Canada’s Natural Resources – Now and for the Future 1
North American Shale Gas Revolution
Presentation to APECBy Dan Cowan – Petroleum Resources Branch, Natural Resources Canada
May 10, 2011
Canada’s Natural Resources – Now and for the Future 2
Outline
Natural gas and energy in Canada Energy policy and jurisdiction North American gas market Shale gas at a glance How has “the game” changed? Cdn. unconventional resources Challenge of commercializing resource Canadian supply forecast
Canada’s Natural Resources – Now and for the Future 3
Energy - important to Canada’s economic prosperity
3rd largest producer & exporter of natural gas
Only OECD country with growing oil production
Stable and secure energy supplier
$84 billion exports in 2009, primarily oil and gas:
23.4% of total exports
In 2009, energy represented 6.7% of GDP, with direct employment of about 263,000 people
1.8%
6.7%
20.6%23.4%
0%
5%
10%
15%
20%
25%
Investment Exports GDP Employment
Energy as a Percentage of Canadian Total (2009)
Canada’s Natural Resources – Now and for the Future 4
Federal Energy Framework and Jurisdiction
Reliance on competitive markets for determining supply, demand, prices, and trade
Shared jurisdiction over natural resources
Federal Jurisdiction
•International and interprovincial issues
•North, offshore and Crown lands•Works declared to be for the general benefit of Canada (e.g. science and technology)
•Nuclear, uranium
Provincial Jurisdiction
•Resource ownership, management and royalties
•Land-use planning and allocation
•Laws regarding the exploration, development, conservation and use of natural resources within provincial boundaries
Canada’s Natural Resources – Now and for the Future 5
North American Natural Gas Market
74 Bcf/d - fully integrated market Supply and demand centers connected via
extensive pipeline network Canada is a major producer and net exporter
Provides 85% of US imports Majority of reserves located in Western Canada
Far from premium markets incl. Boston and H.H. Surging U.S. shale gas production
Prices expected to remain relatively low Ongoing efforts to build and diversify markets
Canada’s Natural Resources – Now and for the Future 6
Technology is unlocking shale gas potential
Shale is an unconventional natural gas
Resource development not previously economical due to low flow rates
Combining long-reach horizontal drilling with multi-stage hydraulic fracturing has made the resource viable
Canada’s Natural Resources – Now and for the Future 7
Shale Gas - Production and Resource Profile
Shale gas development began in the US where production grew from <1 bcf/d in 2000 to about 15 Bcf/d today More than 20% of North American production
Shale gas widely expected to compose a third of North American natural gas production by 2020
Canadian Society for Unconventional Gas estimates 700 to 1300 Tcf of natural gas in Canada (largely unconventional) At unconstrained prices, North America estimated to now have
100-200 years of supply
Canada’s Natural Resources – Now and for the Future 8
2008- Present Demand-driven market,
lower drilling, 100-200 years supply
Lower prod’n costs and prices, reduced volatility
Decoupling from oil prices Redrawing the energy
map Surplus LNG import
capacity Industry advancing LNG
export projects
2000-2007 Supply-limited market High drilling levels,
concern about supply High prod’n costs, high
and volatile prices, linked to oil
Falling WCSB conventional prod’n
Falling exports to US Canada looking to
import LNG
How is shale gas changing the game?
Canada’s Natural Resources – Now and for the Future 9
Forecast Oil (WTI) and Natural Gas (Henry Hub) Prices
$0
$20
$40
$60
$80
$100
$120
$140
$160
$US
200
8 /
Per
Bar
rel
$0
$3
$6
$9
$12
$15
$18
$21
$24
$27
$US
200
8 / M
MB
tu
Oil Price Range Natural Gas Price Range Average PriceSource: Various private consultants on retainer to the department and publically available forecasts.
Natural Gas prices converted into per barrel equivalent using a value of 1 barrel oil = 5.8 MMBtu
WTI
H.H.
Canada’s Natural Resources – Now and for the Future 10
Major Unconventional Gas Basins
Canada has major unconventional gas resources
50% of currently defined potential exists within Horn River and Montney Both among lowest cost
basins in North America Challenged by distance to
domestic markets and current low prices
Canada’s Natural Resources – Now and for the Future 11
Producer Challenge:How to increase netbacks?
Cost reductions, stimulate demand etc. Focus on the liquids rich plays Exploring gas-to-liquids opportunities Diversify export markets (via LNG)
AECO$3.84 NBP
$8.99LNG
>$11.00 H.H.$4.11
Oil-based LNG
Canada’s Natural Resources – Now and for the Future 12
Canadian Gas Supply Forecast – February 2011
Source: CAPP, Price assumption: $5.50/mcf
Tight Gas
Shale Gas
Canada’s Natural Resources – Now and for the Future 13
Conclusions
Surging US unconventional natural gas prod’n caused significant over-supply in North America
Canada has enormous shale gas potential Industry aggressively developing shales in BC
and other provinces
Industry exploring new business models including boosting demand, gas-to-liquids technology, and diversifying export markets via LNG.
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