Oil edmonton's re investing final aug13

OIL … EDMONTON’S REAL ESTATE INVESTING
FOUNTAIN OF YOUTH
PROPERTY OF STEP AHEAD INVEST 2013

THERE ARE 5 KEY STEPS TO
REAL ESTATE PROFITS

5 KEY STEPS TO REAL ESTATE PROFITS
Drives Population Growth - Immigration
IntraProvincial Foreign
Drives the Economy & GDP Growth
Increased Jobs Increased Wages
Alberta Oil Reserves
Attracts Investment Infrastructure/Operations
Step 1
Step 2
Step 3

OIL DRIVES REAL ESTATE PROFITS
Results in Real Estate Profits
Positive Cash Flow Appreciation/Principle Pay Down
Higher Real Estate Prices
Homes Apartments
Increased Rental Demand
Higher Rents Lower Vacancies
Step 4
Step 5
Profits

WHY IS OIL SO IMPORTANT TO THE WORLD?
 Before we can look at the 5 key steps to profitable real estate
investing, we must first determine how important oil is to the
world
 We will look at which countries have oil, the world demand for
oil and finally the world supply of oil

 Oil provides over 1/3 of the worlds energy requirements everyday
 Oil is the world’s transit fuel
 Approximately 90% of every barrel of oil is consumed through
transportation
Cars
Trucking
Rail
Air
Shipping

 Food Consumption
 For every 1 calorie of food that you eat …
 10 calories of fossil fuels are used to process & transport it to your table
 Energy from Oil is Unique vs. Other Sources
 Natural gas has only 2/3 the energy of oil
 Oil has two times the energy of coal
 Inexpensive Energy Source
 Oil does not spoil
 Can be stored easily … not like electricity
 Has an established world wide infrastructure
 Easily moved through pipelines, trucks, rail and tankers

CAN ALTERNATIVE ENERGY REPLACE OIL?
 Electricity – Wind, Solar, & Battery
 No infrastructure set up to handle the demand as a transportation fuel
 Electricity is extremely difficult and costly to store
 Natural Gas
 Infrastructure is the biggest hurdle and will take decades to become a reliable alternative
 Alberta has one of the largest natural gas reserves as well
 Coal
 Does not have energy equivalent to compete with oil
 Primarily used for electricity
 40% of the world’s electricity comes from coal and 75% is for
China
 Coal is 20% dirtier than oil and 2 times more than
Natural Gas
 Alberta also has large coal reserves to supply the world

SUMMARY OF ALTERNATIVE ENERGY
 Most alternatives fuels don’t have the cost and energy advantages of oil
 It will take trillions of dollars to build out the infrastructure for alternatives
 This will take several decades if it started now and will require both a
national and international energy plan
 None of this has been started or is even being discussed
 It will take a major crisis before governments around the world turn this
into a reality

WHAT COUNTRIES HAVE THE OIL?

WORLD OIL RESERVES
ALBERTA 3RD LARGEST

81% OF WORLD OIL INVESTMENT IS RESTRICTED

ALBERTA HAS 55% OF THE INVESTIBLE OIL
Canada has 56% of the worlds
only investible oil
Alberta 171

WORLD OIL RESERVES
 Alberta has the 3rd largest proven reserves in the world at 171BB (Billion Barrels)
 They have mined only 3BB since the start of mining in the oil sands
 Alberta has total reserves of over 2 Trillion Barrels which include all 3 categories of
(proven, probable and additional probable)
 This is more than all other countries proven reserves combined
 81% of the worlds known reserves are owned by their respective governments
 Canada has 56% of the investible reserves with Alberta controlling 55%
 Companies can not or will not invest in government owned reserves for fear of
nationalization like what has happened in Russia and Venezuela
 Triple digit oil prices will shift the economic and political power from the major oil
consuming countries to the major oil exporting countries
 As oil shortages begin to appear, countries will begin to hoard oil creating even more of a
supply issue

 Requires significantly more energy to
mine and refine
 Oil Sands takes 1 BTU to produce 3
BTU
 Alberta and Venezuela have the largest
reserves
 All deep water drilling and new shale
plays are consider non-conventional
 Requires very little processing
 Takes 1 BTU of energy to produce
100 BTU’s
 OPEC is the largest supplier
 US is the second largest producer
but consumes 100%
TWO MAJOR CLASSIFICATIONS OF OIL
Conventional Non-Conventional

WORLD OIL SUPPLY VS. OIL DEMAND
Oil Shortfall?

