Canadian Oil and Gas Outlook and Challenges Calgary Real Estate - - PowerPoint PPT Presentation
Canadian Oil and Gas Outlook and Challenges Calgary Real Estate Forum October 24, 2007 Canadian Association of Petroleum Producers 150 producer member companies who produce more than 95 per cent of Canadas natural gas and crude oil
Calgary Real Estate Forum October 24, 2007
Canadian Association of Petroleum Producers
Explore for, develop and produce natural gas, natural gas liquids, crude oil, synthetic crude oil, bitumen and sulphur throughout Canada
Searching for Clarity in a Haystack of Uncertainty
– Oil up, natural gas down, impact of exchange rates
– Global costs (steel, materials) up – Labour market tight but easing
– Public (roads, schools, medical, etc.) – Private (pipelines, upgraders, new markets)
– In a state of flux
Crude Oil and Natural Gas prices
5.00 15.00 25.00 35.00 45.00 55.00 65.00 75.00 85.00 '04 '05 '06 '07
0.00 2.00 4.00 6.00 8.00 10.00 12.00 14.00 '04 '05 '06 '07
Crude Oil Prices (WTI NYMEX) $US per barrel Natural Gas Prices (AECO Daily Spot Price) $Cdn/mcf
10 20 30 40 50 60 70 80 O ct '04 N o v Dec Jan '05 Feb M ar A pr M ay Jun Jul A ug Sep O ct N o v Dec Jan '06 Feb M ar A pr M ay Jun Jul A ug Sep O ct N o v Dec Jan '07 Feb M ar A pr M ay Jun Jul A ug Sep
U S$ pe r ba rre l
Bitumen price netback Light crude oil price quoted in media (West Texas Intermediate)
Light and bitumen crude oil prices
Canada/U.S. Foreign Exchange Rate
0.60 0.65 0.70 0.75 0.80 0.85 0.90 0.95 1.00 1.05
J03 A J O J04 A J O J05 A J O J06 A J O J07 A J
U S$/C dn$
Impact of exchange rate on oil prices US $80.00/bbl at parity is equal to US $52.00/bbl at 0.65 exchange rate Materials and equipment from the US and upgraders in US are more affordable
Oct 22 C$ closed at 1.02
Industry Capital Spending Cdn $billions
Northern Canada ‘04 ‘05 `06 `07F $0.3 $0.5 $0.4 $0.5 Oil Sands ‘04 ‘05 `06 `07F $6.2 $10.4 $14.3 $16.0 WCSB ‘04 ‘05 `06 `07F $24.5 $32.7 $36.5 $31.0 East Coast Offshore ‘04 ‘05 `06 `07F $1.9 $1.9 $1.6 $1.0
Note: Spending in Canada excludes spending associated with mergers & acquisitions
The oil & gas industry will invest $49 billion in Canada in 2007, down from $53 billion in 2006
Global Oil/Gas Investment Returns 5 Year Return on Cumulative Capital Costs
39% 35% 30% 26% 22% 22% 21% 20% 20% 19% 18% 18% 15% 14% 14% 12% 12% 12%
0% 10% 20% 30% 40% 50%
C h i n a B r a z i l A s i a
a c i f i c R u s s i a & C a s p i a n W
l d : O u t s i d e N
t h A m e r i c a A f r i c a & M i d d l e E a s t A u s t r a l i a W
l d O u t s i d e U . S . E u r
e T
a l S
t h & C e n t r a l A m e r i c a W
l d w i d e N
t h S e a / N
t h e r n E u r
e U . S . N
A m e r i c a w /
t S y n c r u d e N
t h A m e r i c a : U . S . & C a n a d a A r g e n t i n a C a n a d a : T
a l w / S y n c r u d e C a n a d a : C
v e n t i
a l
Source: John S. Herold Inc. & Harrison Lovegrove & Co. 2007 Global Upstream Performance Review
Alberta Government Lease Sales January - October
500 1,000 1,500 2,000 2,500 3,000 3,500 2004 2005 2006 2007
$m m O il Sands P & N G
WCSB Approximate Major Natural Gas Costs and Price
0.00 1.00 2.00 3.00 4.00 5.00 6.00 7.00 8.00 9.00
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
C $/G J
F& D Costs A nnua l Unit Ope ra ting Costs Roy altie s (a pproximation) A nnua l A v e ra ge A lbe rta Ga s Re fe re nce Price
Source: NEB Report Short-term Canadian Natural Gas Deliverability 2007-2009
