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Market Diversification for
Canadian Oil and Gas
Presented by: John Foran
Natural Resources Canada
June 17, 2013
Canada/US Energy Trade Relationship
51 TWh
14 TWh
840
MMb 3.1
Tcf 1.0
Tcf
2600
tU
% US Market
Electricity 1%
Crude Oil 16%
Natural Gas 12%
Uranium 20%
Canada’s Energy Policy Agenda Market oriented energy policy
Maximize benefits of resources for Canadians
Ensure public health, safety, environmental protection
Address concerns of Canadians
Changing context
Outlook for increased Canadian energy production from shale gas, oil sands and tight oil
Prices less than global prices for same product. Infrastructure required to connect them
US becoming self sufficient
Social license
Energy Market Diversification is a
priority for Canada
“it is increasingly clear that Canada’s commercial interests are best served through diversification of our energy markets.” To this end, our Government is committed to ensuring that Canada has the infrastructure necessary to move our energy resources to those diversified markets.” – Prime Minister Stephen Harper
Canadian oil and gas production far exceeds domestic requirements; resources are huge and growing; greater volumes will be available to export
99% of crude oil exports and 100% of Canada’s natural gas exports go to the United States
US is becoming more self-sufficient, while global demand is growing
North American prices are lower than global prices
Growing need for, and reality of, foreign investment
Market Diversification:
Natural Gas / LNG
Global prices are higher
Brent
Crude Oil
NYMEX Alberta
0
5
10
15
20
25
Jan-
03
Jul-0
3
Jan-
04
Jul-0
4
Jan-
05
Jul-0
5
Jan-
06
Jul-0
6
Jan-
07
Jul-0
7
Jan-
08
Jul-0
8
Jan-
09
Jul-0
9
Jan-
10
Jul-1
0
Jan-
11
Jul-1
1
Jan-
12
Jul-1
2
Jan-
13
$/M
MB
tu Natural
Gas,
Europe
Japan LNG
0
5
10
15
20
25
$ / MMBtu
US becoming more self-sufficient
Canadian Supply will be available to export
2025
21
0
5
10
15
20
0
5
10
15
20
2000 2005 2010 2015 2020
Dry Gas Bcf/d
13
History Forecast
CBM
1616
Associated Gas
Conventional Gas
73%
2%
14%
11%
Shale Gas
Montney and Other Tight Gas
Dry Gas Bcf/d
Source: Ziff Energy
Export Terminals Being Pursued
Kitimat LNG Up to 10 mtpa; In service: 2017
Chevron, Apache Export license approved
Douglas Channel LNG Up to 1.8 mtpa; In service: 2015
BC LNG Export Co-operative Export license approved
Proposed Pipelines
West Coast (Proposed)
Pacific Northwest LNG Up to 18 mtpa; In service: 2018
Petronas/Progress Reg. applications pending
LNG Canada Up to 24 mtpa
In service: 2019/20 Shell, Mitsubishi,
Kogas, PetroChina Export license
approved
Prince Rupert LNG 14 mtpa, expandable to 21 mtpa
In service: 2020 BG Group
Regulatory applications pending
East Coast (Potential)
Halifax
Goldboro LNG Up to 10 mtpa; In service: 2019
Pieridae Energy Canada Regulatory applications pending
Saint John
Canaport LNG Existing import facility, up to
7.5 mtpa Potential to convert to an
export terminal
Proposed Liquefaction terminals
Market Diversification:
Crude Oil
Global light oil prices are higher
$0
$20
$40
$60
$80
$100
$120
$140
$160
Jan
. 08
Apr
. 08
Jul.0
8
Oct
. 098
Jan
. 09
Apr
. 09
Jul.0
9
Oct
. 09
Jan
.10
Apr
. 10
Jul.1
0
Oct
. 10
Jan
.11
Apr
. 11
Jul.1
1
Oct
. 11
Jan
.12
Apr
. 12
Jul.1
2
Oct
. 12
Jan
.13
Apr
. 13
Brent Oil Price Edmonton Par
$US
/Bar
rel
For many years Canadian crudes
track Brent
North American oil price differentials increase with
rising oil sands and tight oil
production and insufficient pipeline capacity to access
global markets
