market diversification & infrastructure
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Oilmen’s Executive Business Forum – Banff, August 21, 2012 Dave Collyer, CAPP PresidentTRANSCRIPT
Market Diversification & Infrastructure
Oilmen’s Executive Business Forum –
Banff, August 21, 2012 Dave Collyer, CAPP
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 & Logging
Wheat & 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)
TransCanada Transmission Mainline
TQ&M
Westcoast
Kern River
Northwest Northern Border
TransCanada Alberta (NGTL)
NGPL
ANR
ANR El Paso SoCal
PGT
Texas Eastern
Panhandle
Algonquin
Transcontinental
NGPL
Northwest Foothills
El Paso
Transwestern
Trailblazer
M&NE
CNG
Iroquois PNGTS Lakes Great West
2.4 bcf/d Mid West 5.1 bcf/d
East 1.4 bcf/d
Alliance
ANG/ Foothills
PG&E
Proposed Kitimat LNG
Projects
• Existing infrastructure serves N.A. markets.
• Changing S/D dynamics necessitate market growth:
• N.A. (transportation, power)
• Exports (LNG for price & takeaway)
4
Projected Net Natural Gas Imports (Bcf/d)
Source: EIA 2011 International Energy Outlook
Global Natural Gas Prices
0.002.004.006.008.00
10.0012.0014.0016.0018.00
North America Europe Japan
$US/
MM
btu
Source: World Bank
Potential West Coast LNG Terminals
Canadian LNG Export Project Development Activity Companies 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
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 China
2011 Canada and U.S. Demand for Crude Oil by Source (Thousand Barrels per Day)
Net Oil Imports (IEA New Policies Scenario)
Changing Oil Import Projections
0
2
4
6
8
10
12
14
China India European Union
United States
Japan
mb/
d
2000
2010
2035
Source: IEA World Energy Outlook 2011, EIA
Korea
Western Canadian and Bakken Crude Pipeline Routes to U.S., Canada and Offshore
Bakken
Utica Niobrara
Eagle Ford
10
Existing infrastructure primarily devoted to N.A. markets.
Strong Canadian production growth requires diversification to new markets:
Price
Takeaway
International Markets: WTI vs. Brent Prices
-40
-20
0
20
40
60
80
100
120
140
Jan-
09
Jul-0
9
Jan-
10
Jul-1
0
Jan-
11
Jul-1
1
Jan-
12
Jul-1
2
Differential WTI Brent
• Brent: Benchmark used to price 65% of world’s oil.
• WTI is lighter than Brent, and has historically traded at a premium.
• Growing disconnect between landlocked crude and globally traded crude such as Brent.
• For most of 2011 and 2012 to date, WTI has traded at a discount to Brent.
• Discount has narrowed slightly since beginning of year.
• July 1-10 average discount ~US$13.50/bbl
US$/bbl Daily
11
North American Market: WTI vs. Edmonton Par Light
0
20
40
60
80
100
120
140
Jan-
09
Jul-0
9
Jan-
10
Jul-1
0
Jan-
11
Jul-1
1
Jan-
12
Jul-1
2
WTI @ Cushing
Edm Par
• Both price benchmarks have been volatile recently.
• Edmonton par discount to WTI narrowed to ~$3.45/bbl in June, but started to widen again to ~$12/bbl as of early July.
• Tight pipeline capacity amplifies volatility.
70
80
90
100
110
120
3-Ja
n17
-Jan
31-J
an14
-Feb
28-F
eb13
-Mar
27-M
ar10
-Apr
24-A
pr8-
May
22-M
ay5-
Jun
19-J
un3-
Jul
US$/bbl Monthly
Daily
12
Canadian Market: Light/Heavy Differential
-40
-20
0
20
40
60
80
100
120
Jan-
09
Jul-09
Jan-
10
Jul-10
Jan-
11
Jul-11
Jan-
12
Jul-12
Cdn Light/Heavy DiffWCS @ HardistyMSW @ Edm
• Light/heavy differential has widened slightly since Jan / 12.
• June 2012 average heavy discount ~ Cdn. $13.00/bbl.
Cdn$/bbl
13
Canadian Oil Sands & Conventional Production (Risked)
WCSB Pipeline Takeaway Capacity vs. Supply
15
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 Framework
Social License = Performance + Communication ● 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.