Market Diversification & Infrastructure Oilmen s Executive Business Forum Banff, August 21, 2012 Dave Collyer, CAPP The Canadian Oil and Natural Gas Industry - A Key Driving Force in the Canadian Economy Investing $55 billion in Canada in 2012 $21 billion to governments in 2011 20-25% of the value on Toronto Stock Exchange Approx. 18% of Canada s exports Employs more than 550,000 people in Canada Upstream Oil & Gas Auto Manufacturing Forestry & Logging Wheat & Barley Uranium
North American Natural Gas Supply Outlook Shale gas supply a gamechanger Technology breakthroughs New producing regions Shifting S/D dynamic Emerging stakeholder environmental concerns (footprint, water use & quality, seismicity) N.A. Natural Gas Pipelines & 2011 Cdn. Exports to U.S. (Bcf/d) Proposed Kitimat LNG Projects Westcoast TransCanada Alberta (NGTL) ANG/ Foothills TransCanada Transmission Alliance Mainline Northwest East Foothills 1.4 bcf/d M&NE West TQ&M Northwest Northern Great 2.4 bcf/d PGT Lakes Border Iroquois PNGTS PG&E Mid West Kern 5.1 bcf/d River CNG Trailblazer Algonquin ANR NGPL Panhandle Transwestern Texas SoCal ANR El Paso NGPL Eastern El Paso Vector Transcontinental Existing infrastructure serves N.A. markets. Changing S/D dynamics necessitate market growth: N.A. (transportation, power) Exports (LNG for price & takeaway) 4
Projected Net Natural Gas Imports (Bcf/d) Source: EIA 2011 International Energy Outlook Global Natural Gas Prices $US/MMbtu 18.00 16.00 14.00 12.00 10.00 8.00 6.00 4.00 2.00 0.00 Source: World Bank North America Europe Japan
Potential West Coast LNG Terminals Ports of Kitimat and Prince Rupert are closer to Asia than any other North American port: Ø 8 sailing days to Japan Ø 9 sailing days to Korea Ø 11 sailing days to China Canadian LNG Export Project Development Activity Companies Location Capacity Est. Status Apache / EOG / Encana Bish Cove, Kitimat, BC 1.4 Bcf/d 2017 Awaiting Investment Decision BC LNG Export Cooperative Kitimat, BC 0.25 Bcf/d 2013 Permits received Shell /China National / Korea Gas Kitimat, BC 1.8 Bcf/d 2020 Final stages of discussion Progress / Petronas Prince Rupert 1.0 Bcf/d 2018 Conducting feasibility Nexen / Inpex TBD Conducting feasibility 2011 Canada and U.S. Demand for Crude Oil by Source (Thousand Barrels per Day)
Changing Oil Import Projections mb/d 14 12 10 8 Net Oil Imports (IEA New Policies Scenario) 2000 2010 2035 6 4 2 0 China India European Union United States Japan Korea Source: IEA World Energy Outlook 2011, EIA Western Canadian and Bakken Crude Pipeline Routes to U.S., Canada and Offshore Existing infrastructure primarily devoted to N.A. markets. Strong Canadian production growth requires diversification to new markets: Price Takeaway Bakken Niobrara Utica Eagle Ford 10
International Markets: WTI vs. Brent Prices Brent: Benchmark used to price 65% of world s oil. WTI is lighter than Brent, and has historically traded at a premium. Growing disconnect between landlocked crude and globally traded crude such as Brent. For most of 2011 and 2012 to date, WTI has traded at a discount to Brent. Discount has narrowed slightly since beginning of year. July 1-10 average discount ~US$13.50/bbl US$/bbl 140 120 100 80 60 40 20 0-20 -40 Jan-09 Daily Differential WTI Brent Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 11 North American Market: WTI vs. Edmonton Par Light Both price benchmarks have been volatile recently. US$/bbl 140 120 Edmonton par discount 100 to WTI narrowed to ~$3.45/bbl in June, but 80 started to widen again 120 to ~$12/bbl as of early 60 110 July. 40 100 90 Tight pipeline capacity 80 amplifies volatility. 20 70 0 Jan-09 Jul-09 WTI @ Cushing Edm Par Jan-10 Monthly Jul-10 Jan-11 Daily 3-Jan 17-Jan 31-Jan 14-Feb 28-Feb 13-Mar 27-Mar 10-Apr 24-Apr 8-May 22-May 5-Jun 19-Jun 3-Jul Jul-11 Jan-12 Jul-12 12
Canadian Market: Light/Heavy Differential Light/heavy differential has widened slightly since Jan / 12. June 2012 average heavy discount ~ Cdn. $13.00/bbl. Cdn$/bbl 120 100 80 60 40 20 0-20 Cdn Light/Heavy Diff WCS @ Hardisty MSW @ Edm -40 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 13 Canadian Oil Sands & Conventional Production (Risked)
WCSB Pipeline Takeaway Capacity vs. Supply 15 Industry Objective West Coast Access Objective: Industry seeks timely expansion of crude oil and natural gas export infrastructure from Canada s west coast aligned with production growth. Drivers are fundamentally: Securing market outlets Securing global prices What is needed to achieve this objective: Economically viable projects supported by markets and suppliers. Support from governments (federal and provincial) policy and project approvals. Regulatory approvals (necessary, but not sufficient). Social license to build and operate.
Social License Framework Social License = Performance + Communication Performance: Continuous environmental & social performance improvement across the value chain (production, p/l and rail transportation, marine). Resolution of Aboriginal consultation & economic benefits / opportunities. Line of sight to jobs and economic growth / value creation. Solutions-oriented advocacy for balanced policy and regulation. Technology & innovation and industry collaboration are key levers. Communications & Outreach: Sustained & substantive commitment to communications: Messaging - balanced 3E focus, targeted, fact-based, solutions oriented, high road, direct, respectful..not apologetic or defensive. Delivery diversity of mediums, approaches, spokespersons. Grounded in performance improvement. Strong focus on outreach local / regional / national / international.