NORTHERN PIPELINES- PIE IN THE SKY OR PATHWAYS TO PROSPERITY? Alan - PowerPoint PPT Presentation

1 NORTHERN PIPELINES- PIE IN THE SKY OR PATHWAYS TO PROSPERITY? Alan Murray SNAME Arctic Section January 19 th 2012

Outline • A Brief History • The Resource • The Demand • The Potential Projects • The Competition • What’s Next? • Lessons Learned • Questions??? 2

3 A Brief History • 1922 first well drilled at Norman Wells • 1944 Canol Pipeline constructed (decommissioned in 1948 ) • 1967 discovery of large natural gas reserves in Prudhoe Bay, Alaska • 1969 first oil well in The Mackenzie Delta • 1970 first natural gas well built at Parson's Lake. • 1973 Canadian Arctic Gas Pipeline mooted linking Prudhoe - >North Yukon-> Delta -> Mackenzie Valley -> Alberta • 1974 March Berger Inquiry begins visiting 35 communities and criss crossing Canada • 1977 June Berger issues 40,000 page report ‘Northern Frontier, Northern Homeland” concludes “no pipeline should be built through the northern Yukon, and that a pipeline through the Mackenzie Valley should be delayed for 10 years”

4 A Brief History • 1977 Lysyk Alaska Highway Pipeline Inquiry reached similar conclusions to Berger noting ” most of the economic benefits of the pipeline would go outside of the Yukon, but that there was large conditional support for the project if native land claims were settled and the pipeline companies agreed to pay to mitigate negative social impacts of the project. • 1978-1982 stage 1 of Alaska Highway pipeline pre-build • 2004 MGP proponents apply to NEB • 2008 TransCanada Alaska Co. received a license under the Alaska Gas Inducement Act (AGIA) to pursue Stage Two of the AHGP (funding of $500MM provided to develop project) • 2010 December NEB gives conditional approval to the MGP with a “sunset” condition, onus now on proponents • 2011 BP led Denali gas pipeline proposal scrapped

5 Northern Canada Total Wells Drilled Courtesy: Dan Masterson Chevron

6 The Resource

7 Distribution of Natural Gas Resources Outside the WCSB in Tcf Mackenzie/Beaufort Other UR 52.0 Frontier ** Yukon & NWT DR 9.0 UR 34.0 UR 10.3 Arctic Islands RR 0.0 DR 0.0 DR 25.0-26.0 CP 0.0 UR 8.0-33.0+ RR 0.0 RR <1.0 DR 12.0-20.0 Total 61.0 CP 0.0 CP 0.3 RR 0.0 Total 40.0 Total 36.6-37.6 CP 0.0 Total 20.0-53.0 Grand Banks / Labrador UR 36.5 Offshore DR 9.6 West Coast RR 0.0 UR 17.0-43.4 CP 0.0 DR 0.0 Total 46.1 RR 0.0 CP 0.0 Total 17.0-43.4 Scotia Shelf UR 15-41 UR = Undiscovered Resources Ontario DR 3.6-5.3 DR = Discovered Resources UR 1 RR 2.7 DR 1 RR = Remaining Marketable Reserves CP 0.5 RR 0.7 CP = Cumulative Production Total 18.6-46.3 CP 1.2 Total 2.4 ** Other Frontier areas include: the Georges Bank, Laurentian, East Newfoundland Basin and Southern Grand Banks, the St. Lawrence Lowland and Maritimes Basin, Hudson's Bay, Baffin Bay and offshore British Columbia. Source: National Energy Board, Canada’s Conventional Natural Gas Resources: A Status Report

8 The Demand

9 Natural Gas End Use Demand – Canada Provincial Gas Consumption End use, Final Demand 2008 (Terajoules) Canada 2,376,882 1,256 273,370 766,994 79,626 173,993 181,858 882,133 16,314 Atlantic Provinces Source: Statistics Canada 57-003-X1E

10 Canadian Natural Gas Consumption Residential Power Generation 2,731,476 Terajoules 689,049 354,594 (25.2%) (13%) (2008) Agriculture 22,635 (<1%) Public Administration 22,313 (<1%) Commercial & other institutional Industrial Transportation 468,656 1,025,391 148,837 (17.2%) (37.5%) (5.4%) Source: Statistics Canada 57-003-X1E

