Albertas Energy Markets: Opportunities and Challenges Matthew Foss - PowerPoint PPT Presentation

Alberta’s Energy Markets: Opportunities and Challenges Matthew Foss Alberta Department of Energy Economics and Markets Branch Presented to Economic Real Estate Forum May 2012

The Big Picture Key findings in the IEO 2011 Reference case: • World Energy consumption increases by 53% between 2008 and 2035 with half of the increase attributed to China and India • Renewables are the world’s fastest growing energy source, at 2.8% per year, renewables share of world energy grows to roughly 15% in 2035. • Fossil fuels continue to supply almost 80% of world energy use in 2035. • Liquid fuels remain the largest energy source worldwide through 2035, but the oil share of total energy declines to 28% in 2035, as sustained high oil prices dampen demand and encourage fuel switching where possible and modest use of liquid biofuels. 2

Alberta’s Natural Gas Resources World Proved Natural Gas Reserves (Tcf): • Russia: 1,680 • Iran: 1,046 • Qatar: 896 • Saudi Arabia: 276 100 Tcf Global Natural Gas Production (Bcf/d): • United States: 59.1 82 Tcf • Russia: 57 141 Tcf • Canada: 15.5 • Iran: 13.2 Source: Energy Resource Conservation Board, Petrel Robertson, Gas Technology Institute (GTI) Alberta’s Natural Gas Industry GIP: Gas in Place is the total gas volume believed to be contained in the reservoir. is Well Placed with Abundant NGC: Natural gas from coal (CBM) Source: Canadian Society for Unconventional Gas Resource Opportunities 3

Alberta’s Crude Oil Proved Reserves World Oil Reserves Accessible Oil Reserves State owned or controlled Accessible Canada’s Oil Sands 51% 49% Other Accessible Reserves Alberta’s Oil Sands represent more than half of the world’s oil resources that are 4

Alberta’s Crude oil and Natural Gas Activity 5

Investment On the Rise 13

Alberta P & NG Land Sales Bonuses $4,000 Millions $3,500 $3,000 $2,500 $2,000 AB BC $1,500 SK $1,000 MB $500 $- 2008 2009 2010 2011 15

Alberta Drilling Activity Source: GeoScout • Increasing horizontal drilling reflecting shift towards unconventional oil and gas development in shale and tight plays • Activity has shifted towards tight oil in Alberta 11

Focus Areas Horizontal Wells Vertical Wells Total Wells Drilled Jan - Feb 2011 = 1326 20% Jan - Feb 2012 = 1064 Jan - Feb 2011 Vertical Wells Drilled = 848 Jan - Feb 2011 Horizontal Wells Drilled = 478 36% 9% Jan - Feb 2012 Vertical Wells Drilled = 542 Jan - Feb 2010 Horizontal Wells Drilled = 522 Excludes oil sands wells 12

Alberta Natural Gas Production Forecast (not including unconventional natural gas) Total marketable gas production & demand 500 17.8 Production and demand (10 6 m 3 /d) 450 2012 YTD Actual: Down 1.5% 16.0 Global Production 2012 Forecast: Down 5.3% Production and demand (bcf/d) 400 14.2 Alberta gas removals (Bcf/d) Other Alberta demand 350 12.4 • United States: 59.1 Commercial demand • Russia: 57 Residential demand 300 10.7 • Canada: 15.5 250 8.9 • Iran: 13.4 200 7.1 • Qatar: 11.3 150 5.3 100 3.6 50 1.8 0 0.0 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 7

Alberta Conventional Crude and Oil Sands Production Alberta’s total oil production: 2.05 million b/d • 0.700 of bitumen • 0.800 SCO • 0.460 conventional World oil production as of November 2011: 88.1 million barrels per day Alberta’s Crude Oil Production is Ramping Up 8

Conventional Crude Oil Production Forecast 12 2012 YTD Actual: Up 17.2% 2012 Forecast: Up 10% Source: Energy Resource Conservation Board Horizontal Drilling/Shale Oil Production to outperforming expectations

