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Canadian Natural Gas Outlook

Canadian Natural Gas Outlook. Greg Stringham October 2006. Canadian Association of Petroleum Producers. 150 producer member companies Explore for, develop and produce natural gas, natural gas liquids, crude oil, synthetic crude oil, bitumen and sulphur throughout Canada

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Canadian Natural Gas Outlook

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  1. Canadian Natural Gas Outlook Greg Stringham October 2006

  2. Canadian Association of Petroleum Producers • 150 producer member companies • Explore for, develop and produce natural gas, natural gas liquids, crude oil, synthetic crude oil, bitumen and sulphur throughout Canada • Members produce more than 95 per cent of Canada’s natural gas and crude oil • 130 associate members provide a wide range of services that support the upstream crude oil and natural gas industry

  3. Canada’s Oil and Gas Industryin the North American Energy Economy • Canada is the world’s 3rd largest natural gas producer • Canada is the world’s 8th largest crude oil producer • and moving up the list quickly with oil sands production increasing • Canada is the largest supplier of energy to the United States #1 #1

  4. Oil sands growth will move Canada from #8 to #4 in the world by 2015 Top 10 World Crude Oil Producers in 2005 Production Outlook Stable Growing Stable Stable Stable Stable Declining Growing Stable Growing Source: EIA & CAPP

  5. Top 10 World Natural Gas Producers in 2005 Canada is the 3rd largest producer of natural gas in the world. Source: Oil & Gas Journal & CAPP

  6. Crude Oil and Natural Gas prices Crude Oil Prices(WTI NYMEX) $US per barrel Natural Gas Prices(AECO Daily Spot Price) $Cdn/mcf

  7. Industry Capital Spending Cdn $billions The oil & gas industry will invest over $47 billion in capital in Canada in 2007 Northern Canada ‘04 ‘05 ‘06F `07F $0.3 $0.5 $0.5 $0.5 Oil Sands ‘04 ‘05 `06F `07F $6.2 $10.4 $11.0 $12.5 WCSB ‘04 ‘05 ‘06F `07F $24.5 $32.7 $32.5 $33.3 East Coast Offshore ‘04 ‘05 ‘06F `07F $1.9 $1.9 $1.0 $0.7 Note: Spending in Canada excludes spending associated with mergers & acquisitions International are acquisitions net of divestures.

  8. Total Wells Drilled in Canada 2007 = 25,000 2006 = 24,500 2000’s Avg > 20,000 Wells 1990’s Avg = 10,000 Wells Based on Rig Release

  9. Western Canadian Gas ResourcesConventional and New Sources Source: Alberta Energy & Utilities Board/National Energy Board, CERI

  10. Western Canada Exploration DrillingSet New Record Highs in Q1 2006(Q1: Jan-Mar) Successful Natural Gas Exploration Wells Successful Crude Oil Exploration Wells Source: Nickle’s Daily Oil Bulletin

  11. Western Canada Natural Gas Production 2006 2005 2004 2003 Source: FirstEnergy Capital

  12. Natural Gas Wells Drilled in Western Canada Source: CAPP Statistical Handbook

  13. Note: Industry data shown on a 5-yr rolling average basis and based on reserve additions. Total capital is allocated as a portion of successful total well completions. Excludes Frontier and non-conventional activity since 1995. Includes natural gas liquids converted at 1 Bbl:6 Mcfe. Industry Average F&D Cost: Natural Gas(Trailing 5 Year Moving Average)

  14. 2002 2003 2004 2005 <10 mmcf/d 10-20 mmcf/d >20 mmcf/d Top Natural Gas Wells Drilled2002 - 2005

  15. Coalbed Methane in Canada • Much of Canada’s CBM potential is in Alberta • Multiple coals underlay half of province • About 500 trillion cubic feet (Tcf) of gas in place (AGS) • Up to 167 tcf can be recovered in Canada, most from AB (CERI) • CBM expected to represent about 10+ percent of future Canadian natural gas production

  16. Coalbed Methane –Wells Drilled and Production Forecast Coalbed methane wells drilled Production Forecast Billion cubic feet per day Impact of gas prices below $4/mcf Source: FirstEnergy & CAPP

