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Presentation by Dave Collyer, CAPP President Presentation in Ottawa, ON, October 17, 2012
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Focus on Geopolitics N.A. Shale & Export Options
- A Canadian View
International Gas Union October 17, 2012 – Ottawa, ON
Dave Collyer, President, CAPP
North American Natural Gas – Supply Outlook
• Shale gas supply a game-changer …100+ years supply.
• Technology success (horizontal drilling, fracturing, completions).
• Implications:
Abundant, affordable energy.
Significant shift in S / D dynamics
Changes in p/ l flows.
Emerging stakeholder challenges (env. & social).
Western Canada – Resource Plays
Source: TransCanada
100 Years + Supply
0
2
4
6
8
10
12
14
16
18
20
22
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Eastern Canada
Alberta Shale
Horn & Cordova
Montney
CBM
Conventional
Canadian Natural Gas Production – Two Price Scenarios (bcfd)
Note: Prices do not exceed $4.00/GJ over the forecast period
Note: Prices recover to at least a level of $5.50/GJ
Price Recovery Case
Continued Low Prices Case
CAPP 2012
Required NYMEX Natural Gas Strip for 10% IRR
Natural Gas Supply Costs (Representative Single Well Economics – Established Plays)
Source: Morgan Stanley Research August 19, 2010
& CAPP (Forward Strip Price)
$0
$1
$2
$3
$4
$5
$6
$7
Pine
dale
(Cre
st)
Mar
cellu
s W
et (c
ore)
Pine
dale
Mar
cellu
s D
ry (c
ore)
Faye
ttevi
lle (3
.4 B
cf)
Gra
nite
Was
h (H
oriz
onta
l)
Mon
tney
(10
stag
e fr
ac)
Hur
on S
hale
Dee
p B
ossi
er (E
. Tex
as)
Eagl
e Fo
rd (C
onde
nsat
e Zo
ne)
Can
a-W
oodf
ord
(Cor
e)
Pice
ance
(Val
ley
- Cor
e)
Bar
nett
(Tie
r 1)
Hor
n R
iver
App
alac
hian
-CB
M
Hay
nesv
ille
Nik
anas
sin
Mar
cellu
s dr
y (ti
er 2
)
Eagl
e Fo
rd (G
as)
Faye
ttevi
lle (2
.8 B
cf)
Jona
h
Woo
dfor
d (A
rkom
a)
Wat
tenb
erg
(Cor
e)
Uin
ta (S
hallo
w)
Pice
ance
(Hig
hlan
ds)
Rat
on (C
BM
)
Alb
erta
Sha
llow
Gas
War
wic
k (W
. Tx
Ove
rthr
ust)
Mon
tney
(4 s
tage
frac
)
Bar
nett
(Tie
r 2)
Pow
der R
iver
(CB
M)
Alb
erta
Dee
p B
asin
Jean
Mar
ie (T
ight
Gas
)
Hor
sesh
oe C
anyo
n (C
BM
)
Canada is resource rich, competitively challenged.
2 year forward strip: $3.66/MMBTU
(September 14, 2012)
5
Canadian Natural Gas Exports, 2011 Impact of Shale Gas on N.A Gas Flows
West 2.4
bcf / d
Mid-West 5.1 bcf / d
Northeast 1.4 bcf / d
LNG
Marcellus
Haynesville, Fayetteville, etc.
Horn River, Montney
U.S. Rockies
New Supply Areas
Increased Flow
2011 Canadian Exports 8.9 bcf / d
• Existing infrastructure serves N.A. markets.
• Changing S/D dynamics necessitate market growth:
• N.A. (transportation, power)
• Exports (LNG for price & takeaway)
Projected Net Natural Gas Imports (Bcf/d)
Source: EIA 2011 International Energy Outlook
World Natural Gas Prices
0.002.004.006.008.00
10.0012.0014.0016.0018.0020.00
North America Europe Japan
$US/
MM
btu
Source: World Bank
Favourable Project Economics Associated with Serving Asian Natural Gas Markets
0
2
4
6
8
10
12
14
16
18
Gas Price WesternCanada
Transportation Costto Coast
Liquefaction Cost Shipping Cost
Japan LNG Price 2010
Japan LNG Price 2011
Japan LNG Price 2012
$/M
Mbt
u
Proposed Canadian West Coast LNG Terminals
Sponsors Location Timing Capacity Status Kitimat LNG Apache; EOG; Encana Kitimat BC 2017 1.4 Bcfd
Phase 1 & 2 total Permits Received Awaiting Final Investment Decision
Douglas Channel Energy Partnership
LNG Partners & Haisla Nation Limited Partnership
Kitimat BC Q4 2013/Q1 2014
0.25 Bcfd Export Permit Received
LNG Canada Shell Canada, Korea Gas, Mitsubishi and PetroChina
Kitimat BC 2020 2.0 Bcfd Early Project Development stage, applied for export license
Petronas Progress; Petronas Prince Rupert
2018 1.0 Bcfd Conducting Feasibility
Nexen/Inpex Nexen/Inpex TBD TBD TBD Conducting Feasibility
Positives Asian market growth Proximity to Asia Deep water port(s) Robust supply Gov’t & stakeholder support
Potential Challenges
Multiple competing projects Global scale Cost escalation Market window
● Competitiveness Aligned policy (federal & provincial)….sense of urgency. Efficient regulatory framework (upstream, infrastructure, export
licenses). Stable, competitive fiscal regime. Timely enabling infrastructure development. Win – win relationship among producers and markets.
● Social License Continuous performance improvement – environmental & social. Recognition of environmental benefits of use in export markets. Addressing local “on the ground” issues. FN & stakeholder support.
…… A significant opportunity for Canada requiring shift from N.A. to global competition to realize market window.
Summary - What’s Needed to Make It Happen?