100 200 300 400 500 600 700 800 J a n F e b M a r A p r M a y J u n J u l A u g S e p O c t N
D e c
2005 2006 2007
2005
# of Rigs active
2006 2007
Drilling Rigs Active in Western Canada
Source: Nickle’s
Rig count down 20% from 2006 and lowest since 2002
Total Wells Drilled in Canada
Source – CAPP. Based on Rig Release
4,000 8,000 12,000 16,000 20,000 24,000 28,000 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007F 2008F
Dry/S u sp . G as Oil
1990’s Avg = 10,000 Wells
2005=25,200 2006=23,400 2007=19,000 2008F =17,300
Oil Sands Projects in Three Deposits
Peace River Athabasca Cold Lake
Edmonton Calgary
In Situ Projects Mining Projects
Athabasca – Mining Barrels per day Operator Project Initial Potential Petro-Canada Fort Hills (2011) 100,000 190,000 ConocoPhillips Surmont 25,000 110,000 Encana Christina/Foster 42,000 400,000 Total E&P Joslyn Creek 10,000 40,000 Athabasca – In Situ Thermal Cold Lake – In Situ Thermal Peace River – In Situ Thermal Albian/Shell Muskeg/Jackpine 155,000 Base Plant 280,000 300,000 135,000 100,000 50,000 10,000 68,000 35,000 50,000 72,000 22,000 600 50,000 150,000 18,000 12,000 Base Plant Horizon (2008) Kearl (2010) Joslyn Creek Mine (2013) Hangingstone (pilot) Firebag Jackfish (2008) Sunrise (2012) Long Lake (2007) MacKay River (2009) Hilda Lake (pilot) Primrose Cold Lake Tucker (2007) Peace River Suncor Syncrude CNRL Imperial Total E&P JACOS Suncor Devon Husky OPTI/Nexen Petro-Canada Shell CNRL Imperial Husky Shell 560,000 550,000 600,000 577,000 300,000 200,000 30,000 375,000 70,000 200,000 288,000 70,000 20,000 110,000 170,000 40,000 100,000 Muskeg River Albian Christina Lake
Cold Lake
Wolf Lake/Primrose Hilda Lake Cold Lake Tucker Lake
Peace River
Peace River
Fort McMurray
Fort Hills Horizon Joslyn Creek Syncrude Suncor MacKay River Firebag Hangingstone Long Lake Surmont Foster Creek Jackfish Kearl Lake Jackpine Sunrise Northern Lights Whitesands Seal (Blackrock)
Bitumen Upgraders in Alberta Capacity by 2015
Existing: Volume (bpd)
Albian/Shell-Scotford 155,000 Husky-Lloydminster 82,000 Albian/Shell-Scotford 135,000 Increases capacity to 255,000 by 2010. Approval to 290,000 b/d. Husky-Lloydminster 68,000 Expansion to 150,000 b/d (2011). Statoil ASA (Kai Kos Dehseh) 250,000 Phase 1 – 75,000 b/d (2012). Phase 2 - 175,000 b/d by 2015 Shell Scotford Upgrader 2 100,000 Phase 1 on stream by 2012 - total capacity of 400,000 Suncor 338,000 Syncrude 410,000 Expansions: Comment Suncor 336,000 90,000 b/d expansion of Upgrader 2 & in-situ to total planned 428,000 b/d in 2008. Upgrader 3, additional 246,000 b/d to 674,000 b/d in 2012. Syncrude 160,000 Stage 3 debottleneck - capacity to 450,000 b/d in 2012. To 570,000 b/d post 2016. New projects: BA Energy-Heartland 163,200 Phase 1 – 54,400 b/d (2008); Phase 2&3 completed during 2011-13 CNRL-Horizon 270,000 Phase 1-3 (2011); Phase 1 in 2008 – 135,000 b/d. Phase 2&3-135,000 b/d -2012. Nexen/OPTI-Long Lake 288,000 On-stream late 2007 @ 72,000 b/d; 2011-72,000; 2013-72,000; 2015-72,000 b/d Northwest Upgrading 100,000 3-phased expansion. Phase 1-2010; Phase 2-2013; Phase 3-2016 additional 50,000. Petro-Canada 85,000 Refinery conversion to upgrader/refinery in late 2008 Petro-Canada/UTS-Fort Hills 340,000 Phase 1-165,000 b/d (2011); Phase 2/3-175,000 b/d (2014) PRO (Bluesky) 50,000 Phase 1 on-stream 2011. Total E&P-Strathcona 153,000 On-stream in 2013-14. Phase 2 - 82,000 in 2016 TOTAL 3,483,200 NOTE: All volumes expressed as bitumen.
