House of Commons

Standing Committee on Natural Resources

Ottawa, ON

June 16, 2015

Presentation Outline

1. PSAC is Working Energy

2. Canadian Oil and Natural Gas

3. Hydraulic Fracturing

• Overview

• Issues of Concern

• PSAC Code of Conduct

4. Growing Canadian Potential

Petroleum Services Association

of Canada (PSAC)

• Represents the service, supply and

manufacturing sectors in Canada’s upstream

petroleum industry

• Works for 230 member companies and their

70,000+ employees, who directly support and

supply exploration and production (E&P)

companies

• Mission: To champion the interests of members

and the industry

Upstream Petroleum Industry

Exploration

& Production

Seismic

Service, Supply

& Manufacturing

Drilling

Pipelines

Petroleum Services Sector

drilling fluids &

chemical suppliers

supply &

rental stores

pipeline & oilfield

construction

pipe coating &

inspection

pipe & drill bit

manufacturers

energy environmental

services

equipment & processing

manufacturers

cementing & stimulation

services

safety services

production testing

snubbing services

wellsite consultants

wireline & perforating

services

rathole conductor

contractors

various supplier/service fabricators,

coring, BOPs, tongs

specialized trucking services

drilling & completion tools & services

cathodic protection

hydraulic fracturing

Who is PSAC?

Canadian Oil & Natural Gas:

Contribution in Context

Industry Capital Spending ($billions CAD) Oil & Gas Investment Spending:

2012: $67 billion

2013: $74 billion

2014: $73 billion (estimate) Northern Canada

2013 2014E

$0.7 $0.5

Oil Sands

2013 2014E

$31 $33

Western Canada

2013 2014E

$39 $36

East Coast Offshore

2013 2014E

$3.9 $3.5

Source: CAPP, 2015

OGS 2009 GDP Compared to

Other Major Industries (in $Billions CAD)

$0

$10

$20

$30

$40

$50

$60

$70

$80

Oil and GasServices

Oil and GasProducers

Construction(Residential)

Agriculture Mining Automotive Forestry

$75

$48

$34

$23 $20

$17

$4

Total Reported GDP: $ 221 B Oil/Gas Services: 33.93 %

Oil/Gas Producers: 21.72 %

Residential Construction: 15.38 %

Agriculture: 10.41 %

Mining: 9.05 %

Automotive: 7.69 %

Forestry: 1.81 %

Total Oil and Gas GDP Contribution

= $123 billion

Industrial Diversification

$0.0

$10.0

$20.0

$30.0

$40.0

$50.0

$60.0

2013 2014 2013 2014 2013 2014 2013 2014

Contract Drillers Oil and GasServices

Manufacturing PipelineInfrastructureProcessing

$2.9 $3.2 $10.6 $13.7

$1.1 $1.5 $20.1 $21.9

$3.6 $4.4

$4.5 $6.0

$2.0 $2.5

$24.9

$29.6

Canada International

International Revenue

by Sector (in $Billions CAD)

• Petroleum services sector

has outgrown domestic

clients

• A sampling of 42 Canadian-

headquartered companies in

2014 revealed international

revenues of $42.5 billion,

up 21 percent from the

previous year

• Most of the equipment

employed internationally is

manufactured in Canada

• Majority of the technology

deployed internationally is

developed in Canada

Hydraulic Fracturing

• Overview

• Issues of Concern

• PSAC Code of Conduct

Issues of Concern

• Ground water protection and well construction

• Water usage

• Surface disturbance

• Fracturing Fluid and Disclosure

• Seismicity

First hydraulic fracture

treatment was in 1949

Unconventional is the new conventional

60 Years of Hydraulic Fracturing

Photo: Trican Well Service

• Game-changer

• Tapping previously uneconomic

reservoirs

• Innovation in horizontal drilling is the

big technological story

• Reaches unconventional sources of

oil and natural gas (shale)

• AB –about half of drilling activity

• BC – 90% of total drilling activity

• SK – accounts for 60% of all drilling

Source: Alberta Energy Regulator, 2013

Shift to Horizontal Wells

• R&D centres

• Scientific protocols

• Environmentally friendly chemistries

• Equipment to reduce wellsite footprint

• Simulators to map out hydraulic fracturing operations

• Real-time microseismic monitoring and interpretation

• Canadians are experts and leaders in technological innovation in oil and

natural gas, and invest significantly in research and development

Hydraulic Fracturing Today

Shift to Horizontal Wells

Source: Alberta Energy Regulator, 2013

• 85% of all wells drilled and

completed in Canada are

hydraulically fractured

• The 11 companies active in

Canada are all PSAC members

• Completed hydraulic fracturing

of ~10,000 wells in 2014

• Over 215,000 wells

hydraulically fractured in

western Canada

(CAPP, 2012)

Hydraulic Fracturing Today

Video courtesy: Canadian Association of Petroleum Producers (CAPP)

Water and the Environment

Ground water protection

• The provinces have well established regulations to guide how a wellbore is drilled and

completed, what testing is done, and what data is reported.

• Industry must comply with these regulations and if complications do arise, regulations

are in place to ensure that corrective measures are completed

Water and the Environment

Ground water protection

• Regulations require isolation of useable groundwater

and saline groundwater and hydrocarbon zones

• Proper wellbore construction is critical to protection

of groundwater

• This isolation is accomplished during the well

construction stage by installing multiple layers of

steel casing and cement to ensure wellbore integrity

Source: Trican Well Service

Source: Trican Well Service

Wellbore construction and integrity

• Surface casing is set and cemented in place to

below base of groundwater protection. Cement is

pressure tested

• Production casing is used to isolate hydrocarbon

zones between the reservoir and surface casing

• A cement bond log is run to validate cement

integrity prior to any completion

• If a well is deep enough, intermediate production

casing is also run >

2,0

00

m

Water and the Environment

Source: SPE 145949n Hydraulic Fracture Height Growth (Real Data)

Water and the Environment

Wellbore Construction and Integrity

>2,0

00 m

Water and the Environment

Water usage

• Lessening the quantity of fresh water

needed for a fracturing operation is one

way to reduce the demand on river and

stream flow, and on lakes and ponds.

