CANADIAN OIL SANDS CONVENTIONAL OIL AND GAS PRODUCTION FORECAST, - PowerPoint PPT Presentation

CANADIAN OIL SANDS CONVENTIONAL OIL AND GAS PRODUCTION FORECAST, SUPPLY COSTS, EMISSIONS AND ECONOMIC IMPACTS CERI Breakfast Overview Allan Fogwill, President & CEO Bow Valley College - Calgary September 13, 2019 Flagship Breakfast Overview Sponsor : www.ceri.ca

CANADIAN ENERGY RESEARCH INSTITUTE Overview Founded in 1975, the Canadian Energy Research Institute (CERI) is an independent, registered charitable organization specializing in the analysis of energy economics and related environmental policy issues in the energy production, transportation, and consumption sectors. Our mission is to provide relevant, independent, and objective economic and environmental research of energy issues to benefit business, government, academia and the public. CERI publications include: • Market specific studies • Geopolitical analyses • Quarterly market reports (crude oil, electricity and natural gas) In addition, CERI hosts a series of study overview events, executive briefings for organizations and an annual Petrochemicals Conference. 2

CORE FUNDERS 3

DONORS Ivey Foundation 4

AGENDA ▪ Background ▪ Production Outlook ▪ Supply Costs ▪ Emissions ▪ Economic Impacts 5

RECENT CHALLENGES IN THE CANADIAN OIL AND GAS INDUSTRY • Lack of market access to international and US markets • Ongoing judicial / regulatory hurdles for Line 3, Trans Mountain, Keystone XL, Coast Gas Link • Differential between Western Canadian Select and WTI • Depressed AECO-C gas prices for producers • Changes in regulatory processes (EIA process, redesign of NEB) • Production and price risks from the upcoming regulation change in the shipping industry regarding Sulphur levels • Depressed service industry due to reduction on drilling 6

RECENT ACTIVITIES IN THE INDUSTRY • Oil and natural gas production keeps growing (+8.5% oil 2017-18, 4.1% gas 2017-18) • Canadian oil grows its presence in US (market share 39% to 48% in total US imports), primarily because of oil sands • FID for LNG Canada (1.9 bcf/d ), possibility for 3.7 bcf/d in expanded • 300-million-barrel-reserves Bay Du Nord project approval (NL) • New propane export facilities: Altagas in service, Pembina close FID • PDH/PDP projects in Alberta: Interpipeline under construction, Pembina close to FID • Differential between Western Canadian Select and WTI came to “normal level” due to AB curtailment 7

GLOBAL MARKET SUPPLY AND DEMAND Source: EIA 8 Source: EIA

CANADIAN CRUDE OIL PRODUCTION 8.5% 5000 4500 4000 3500 ('000bpd) 3000 2500 2000 1500 1000 500 0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Atlantic MB SK AB BC NWT AB-Bitumen and SCO Source: Statistics Canada CANSIM Table 126-0003 9

US CRUDE IMPORTS FROM CANADA 7.3% 4,000 3,500 3,000 2,500 68% 66% 61% ('000 bpd) 62% 60% 2,000 59% 59% 59% 1,500 55% 57% 1,000 500 - 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Light Sweet Light Sour Medium Heavy Sweet Heavy Sour Source: US EIA 10

GROWING CANADIAN SHARE IN US MARKETS OIL IMPORTS Source: US EIA 11

CANADA’S GAS PRODUCTION, EXPORTS AND IMPORTS 4.1% Source: EIA Natural Gas Consumption, ARC Energy Institute 12

CURRENT CANADIAN GAS PRODUCTION • AB – 67% • BC - 30% • SK – 3% • NS – 0.4% • Changes • BC grows at 6%, AB at 2% annually • Deep Panuke decommissioned • Hydraulic Fracturing bans – QC, NS • Partial lifting of hydraulic fracturing ban - NB Source: CERI, EIA 13

CANADIAN OIL SANDS PRODUCTION BY TYPE 5,000 4,500 4,000 3,500 3,000 MBPD 2,500 2,000 1,500 1,000 500 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 Mining In situ Source: CERI, Canoils 14