100% INCREASE IN WORLD CAPITAL
SPENDING ON OIL PROJECTS
$300B
$600B

WORLD OIL SUPPLY IS FLAT
DESPITE $300B SPENDING INCREASES

WORLD OIL PRODUCTION FALLING SHORT
 Production of transportation fuels for the last 12 years has remained very
tight within a 5% range
 Despite higher oil prices over the last decade, this has not produced
additional production
 Capital spending has doubled for exploration from $300B to $600B to deliver
the same
 This is why oil cost $100/b and is rising
 It is estimated that if China and India continue to grow their imports at current
rates it will cause the world to run out of available oil for export before 2030
 In time nearly every country in the world will become a net importer of oil
including Saudi Arabia
 This leaves Alberta in a very powerful position

ALBERTA OIL OUTPUT GROWING
WHILE OTHERS ARE IN DECLINE
Alberta has 98% of
Canada’s Oil

THE WEALTH SHIFT IS STARTING

WHERE IS THE DEMAND FOR OIL COMING FROM?

WORLD OIL CONSUMPTION

BRIC COUNTRIES OIL CONSUMPTION
EQUALED THE US IN 2011

BY 2040 CHINA’S ENERGY
USE WILL BE DOUBLE US

WORLD OIL DEMAND CONTINUES TO GROW
 Despite a slow down in the industrialized world emerging market growth is
more than off-setting the decline
 Emerging market demand is growing at 10%/yr.
 The greatest demand is coming from Asia and the Middle East
 Many of the top exporters are seeing continued domestic demand erode
their exports and will become net importers in the near future
 BRIC countries are growing at 20% - 30%
 Much of the growth is coming from
additional vehicles on the road
 There are 42 gallons of gas in 1 barrel of oil
 There are 159 liters of gas in 1 barrel of oil

CARS PUTTING THE STRAIN ON OIL

CHINA THIRST FOR OIL
 China is the largest auto market in the world
 50% larger than the USA
 1000 new cars are going on the road on Beijing road system each day
 Car ownership is 1/10th of the USA with massive upside potential
 Sold 18M cars in 2011 and expected to
grow to 35M by 2020
 Sells more cars than any country in the
world
 Gas is subsidized by the government

OTHER OIL DEMAND PRESSURES
 Saudi Arabia
 Population continues to grow consuming more and more gas at a growth rate of 5%/yr
 Saudi Arabia and most of the OPEC countries subsidize gasoline
 Currently burning over 1mb/d of oil to run desalination plants
 The large demand for water is causing their aquifers to dry up and therefore the number
of plants continue to grow
 India
 Sells 11M cars per year and growing
 Gasoline is also subsidized
 Japan
 Nuclear power represented 1/3rd of all their energy needs until it was shutdown
 Oil had represented 50% of their needs but has now become a growing part of their needs
since the nuclear issue
 Countries are terrified to cut their fuel subsidies for fear of riots

OIL COST TO THE WORLD IS GROWING
Year Oil Brent Price World Oil Bill
2000 76mb/d $28.50 $791B
2010 87mb/d $79.50 $2.5T
2011 90mb/d $100.00 $3.0T
2015
 There are 2B people not currently consuming oil and gas
 There is a tremendous wealth transfer taking place in the world
 Cash is moving from the oil consuming countries to the oil producing
countries like Russia, Venezuela and Canada/Alberta

IS THERE AN OIL SUPPLY SHORTFALL?

IS SAUDI ARABIA RUNNING OUT OF OIL?

HOW RELIABLE IS OPEC
AND SAUDI ARABIA?
 OPEC/Saudi Arabia
 2/3rds of the worlds exportable oil comes from the 12 member states which equals
about 30mb/d
 Saudi Arabia represents about a 1/3rd or 10mb/d

THE ONCE GREAT SAUDI ARABIA OIL FIELDS
 5 oil fields represent 90% of their production
 Ghawar is the largest and oldest currently producing 60% of the
country’s output
 It has produced over 55 BB to-date
 It was founded in 1940 which is over 70 years ago
 Safaniya and Abqaiq make up two of the other fields and were
found at about the same time
 There have been no significant oil field discoveries in Saudi
Arabia to compare with Ghawar
 All other fields are much smaller

DO THEY HAVE WHAT THEY SAY
THEY HAVE?
 Saudi Arabia states that they have about 260BB of proven reserves
 This has not and cannot be verified
 1979 was the last time an independent party audited their reserves and they said
 110BB proven reserves
 66BB probable reserves
 69BB additional probable
 Total 245BB
 No company was allowed into SA after 1979

THE BIG COVER UP
 In 1982 OPEC including SA stopped reporting their reserves
 8 years later SA changed their reporting to 260BB proven reserves from 110BB
 All the probable and possible reserves were moved to proven
 The world only uses proven to determine reserves
 There was never any announcement of any new oil fields found
 They are extracting about 3BB/yr. and since 1980 they have extracted between 90-
100BB of oil … yet their total reserves have not changed???

