Creating Energy Sustainability in a Global ContextLessons Learned

Jamie Sawchuk, Partner

The Pacific Northwest Gateway to Asia

Energy: Asia Demand – Canadian Response

Canadian International Council Conference

October 28th, 2014

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2 Deloitte Confidential - CIC Energy-Asian Demand-Cdn Response, October 28th, 2014

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Global Context

1. Liquefied Natural Gas (LNG) has the potential to become integral to Canada’s natural gas future

2. Asia is interested in Canadian LNG

Diversity of Supply

Canada’s History as an Natural Gas Exporter

Cleaner, Energy Supply

Large natural gas reserves

Friendly, Stable Country

Cold Weather(lower cost to liquefy)

3. Canada, including industry, government – and importantly First Nations – are looking to safely and sustainably export LNG to Asia

3 Deloitte Confidential - CIC Energy-Asian Demand-Cdn Response, October 28th, 2014

© Deloitte LLP and affiliated entities.

Global Context

Competing in a global marketplace

Deloitte Confidential - CIC Energy-Asian Demand-Cdn Response, October 28th, 20144

4. Multiple consortiums are considering making billions of dollars of investments in Canada and specifically British Columbia

5. Facing global competition from US brownfield as well as Africa, Australia, S.E. Asia, Qatar and Russia

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Global Context

Canadian energy projects compete for global capital

5 Deloitte Confidential - CIC Energy-Asian Demand-Cdn Response, October 28th, 2014

• The economic benefits to the region getting the capital investment are enormous.• For some regions – like Mozambique – the potential investment is massive relative to the

existing economies

Australia Nigeria Kazakstan Angola Papua New Guinea

Mozambique

1,542

273

201

115

15 15

302

45

10078

19

68

2012 GDP Proposed megaprojects capex

20% 17% 50% 68% 123% 467%

$ billions(not to scale)

Megaprojects as a share of GDPMegaprojects capex versus 2012 GDP

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1 2 3 4 5 6 7 8 9 10 11 12 13 14 150

20

40

60

80

100

120

140

160

Canada’s LNG – Will we go through the “Hype” lifecycle?

6

Illustrative LNG Hype Lifecycle

?

Time

Is the HypeHere?

Growing Momentum Overcoming Barriers Build-out & Operations

Expect consolidation over the next two years as consortiums sell down equity positions to reach Final Investment Decision (FID)

Hype

Companies will spend hundreds of millions getting to FID Companies will spend billions post-FID

FID

Long Term Trend

Investment requires a more pragmatic view

A challenge…or an opportunity?

Deloitte Confidential - CIC Energy-Asian Demand-Cdn Response, October 28th, 2014

… or here?

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A challenge…or an opportunity?

Social License is setting the bar

Source: Urban Institute — National Center for Charitable Statistics, “Foundation Giving Trends, 2009” (Foundation Center),

Legal

Social

Time

Investigate / Posit

PublishMonitor

Activist Action Cycle

Level of Expectation

Gap

7 Deloitte Confidential - CIC Energy-Asian Demand-Cdn Response, October 28th, 2014

© Deloitte LLP and affiliated entities.8 Deloitte Confidential - CIC Energy-Asian Demand-Cdn Response, October 28th, 2014

28% Economic Trends |

Competition

32% Business

Model

40% Reputation

Today

26% Reputation

28% Economic

Trends

41%Brand

2010

Deloitte: Exploring Strategic Risk:A Global Survey, 2013

A challenge…or an opportunity?

Businesses now cite reputation as the No. 1 risk

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A challenge…or an opportunity?Can we learn from Australia’s LNG experience or are we destined to repeat it?

Moving from a “high speed, high cost” mentality to a “low cost / operational excellence” approach

9 Deloitte Confidential - CIC Energy-Asian Demand-Cdn Response, October 28th, 2014

© Deloitte LLP and affiliated entities.

Gas

market

A challenge…or an opportunity?

New models for collaborative competition are emerging

10 Deloitte Confidential - CIC Energy-Asian Demand-Cdn Response, October 28th, 2014

Incr

easi

ng

co

mp

lexi

ty a

nd

fo

rmal

ity

of

stru

ctu

re Asset value

Industry value

Operations Value

Regulatory/Infrastructure

Basic communicationsE.g., APPEA“Our natural advantage”

E.g., Queensland Resources Council

APPEA

Surplus goods disposal and Shared services

outsourcing

JVs and Common

Engineering

© Deloitte LLP and affiliated entities.

A challenge…or an opportunity?

Key lessons on creating meaningful engagement

BC

United States

Nigeria

Papua New

Guinea

Kazakhstan

Colombia Australia

11

Denmark

Norway

Deloitte Confidential - CIC Energy-Asian Demand-Cdn Response, October 28th, 2014

El Salvador