat, BC 1.8 Bcf/d 2020 Final stages of discussion• Progress / Petronas Prince Rupert 1.0 Bcf/d 2018 Conducting feasibility• Nexen / Inpex TBD Conducting feasibility
2011 Canada and U.S. Demand for Crude Oil by Source(Thousand Barrels per Day)
Changing Oil Import Projections Net Oil Imports (IEA 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
Western Canadian and Bakken Crude Pipeline Routes to U.S., Canada and Offshore Existing infrastructure primarily devoted to N.A. markets. Strong Canadian production growth requires diversification to new markets: Price Takeaway Bakken Utica Niobrara Eagle Ford10
International Markets: WTI vs. Brent Prices US$/bbl Daily • Brent: Benchmark used to price 65% of world’s oil. 140 • WTI is lighter than Brent, and 120 has historically traded at a 100 premium. • Growing disconnect between 80 landlocked crude and globally 60 traded crude such as Brent. • For most of 2011 and 2012 to 40 date, WTI has traded at a 20 discount to Brent. Differential WTI Brent • Discount has narrowed slightly 0 since beginning of year. -20 • July 1-10 average discount -40 ~US$13.50/bbl Jul-09 Jul-10 Jul-11 Jul-12 Jan-09 Jan-10 Jan-11 Jan-1211
North American Market: WTI vs. Edmonton Par Light US$/bbl Monthly • Both price benchmarks 140 have been volatile WTI @ Cushing recently. 120 Edm Par • Edmonton par discount 100 to WTI narrowed to ~$3.45/bbl in June, but 80 started to widen again Daily 120 to ~$12/bbl as of early 60 110 July. 100 40 90 • Tight pipeline capacity 80 amplifies volatility. 20 70 17-Jan 31-Jan 10-Apr 24-Apr 8-May 13-Mar 27-Mar 22-May 14-Feb 28-Feb 5-Jun 3-Jul 19-Jun 3-Jan 0 Jul-09 Jul-10 Jul-11 Jul-12 Jan-09 Jan-10 Jan-11 Jan-1212
Canadian Market: Light/Heavy Differential Cdn$/bbl 120 • Light/heavy differential has widened slightly 100 since Jan / 12. 80 • June 2012 average 60 heavy discount 40 Cdn Light/Heavy Diff ~ Cdn. $13.00/bbl. WCS @ Hardisty 20 MSW @ Edm 0 -20 -40 Jul-09 Jul-10 Jul-11 Jul-12 Jan-09 Jan-10 Jan-11 Jan-1213
Canadian Oil Sands & Conventional Production (Risked)
Industry Objective – West Coast Access● Objective: Industry seeks timely expansion of crude oil and natural gas export infrastructure from Canada’s west coast aligned with production growth. Drivers are fundamentally: • Securing market outlets • Securing global prices● What is needed to achieve this objective: Economically viable projects supported by markets and suppliers. Support from governments (federal and provincial) – policy and project approvals. Regulatory approvals (necessary, but not sufficient). Social license to build and operate.
Social License FrameworkSocial License = P erform ance + Com m unication● Performance: Continuous environmental & social performance improvement across the value chain (production, p/l and rail transportation, marine). Resolution of Aboriginal consultation & economic benefits / opportunities. Line of sight to jobs and economic growth / value creation. Solutions-oriented advocacy for balanced policy and regulation. Technology & innovation and industry collaboration are key levers.● Communications & Outreach: Sustained & substantive commitment to communications: • Messaging - balanced “3E” focus, targeted, fact-based, solutions – oriented, “high road”, direct, respectful……..not apologetic or defensive. • Delivery – diversity of mediums, approaches, spokespersons. • Grounded in performance improvement. Strong focus on outreach – local / regional / national / international.