Oil Sands - Key Issues
Capital (steel) is global, not just regional One of the major operating costs is fuel (natural gas)
Private – pipelines, upgraders, refineries (new markets), etc. Public – roads, housing, education, health care, etc. (Radke Report)
diluent supply and upgrading
Climate change, royalty review, value added, etc.
Global Cost Increases Not Just Local 20 000 40 000 60 000 80 000 100 000 120 000
Suncor - Millennium Albian Syncrude - Aurora 2 & UE 1* Nexen-OPTI CNRL - Horizon Shell - Muskeg & Scotford PCA/UTS Fort Hills
Capital $ per bbl/day (upgraded)
Production Start Date 2001 2003 2006 2007 2008 2011 2010
Capital Cost of 100,000 bbl/day project $3.3 billion $10-11 billion
*Syncrude includes base plant quality improvements and power
Construction Workforce Outlook – Oct 2006
Source: Construction Owners Association of Alberta (COAA) Oct 2006 CNRL – Horizon Phases 1 &2 IOL – Mackenzie Gas Project OPTI Canada/ Nexen Upgrader IOL Cold Lake Suncor Firebag & Voyageur Albian Sands – Jackpine & Upgrader Expansion PC/UTS Fort Hill Conoco Surmont Petro Canada Synenco Northern Lights Phases 1 & 2 Joslyn Syncrude UE1 & SERP Northwest Syncrude North American
Platte
Burnaby Portland Salt Lake City Houston Anacortes
Canadian & U.S. Crude Oil Pipelines
Enbridge Gateway Capacity 400 kbpd In service 2012-14
Express
Montreal Lima Chicago Cushing
Trans Mountain
TransCanada AB-California Capacity 400 kbpd In service 2012 AB-USGC Capacity 400-600 kbpd In service 2012 Guernsey Hardisty Edmonton Kinder Morgan TMX Northern Leg Capacity 400 kbpd In service 2012 TMX2 Expansion Capacity 100 kbpd In service 2011 TMX3 Expansion Capacity 300 kbpd In service 2011
Enbridge
BP
Enbridge North Alberta Clipper Capacity 450+ kbpd In service mid-2010 Southern Access Capacity 400 kbpd In service 2009 Southern Lights Capacity 185 kbpd In service 4Q 2008 Line 5 Expansion Capacity 50 kbpd In service 2008 Line 6B Expansion Capacity 44 kbpd In service 2009 Line 6C New Line Capacity 350 kbpd In service 2011 Line 9 Reversal Capacity 180 kbpd In service 2009
existing proposed possible
Sarnia TransCanada Keystone Capacity 435 kbpd In service late 2009 Cushing Extension Capacity 155 kbpd In service late 2010 Heartland Extension Capacity 600 kbpd In service 2009-10 Enbridge South New Line Capacity 450 kbpd In service 2010 New Line Capacity na In service 2012-14 Spearhead Expansion (N/S)
In service 2009 North Loop to Chicago In service 2009 BP Light line ex-Chicago Capacity 180 kbpd In service 2009 Altex Capacity 250+ kbpd In service 2011 ExxonMobil Mustang Expansion Capacity 38 kbpd In service late 2008 Pegasus Expansion Capacity 31 kbpd In service late 2008 Clydesdale New Line Capacity 280+ kbpd In service 2010 Kinder Morgan Express Option 1 Capacity 160 kbpd In service 2010 Express Option 2 Capacity 55 kbpd In service 2010 Express Bullet Capacity 400+ kbpd In service 2010 Express Routing Patoka South Wood River Patoka Sunoco New Line Capacity 200 kbpd In service 2012
ExxonMobil
Government Policy Impacts
$300 million increase last year for conventional Panel proposal as input to government policy
Provincial and Federal policies on GHG Air Pollutants policy as currently drafted sets cap on growth
Government decision to revoke OSUM seismic license and lease
Impact of changes to income trust taxation Accelerated Capital Cost allowance changes
From ethane to bitumen; how much and where?
Oil Sands & WCSB Conventional Production
1,000 2,000 3,000 4,000 5,000 6,000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 Thousand Barrels Per Day
In Situ Mining
Actual Forecast
Pipeline Planning Case
Conventional Heavy Conventional Light Pentanes
Moderate Growth Case Future Potential In Production and Under Construction
Canadian Oil & Gas in a Global Context
Large Resource
Oil Sands/Unconventional Gas
Driving activity
regulation
Broad range of expert services
Not Venezuela or Nigeria
Need infrastructure
Multiple levels of regulation
Tax, royalty, environmental
Impact on Outlook
Strong oil prices
Global costs (steel, materials) rising
Public (roads, schools, medical) catching up
Royalty review, taxation, regulatory uncertainty