THE BIG COVER UP
 These fields have been aggressively mined and their life expectancy
has been significantly shortened because they are pumping water into
them to maintain pressure
 The 1979 projections had these fields starting to decline by the 1990’s
 Saudi Arabia and OPEC do not want the world to know the true
numbers because they would lose control and influence in the world

BIG COVER UP
 It is suspected that Venezuela and other nationally
controlled reserves are also being fudged to protect
influence
 Remember if Alberta combined all 3 types of reserves they
would have over 2 Trillion Barrels of oil

USA TO BE ENERGY INDEPENDENT …
REALLY?

USA TO BE NET EXPORTER
OF OIL IN FUTURE
 Largest consumer of oil in the world at about 19mb/d
 Currently the second largest producer of oil in the world
Produce 8 - 9mb/d
No oil is exported and they import 8 – 10mb/d
Reached peak oil in 1970 and oil production has been
declining ever since until the recent shale oil discovery

SHALE OIL TO GIVE U.S. OIL INDEPENDENCE
… NOT!
 The recent shale oil discoveries in the US have been known for several
decades
 It was never mined because it requires over $75/b to mine cost
effectively
 It is forecasted that under the best case scenario all shale reserves
combined will produce 3mb/d by 2020
 If we assume no decline in their current production
(Unrealistic – Peak Oil 1970) they would be
producing up to 12mb/d
 This is significantly short of their
current 17 – 19bb/d requirement

EIA FORECAST FOR OIL SUPPLY & DEMAND
Demand
60mb/d

PROJECTED OIL SHORTFALL
 The EIA projects the decline of all known oil projects
 US shale boom is projected to peak at only 3mb/d (million, barrels/day)
 Production to slip from 85mb/d of crude oil to just 45mb/d between 2012 and
2030
 IEA forecasted in 2010 that 80% of the oil fields operating today won’t be
producing in 25 yrs.
 Total oil supply is declining at about 4mb/d per year
 2030 is only 17 years away
 The projected shortage is compounded by the fact that oil companies don’t
talk about their oil reserve shortages because that lowers their valuations

WE NOW KNOW HOW IMPORTANT OIL IS!
Cheap Oil Expensive Oil
Abundance Shortage

STEP 1 - OIL ATTRACTS INVESTMENT
Step 1
Step 2
Step 3

MINING ALBERTA’S BLACK GOLD

WHERE ARE THE OIL SANDS?

TOTAL INVESTMENT IN ALBERTA
CONTINUES TO GROW
2013 Over $70B in Total

HISTORICAL OIL & GAS INVESTMENT
IN ALBERTA
$48.1B

PROJECTED INVESTMENT IN OIL & GAS
Oil & Gas investment remains at
nearly $50B out to 2016 and will stay
the same or increase as new projects
are announced in the future

OIL SANDS - ONLY
CAPEX INVESTMENT GROWING

ALBERTA OIL IS REFINED
IN ALBERTA AND US
 Bitumen (Oil Sands) after it is refined is of higher quality than
Saudi Arabian oil and trades at a premium
 Operating expenditures alone on oil and gas are approximately
$20B/yr. and growing

OIL PRICES ARE FORECASTED TO INCREASE
Higher Oil Prices Drives
Investment

ALBERTA OIL PRODUCTION
FORECASTED TO DOUBLE
6.5mb/d
3mb/d

WHO ARE ALBERTA’S OIL CUSTOMERS?

ALBERTA IS THE LARGEST SUPPLIER TO U.S.

CANADA IS THE ONLY COUNTRY GROWING
EXPORTS TO U.S.
U.S. needs the Keystone Pipeline

THE U.S. WILL CONTINUE TO NEED OUR OIL

PIPELINE IS THE MAJOR MEANS OF
TRANSPORTATION
 There are 4 key major pipelines being proposed to accommodate
the oil sands growth
1. Keystone pipeline to US Gulf (800kb/d – 900kb/d)
1. Requires presidential approve and is expected 2013 – 2014
2. Northern Gateway pipeline (800kb/d – 900kb/d)
1. Provides access to the west coast and the Asian market
2. Currently under environmental review and expected decision
by 2015

4 MAJOR PIPELINES PROPOSED
3. Eastern Pipeline to Canada’s east coast (850kb/d – 1,200,000kb/d)
1. Eastern Canada imports 700kb/d of oil
2. Will allow Canada to become truly energy independent
3. Provides access to Europe
4. Completion expected by 2017
4. Trans Mountain Pipeline Expansion to Canada’s west coast
1. Expansion from 300kb/d to 890kb/d
2. Access to Asia and US by ship

Keystone
East
Coast
Gateway
Trans
Mountain

ALBERTA INVESTMENT SUMMARY
 We have demonstrated the world’s need for oil for many years
to come
 Alberta will be one of the only places in the world to supply that
oil … tremendous wealth and influence transfer
 This will attract continued investment into Alberta and Edmonton
economy for many decades to come
 Edmonton is the hub that services the oil and gas industry