Alberta’s Crude oil and Natural Gas Markets 5

Current Alberta Natural Gas Markets New Shale Gas Production Impeding on Alberta’s Traditional Eastern Markets WCSB Alberta production in 14.4 Bcf/d 2010: 11.5 (bcf/d) Alberta Disposition – 2010 Market Bcf per Day US Bison Marcellus Rockies PADD 1 0.26 1 10 Bcf/d PADD 2 2.87 Bcf/d PADD 3 0.00 PADD 4 0.40 Legend PADD 5 1.26 Light Blue – WCSB Gas Production Barnett & Eastern Canada 1.76 Dark Blue – US Gas Production Haynesville Source: Source: WoodMcKenzie 2009 ; ERCB 6 Bcf/d Western Canada 1.07 2010 , Gulf Total 7.63 15.8 Bcf/d 17

Global Natural Gas Prices and LNG Infrastructure Source: FERC. “World LNG Estimated April 2012 Landed Prices”. March 6, 2012. 18

Current Alberta Crude Oil Markets Currently, there is Kinder Morgan TMX Capacity: 300,000 b/d ample amount of Alberta (80% AB Crude) pipeline to carry Alberta Enbridge Mainline 80% light crude, 20% Exports crude to its current Capacity: 2.3 m b/d heavy, small amount of Crude Oil Demand from (60% AB crude) refined products market (PADD 2) (Barrels Per Western Canada (refinery 50% heavy/light Day 000’s) capacity in parenthesis) Market crude Barrels per day 000’s However, refinery capacity and increased PADD 1 59 North American crude production are the Kinder Morgan Express Capacity: 280,000 b/d limiting factors in PADD PADD 2 1,167 (98% AB Crude) 2 for the future 35% light crude, 65% heavy PADD 3 78 PADD 4 218 PADD 5 Eastern PADD 5 106 PADD 4 148 Canada 238 [2,730] 258 Eastern Canada 252 [613] [398] Increasing Western Canada 47 supplies from PADD 2 Bakken, heavy crude from Total 1,927 1,215 Alberta, and [3,711] Source: CAPP – 2011 crude oil from PADD III Crude oil Market Outlook PADD 1 62 Increased heavy crude oil refining capacity [1,394] PADD 3 107 Alberta’s Crude Oil Market Limited to U.S. Mid [8,928] West – Huge Potential in U.S. Gulf Coast 19

Global Crude Oil Prices ESPO North $120.95 Alaska Sea Brent Suez North $122.05 Blend Slope $116.74 $121.39 Japan Cocktail $116.26 WTI USGC $104.08 Arab Light $118.63 Masa Venezuela $116.53 Saharan Australia Blend Cossack $121.08 West $124.45 Colombia Africa Cusiana Strip $122.60 $121.87 April 2012

Current Alberta Refined Products Markets (Diesel, Gasoline and Jet Fuel) Unlike Crude Oil, Alberta Has Limited Alberta Access to U.S. Mid West for its Refined Products Exports Eastern Canada Exports PADD 4 0.01 MBD PADD 2 PADD 5 PADD 1 0.08 MBD PADD 3 2.1 MBD Source: EIA, 2011 data Global Imports

Alberta Refined Products Refining Capacity Gasoline 200,000 180,000 160,000 Alberta Refineries - Capacity 140,000 Barrels Per Day 120,000 100,000 A) Imperial – 187,000 B/D 80,000 60,000 40,000 B) Suncor -135,000 B/D 20,000 - C) Shell – 110,000 B/D 2005 2011 Diesel 200,000 180,000 160,000 140,000 Barrels Per Day 120,000 100,000 80,000 60,000 40,000 20,000 C - B 2005 2011 Jet Fuel 30,000 A 36,000 B/D 25,000 Barrels Per Day by pipeline; 14,000 20,000 B/D by truck 15,000 38,000 B/D 10,000 5,000 by pipeline; 3,000 - B/D by truck/rail 2005 2011 Trucked/Railed Alberta consumption Other province Consumption volumes are Alberta Production estimated Source: StatsCan, Enbridge, Kinder Morgan

Thank You 23