11 US Natural Gas Consumption Consumers by Sector 22,167 Bcf Power Generation Residential (2010) 4,951 Bcf = 7,377 Bcf = 33.2% 22.3% Transportation 32.9 Bcf = .15% Commercial Industrial * 3,205 Bcf = 6599 Bcf = 14.5% 29.8% * Includes Pipelines and Distribution System own-use Source: US Energy Information Administration 2007 Statistics

12 US Annual Natural Gas Consumption 2009 = 22,810 Bcf Alaska 1.8% Midwest 18.6% Northeast 14.2% West 14.6% Central 14.9% South Atlantic 11.2% Gulf 24% Source: US Energy Information Administration

13 Oil & Gas Jnl April 7 2009

Historical Production in Canada * Raw Gas is raw natural gas production less raw and processed gas injection. 14 Source: CAPP 2009 Statistical Handbook, Tables 3.9b and 3.10a

15 Projected Annual Natural Gas Production from United States

16 The Potential Projects Region Pipeline Resource Potential Tcf Alaska North Slope AHPP 126 Mackenzie D /Beaufort MVP/MGP 52 Sea North Yukon MVP or AHPP 11.3

17 Mackenzie/Beaufort and Alaska Gas Transportation The Northern Route is fanciful at best! The Denali Project backed by BP and Conoco Philips and solely funded by them was cancelled in May 2011 due to a combination of poor open season response, low gas prices and the technological advances in shale gas development in the lower 48 states Much closer to the markets. Source: Oil and Gas Journal

Bridging to the Arctic -MVP Mackenzie Delta & Beaufort Sea Middle Mackenzie Valley Fort – Good Proposed Hope Norman Great Wells Mackenzie Bear Lake Valley Pipeline Mackenzie Northwest River Terrotories Great Slave Liard Lake River Basin Cameron Hills 18

19 Mackenzie Valley Pipeline • The Mackenzie Valley Pipeline “MGP” is a joint venture between the 3 anchor field holders, Imperial Oil, Exxon Mobil Canada, Conoco- Phillips, Shell Canada. • TransCanada (TCPL) has provided funding to the Aboriginal Pipeline Group in return for rights to acquire an interest in the pipeline and future expansions • MGP is a 30 “ dia. Pipeline extending 1220km from Inuvik to N Alberta and could ship up to 1.2 bcf/day ( with compression) • In addition a liquids line would parallel the gas line from Inuvik to Norman Wells connecting to the existing Enbridge NW line

20 Mackenzie Valley Pipeline

21 Phase Envelopes for Hydrocarbons

22 Mackenzie Valley Pipeline

23 Mackenzie Valley Pipeline Project would use about 440,000 tonnes of steel Would require facility and camp modules, construction and drilling equipment, borrow material and fuel. Plan is to move materiel and fuel to Hay River then barge to locations north of Fort Simpson and truck to points south . Personnel would be moved by plane and bus Borrow material ( soil and gravel used for construction) would be moved by truck on project roads Peak Activities would occur: In summer, with barges on the Mackenzie from Hay River and Fort Liard. In winter with trucks transporting material to infrastructure sites. At the start and end of winter with aircraft transporting project personnel

24 MGP – the Regulatory Decision “We have decided that the project is in the public interest. In reaching this Decision, we have considered the social , environmental and economic effects And listened to the views of Northerners and other parties. Our approval of the applications ...depends on the companies meeting a combined total of more than 200 conditions to address the concerns we have heard” “The economic benefits would be real and large. The companies proposing the project estimate they would spend $16.2 billion. This would increase Canada’s GDP by more than $13Bn, generate almost $6Bn in labour income and Governments would gain $2.9Bn in tax revenues” “Our decision requires that the gathering and transmission pipelines provide “Open Access”… encouraging further exploration and production” “We are confident that the companies are fully capable of designing, constructing and operating the proposed facilities in a safe manner” Our decision is a major step towards allowing the project to proceed, but does not mean that it will be built. It is up to the companies to decide whether theproject makes economic sense for them based on their view of gas prices ad project costs. By the end of 2013 we require the companies to file an updated cost estimate and decide on building the project Actual construction must begin by end of 2015 for our approval to remain valid.

25 Alaskan Pipeline Project Prudhoe Bay The ANGTS Pipeline received US and Canadian Government Approvals in 1977 Led to the creation of the Northern Pipeline Agency in Canada Foothills Stage 1 Pre build 35Tcf of recoverable gas Question: Is the original approval still valid for the present proposal? Boundary Lake Graphic Courtesy of TransCanada’s Alaskan Pipeline Project

26 Alaskan Pipeline Project In Canada a further 972 miles of pipe