  17. Play under way NGC wells similar to other shallow gas wells Small footprint: often only 3m x 3m (10’ x 10’) Natural Gas from Coal- Horseshoe CanyonSmall footprint minimizes land use Source: CSUG

  18. Water Management in aCoalbed Methane Operation

  19. Northern Natural Gas: Ultimate Potentialand Proposed Gas Routes Mackenzie Valley Pipeline: • Regulatory Application - NEB application October 7, 2004 - 22 regulatory agencies - cooperation agreement in place - environmental review underway - engineering spending on-hold until regulatory and aboriginal lags are addressed • Project - Costs: C$7.0 billion+ - Base Capacity - 1.2 bcf/d - Range – 0.8 to 1.8 bcf/d - On-stream date: 2011+ Arctic Islands 45 Tcf Alaska 115 Tcf Mackenzie Delta / Beaufort Sea 61 Tcf Fairbanks Mackenzie Valley Pipeline Inuvik Alaska Natural Gas Pipeline Mainland NWT & Yukon 17 Tcf Norman Wells Alaska Natural Gas Pipeline: • Costs: US$20 billion (Alaska – Chicago) • Capacity: 4.5 - 6.0 bcf/d • On-stream: 2012-2015 For illustrative purposes only

  20. Proposed Canadian LNG Import Terminals Key LNG Issues: • Site Approval • Gas Supply Contracts • Connection to Market 1 2 3 5 4 7 8 6 Source: FERC 35

  21. Canadian Natural Gas Production Forecast Source: CAPP

  22. Natural Gas Production ForecastsWestern Canada (including Mackenzie Delta)

  23. Actual Forecast Canadian Oil ProductionConventional, Oil Sands and Offshore Oil Sands Production: 2005 = 1.0 million b/d 2015 = 3.5 million b/d 2020 = 4.0 million b/d Offshore Constrained Case Oil Sands Western Canadian Conventional Oil Source: CAPP

  24. Peace River Peace River Cold Lake Hilda Lake (Orion) Athabasca Wolf Lake/Primrose Cold Lake Ft. McMurray Peace River Tucker Lake Edmonton Cold Lake Calgary Oil Sands Projects in Three Deposits Fort Hills Kearl Lake Horizon Joslyn Creek Muskeg River Albian Syncrude Firebag MacKay River Jackpine Suncor Fort McMurray Surmont Hangingstone Christina Lake Long Lake Jackfish Foster Creek In Situ Projects Mining Projects

  25. WASTE WATER OXYGEN PETROLEUM COKE GASIFIER CO2 CAPTURE & SEQUESTER SYNTHETIC GAS (CO, H2, CO2) HYDROGEN FUEL BOILERS HYDROTREATORS STEAM & ELECTRICITY Oil Sands Production TechnologiesAlternatives to Natural Gas THAITM (Toe-to-Heel Air Injection) Petrobank Whitesands Project OrCrude Process - Nexen/OPTI Longlake Multiphase Superfine Atomized Residue - DeerCreek Suncor 3rd Upgrader - Coke Gasification

  26. Purchased Natural Gas Consumed in Oil Sands 2006 to 2015 increase = 0.67 bcf/day Source: Alberta Energy & Utilities Board Reserves & Supply/Demand Outlook 2006

  27. Natural Gas consumed per barrel of oil sands production

  28. Key Canadian Oil/Gas Industry Issues • Transportation Capacity • Natural gas pipeline capacity is sufficient until northern gas arrives • Growing oil production needs markets, refineries and pipeline capacity • Workforce • Workforce sufficient to enable planned growth • Local, national and North America resources will be needed • New Supplies • Coalbed methane, Northern Gas, LNG, etc. • Higher Costs • Moving to more unconventional and more costly resources • Access to the Resource • Environmental – land, water, air • Stakeholders, aboriginal, stewardship • Technology – research and innovation

  29. Photo courtesy Pioneer Natural Resources Canada Compressor Impacts Reduced by Technology

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