STEP 2 – OIL INVESTMENT DRIVES THE
ECONOMY
Step 1
Step 2
Step 3

ALBERTA GDP GROWING AT STEADY RATE
Growth Rate at 3% to 4%

CALGARY AND EDMONTON GDP
HAS FASTEST GROWTH

GDP GROWTH DRIVES JOB
AND WAGE GROWTH
 The tremendous investment into Alberta is creating continued
job growth and very low unemployment which in turn drives
rents up and vacancies down
 Some forecasts project that Alberta will create over 20k new
jobs per year

ALBERTA HISTORICAL EMPLOYMENT &
UNEMPLOYMENT RATE
Employment
Unemployment

ALBERTA’S POSITIVE QUARTERLY
EMPLOYMENT GROWTH

TOTAL OIL SANDS EMPLOYMENT IMPACT

ALBERTA CONSTRUCTION JOBS FORECAST

ALBERTA PROJECTED TO HAVE VERY LOW
UNEMPLOYMENT

ALBERTA WAGES ARE INCREASING

ALBERTA HAS HIGHEST WEEKLY EARNINGS

EDMONTON ALSO SEEING THE JOB
AND WAGE GROWTH

EDMONTON NUMBER OF EMPLOYED
GROWING

EDMONTON QUARTERLY NUMBER
OF JOBS GROWING

EDMONTON UNEMPLOYMENT RATE
DECLINING

JOBS DRIVE IMMIGRATION
& POPULATION GROWTH

STEP 3 – POPULATION GROWTH
Step 1
Step 2
Step 3

ALBERTA POPULATION GROWTH CONTINUES

QUARTERLY ALBERTA
POPULATION GROWTH

ALBERTA LEADS CANADA IN GROWTH

JOBS ATTRACT POPULATION GROWTH
Consecutive Quarters
of Growth

TREND FOR POPULATION GROWTH
TO CONTINUE

ALBERTA PROJECTED POPULATION
GROWTH

ALBERTA PROJECTED POPULATION TO
DOUBLE IN 15 YEARS

EDMONTON IS BENEFITING FROM ALBERTA
NET MIGRATION

POPULATION GROWTH INCREASES THE
DEMAND FOR HOUSING

STEP 4 – INCREASED RENTAL DEMAND
Homes Apartments
Step 4
Step 5
Profits

EDMONTON RENTAL RATES CONTINUE TO
INCREASE

EDMONTON VACANCY RATES FALLING
& BELOW 4%
4% Balanced Market

Q2 2013 VACANCY AT 1.2% -
WELL BELOW FORECAST OF 2.3%

LOW VACANCIES AND HIGHER RENTS
PUSHES REAL ESTATE PRICES HIGHER

STEP 5 – HIGHER REAL ESTATE PRICES
Homes Apartments
Step 4
Step 5
Profits

EDMONTON HOME PRICES SHOWING
SOLID GROWTH

MULTI-FAMILY SALES PRICE/DOOR
INCREASING

WHY INVEST IN EDMONTON?

REFINERY ROW RIPPLE EFFECT

ONE OF THE BEST PLACES TO INVEST
IN THE WORLD
 Edmonton is the major hub that supports the oil and gas industry
 Fort Saskatchewan is one of the major refining locations for petrochemicals and is
supported by Edmonton
 Most of the fabrication for the oil sands is done in Edmonton
 The massive gas plays in Northern BC and Alberta are supported by Edmonton
 Alberta/Edmonton is economically and politically stable
 Has the lowest cost of living with no sales taxes and one of the highest per capita incomes
 The province supports real estate investors and has the least amount of rent controls in
the country
 There is no land transfer tax in Alberta
 Alberta is one of the only world jurisdictions that still has a AAA rating
 A KPMG study once found that Edmonton was the 2nd most diversified economy in all of
North America

OIL + REAL ESTATE = PROFITS
Homes Apartments
Step 4
Step 5
Profits

AN INVESTMENT OF A LIFE TIME
 Alberta has been blessed with what the world needs
 Oil, Gas and Coal
 Mining these resources will provide the fuel needed to drive real
estate for many more decades to come
 Remember … 4 green houses equals one big red hotel
 So what are you waiting for … Invest in Alberta Real Estate Now!

Oil edmonton's re investing final aug13

Recommended

Recommended

More Related Content

What's hot

What's hot (19)

Viewers also liked

Viewers also liked (10)

Similar to Oil edmonton's re investing final aug13

Similar to Oil edmonton's re investing final aug13 (20)

Recently uploaded

Recently uploaded (20)

Oil edmonton's re investing final aug13