CANADIAN CONVENTIONAL CRUDE OIL PRODUCTION 15 Source: CERI, BCOGC, AER, Government of SK, Government of MB, CNLOPB, PSAC, CAPP,

NEWFOUNDLAND AND LABRADOR OIL PRODUCTION FORECAST Source: CERI, BCOGC, AER, Government of SK, Government of MB, CNLOPB, PSAC, CAPP 16

TOTAL CANADIAN OIL PRODUCTION 7,000 6,000 5,000 4,000 ('000 b/d) 3,000 2,000 1,000 - 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 Historical Outlook Non-upgraded Bitumen SCO AB-Oil AB-Pentane Plus and Condensate Production SK-Oil BC-Oil BC-Pentane Plus and Condensate Production MB-Oil NL-Oil Source: CERI, BCOGC, AER, Government of SK, Government of MB, CNLOPB, PSAC, CAPP 17

TOTAL CANADIAN OIL SUPPLY AND PIPELINES 7,500 7,000 6,500 6,000 5,500 5,000 4,500 '000 b/d 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 - 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 Total Western CDN Conventional Export Supply SCO Dilbit Keystone XL Kinder Morgan TMX Expansion Enbridge Line 3 Restored Existing Export Capacity Source: CERI, BCOGC, AER, Government of SK, Government of MB, CNLOPB, PSAC, CAPP, NEB, Canoils 18

CANADIAN NATURAL GAS PRODUCTION Source: CERI, BCOGC, AER, Government of SK, Government of MB, CNLOPB, PSAC, CAPP 19

BITUMEN SUPPLY COSTS $50 $40.61 WTIeq. Costs: $40 SAGD – $27.60 $30 Real 2018 CDN$/bbl US $52.84 $20 Expansion – $10 US $45.88 $0 Expansion SAGD 10% SAGD 10% ROR (a) ROR (a) Fixed Capital (Initial & $18.59 $9.67 Sustaining) Operating Working Capital $0.38 $0.20 Fuel (Natural Gas) $4.63 $4.63 Other Operating Costs (incl. $7.07 $7.07 Elec.) Royalties $7.04 $4.18 Income Taxes $2.21 $1.17 Emissions Compliance Costs $0.67 $0.67 Abandonment Costs $0.03 $0.01 Source: CERI, Canoils 20

CONVENTIONAL OIL SUPPLY COSTS ($/bbl) Montney Spirit River Duvernay Cardium Viking $54-$25 Bakken $22 $58-$31 $40-$33 $71- $40 $41-$25 $81- $68-$36 $59 $40 Legend: $X (Vertical)-$Y (Horizontal)

NATURAL GAS SUPPLY COSTS ($/mmscf) Horn River Montney $4.6 Spirit River Duvernay Cardium Bakken $1.9-$0.9 $1.5-$1.5 $1.9 $1.1-$1.4 $1.4-$1.3 $1.6-$1.7 Legend: $X (Vertical)-$Y (Horizontal)

CO 2 eq. EMISSIONS FROM OIL SANDS PRODUCITON (mtonnes/yr)

CO 2 eq. EMISSIONS FROM CONVENTIONAL OIL PRODUCITON (mtonnes/yr) 24

CO 2 eq. EMISSIONS FROM GAS PRODUCTION (mtonnes/yr)

ECONOMIC IMPACTS – INVESTMENTS AND OPERATIONS - OIL

ECONOMIC IMPACTS – INVESTMENTS AND OPERATIONS - GAS

ECONOMIC IMPACTS – GDP - OIL

ECONOMIC IMPACTS – GDP - GAS

ECONOMIC IMPACTS – EMPLOYMENT - OIL

ECONOMIC IMPACTS – EMPLOYMENT - GAS

CONCLUSIONS • Crude and oil sands producers continue to be challenged by market access • Natural gas producers need to secure new markets • Natural gas market will affect NGLs production and petrochemical investment • Concerns of lower competitiveness compared to the US? • Concerns of regulatory processes • Growth in oil and gas production is predicated on growth in exports • Crude oil production growth will be driven by condensates and in- situ oil sands projects • Natural gas production growth is dependent on the LNG projects • Costs of producing crude oil, bitumen, natural gas and LNG remain competitive 32

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