Global heavy oil prices are higher
$0
$20
$40
$60
$80
$100
$120
$140
$160
Jan
. 08
Mar
.08
May
. 08
Jul.0
8S
ep. 0
98N
ov. 0
8Ja
n. 0
9M
ar.0
9M
ay. 0
9Ju
l.09
Sep
. 09
Nov
. 09
Jan
.10
Mar
.10
May
. 10
Jul.1
0S
ep. 1
0N
ov. 1
0Ja
n.1
1M
ar.1
1M
ay. 1
1Ju
l.11
Sep
. 11
Nov
. 11
Jan
.12
Mar
.12
May
. 12
Jul.1
2S
ep. 1
2N
ov. 1
2Ja
n.1
3M
ar.1
3
Maya WCS Oil Price
$US
/Bar
rel
Maya trades at a slight premium to
WCS
Heavy oil price differentials widen with rising oil sands
and tight oil production and insufficient pipeline capacity
to access global mar kets
US Demand for Crude Imports Falling
Canadian Supply has grown, expected
to keep growing
Canadian Crude Oil Production
0.0
0.5
1.0
1.5
2.0
2.5
3.0
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
Source: Statistics Canada
Million B
arr
els
Per
Day
Oil Sands Synthetic
Oil Sands Bitumen
Pentanes & Condensates
Conventional Heavy
Conventional Light & Medium
Crude Oil Production Forecast
Source: Canadian Association of Petroleum Producers
Source: CAPP / NRCan
TransCanada
Keystone XL
(700k b/d)
US Portion
Under Review
Enbridge
Northern
Gateway
(525k b/d)
Under NEB
Review
Kinder
Morgan
Trans
Mountain
Expansion
(590k b/d)
Proposed
Québec ●
a) Enbridge Line 9A, Sarnia-
Westover Re-reversal
(152k b/d), Approved
b) Enbridge Line 9B, Westover
Montreal Re-reversal
(300k b/d), Under NEB Review
TransCanada
Energy East
(conversion)
(500-850k b/d)
Potential
Prince Rupert
Saint John
Enbridge Bakken
Pipeline (for US
production)
(145k b/d)
Approved
Enbridge Oil Market Access
Projects (400 k b/d):
a) Alberta Clipper Expansion
b) Spearhead/Flanagan South
Expansion
c) Seaway Reversal and
Expansion
TransCanada
Energy East
(500-850k b/d)
Potential
Pipelines
Enbridge Pipelines, including Alberta Clipper
to US Mid West (2,345 kb/d)
Kinder Morgan Express (282 kb/d)
Kinder Morgan Trans Mountain (300 kb/d)
TransCanada Keystone (591 kb/d)
Proposed Pipelines to West Coast
Existing / Proposed to Gulf Coast
Expansions
Pipelines proposed to South, West and East
Canada is a Responsible
Resource Developer
Pipeline Safety
National Energy Board (NEB) administers a rigorous regulatory regime, industry achieves a strong safety record
Canada and US – NEB and PHMSA – similar approaches
Canadian pipelines transport light crude oil, tight light oil, conventional heavy, synthetic light oil, and heavy oil blends (diluted bitumen)
All Canadian crudes transported in pipelines are similar to US crudes transported in pipelines
Bitumen-derived crudes (e.g. Western Canada Select) are heavy crudes similar to Mexico Maya, Venezuela or California heavy.
NRCan pipeline information
http://www.nrcan.gc.ca/pipeline/6698
Environmental Responsibility
Canada is one of the few top 10 global oil producers that committed at Copenhagen to reduce its GHG emissions 17% from 2005 levels by 2020
From 2005 to 2011, overall GHG emissions have declined in Canada. We project this will get us half way to our emissions goal
GHG emissions per barrel have fallen 26% in the oil sands since 1990. The federal government, Alberta and industry are committed to further reductions
Canada will announce GHG regulations for the oil and gas sector in 2013
Canada and Alberta have established a robust monitoring system for air, water and land impacts from oil sands development
Conclusions
US is Canada’s biggest and most valued market
Canada shares US goals of responsible, safe resource development
Government and industry focussed on market diversification
Projects being pursued to realize opportunities
Resource is there; geology is destiny