• The oil and natural gas industry is

increasingly relying on reuse and

recycling of fluids to reduce consumption

of fresh water, and minimize

environmental impacts and costs.

Water and the Environment

Innovation and Collaboration

• The Dawson Creek Reclaimed Water

Project treats municipal wastewater

for use in a natural gas project in

B.C., as well as for the city’s

municipal operations

• This project virtually eliminates the

company’s need to use fresh water

for their operations in that area

Water and the Environment

Water and the Environment

Surface Disturbance

• Technology has

dramatically reduced the

drilling and completion

process environmental

footprint

Source: CSUR; Adapted from www.encana.com

Source: Trican

Typical Fracture

Fluid Composition

for slick water:

99.51% water & sand

0.49% other

For gelled water: 98% water & sand

2% other (older technology)

Fracturing Fluid and Disclosure

Fracturing Fluid and Disclosure

Fracture Fluid and Disclosure

Typical Fracture Fluid Composition for slick water:

99.51% water & sand 0.49% other

For gelled water:

98% water & sand

2% other (older technology)

Ingredient Common Name Carrier Fluid use Common use

Gellant Guar bean gum Water viscosifier Cosmetics and food

Crosslinker Borate salt Water viscosifier Laundry product, cosmetics

Breaker Sodium borate salt Gel breaker for flowback Laundry products

Friction Reducer Polyacrylamide Minimizes friction between fluid and pipe soil conditioner for farming

Clay Control Salt compound Prevent clay swelling Additive for feed/farming

Flowback Enhancer Surfactants Flowback carrier fluid Cosmetics, soaps

Scale Inhibitor Polyamine Prevents scale from forming on pipes Water treatment, hot tubs

pH Control Sodium carbonate Maintains gel crosslinker Soap, hot tubs

Bactericide DBNPA (amide) Kills bacteria in mix water Hot tubs

Fracturing Fluid and Disclosure

Source: https://www.esgsolutions.com/sites/esgsolutions.com/files/img/microseismic-fracture-mapping-esg-small.jpg

Technology and Development

Technology and Development

Microseismicity

• Typical fracture treatments are -3 to -1 on

Richter Scale (1= 10-1)

• Largest measures 3.8 on Richter Scale

• Passing trucks or trains can cause similar

scale vibrations at the surface

• Dam building construction

and mining (~1.4)

Technology and Development

Microseismicty

Health, Safety and Training

Certificate of Recognition (a WCB safety program) is required for PSAC membership

PSAC WORKING ENERGY COMMITMENT:

Statement of Principles

• Operate safely and responsibly

• Meet or exceed all environmental standards

• Act with integrity

• Continually improve our practices and services

• Treat all members of the community with respect, dignity and trust

Robust Regulation in Alberta Alberta Energy Regulator (AER)

• Responsible Energy Development Act

• Draft Directive: Hydraulic Fracturing

• Directive 8: Surface Casing Depth

Requirements

• Directive 20: Well Abandonment

• Directive 27: Shallow fracturing Operations-

Restricted Operations

• Directive 29: Energy and Utility Development

Applications and the Hearing Process

• Directive 31: Guidelines for the Energy Proceeding

Cost Claims

• Directive 35: Baseline Water Well Testing

• Directive 44: Surveillance of Water Production in

Hydrocarbon Wells

• Directive 38: Noise Control

• Directive 50: Drilling Waste Management

• Directive 51: Injection and Disposal Wells

• Directive 55: Storage Requirements

• Directive 56: Energy Development Applications

• Directive 58: Oilfield Waste Management

Requirements for the Upstream Petroleum Industry

• Directive 59: Well Drilling & Completion Data Filing

Requirements

Robust Regulation

Community Engagement

Code of Conduct and Commitments

Our Goals:

• Communicate about our members’ commitment

to listen and openly discuss public concerns

• Emphasize our members’ efforts and priority

towards mitigating risks to health, safety and

environmental impacts

Robust Regulation

Community Partners

Public and Stakeholder Outreach

Canada’s Opportunity

Canada’s Opportunity

Source: International Energy Agency World

Energy Outlook 2014

• Global demand for energy is not

abating; population growth,

increased standard of living

• Increasing role for renewables,

but the ongoing high reliance on

hydrocarbons and non-

conventional oil and gas to meet

demand

Canada’s Opportunity

Source: Oil & Gas Journal Dec. 2014 & AER 2014

Canada’s Opportunity

http://www.theguardian.com/environment/ng-interactive/2015/may/28/carbon-bomb-

canada-tar-sands-fort-mckay-town-sold-itself

Canada’s Opportunity

• Canada is losing ground in the global economy:

• 10 years ago we were the world’s 10th largest exporter; today we are 13th

• In 2014, the World Economic Forum ranked Canada 15th in global competitiveness,

down five spots from 2009

• Industry revenues down 40%

• From $150 billion in 2014 to $90 billion in 2015

• Canadian capital investment down 38% ($28 billion)

• From $73 billion in 2014 to $45 billion in 2015

• Well drilling down 45% (10,400 wells in 2014) to 5,700 wells in 2015

• Oil and gas share of TSX down from 20% in 2014 to 12% in January 2015

Source: Canadian Chamber of Commerce, ARC Financial & CAPP

Canada’s Opportunity

Thank you

For more information, please visit:

psac.ca

Questions?