Shale Gas the “Game Changer” by yurtgc548

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									 North American Shale Gas Revolution
 Presentation to APEC
 By Dan Cowan – Petroleum Resources Branch, Natural Resources Canada




 May 10, 2011


Canada’s Natural Resources – Now and for the Future                    1
 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   2
Energy - important to Canada’s
economic prosperity
 3rd largest producer & exporter of                Energy as a Percentage of Canadian Total (2009)
  natural gas
                                                  25%
                                                                     23.4%
 Only OECD country with growing                          20.6%

  oil production                                  20%



 Stable and secure energy supplier               15%




 $84 billion exports in 2009,                    10%

  primarily oil and gas:                                                        6.7%

      23.4% of total exports                      5%

                                                                                           1.8%

 In 2009, energy represented 6.7%                 0%
                                                        Investment   Exports    GDP     Employment
  of GDP, with direct employment of
  about 263,000 people


  Canada’s Natural Resources – Now and for the Future                                          3
Federal Energy Framework and
Jurisdiction

 Reliance on competitive markets for determining
  supply, demand, prices, and trade
 Shared jurisdiction over natural resources

       Provincial Jurisdiction                           Federal Jurisdiction
 •Resource ownership,                              •International and interprovincial
  management and royalties                          issues
 •Land-use planning and                            •North, offshore and Crown lands
  allocation                                       •Works declared to be for the
 •Laws regarding the exploration,                   general benefit of Canada (e.g.
  development, conservation and                     science and technology)
  use of natural resources within                  •Nuclear, uranium
  provincial boundaries

 Canada’s Natural Resources – Now and for the Future                                4
  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       5
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   6
  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                7
    How is shale gas changing
    the game?

             2000-2007                                            2008- Present
      Supply-limited market                                 Demand-driven market,
      High drilling levels,                                  lower drilling, 100-200
       concern about supply                                   years supply
      High prod’n costs, high                               Lower prod’n costs and
       and volatile prices,                                   prices, reduced volatility
       linked to oil                                         Decoupling from oil prices
      Falling WCSB                                          Redrawing the energy
       conventional prod’n                                    map
      Falling exports to US                                 Surplus LNG import
      Canada looking to                                      capacity
       import LNG                                            Industry advancing LNG
                                                              export projects
    Canada’s Natural Resources – Now and for the Future                             8
Forecast Oil (WTI) and Natural Gas
(Henry Hub) Prices
                         $160                                                                                                       $27

                         $140                                                                                                       $24
 $US 2008 / Per Barrel




                                                                                                                                    $21




                                                                                                                                          $US 2008 / MMBtu
                         $120
                                                                                                      WTI                           $18
                         $100
                                                                                                                                    $15
                          $80
                                                                                                                                    $12
                          $60
                                                                                                      H.H.                          $9
                          $40
                                                                                                                                    $6
                          $20                                                                                                       $3

                           $0                                                                                                       $0
                           00




                                            05




                                                                10




                                                                                   15




                                                                                                       20




                                                                                                                          25
                         20




                                          20




                                                              20




                                                                                 20




                                                                                                     20




                                                                                                                        20
                                 Oil Price Range                   Natural Gas Price Range                       Average Price
                                Source: 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

            Canada’s Natural Resources – Now and for the Future                                                                                              9
 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   10
   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
                                                        $8.99
  LNG
 >$11.00                                        H.H.
Oil-based LNG
                                                $4.11




 Canada’s Natural Resources – Now and for the Future            11
  Canadian Gas Supply Forecast –
  February 2011


                                                                    Shale Gas

                                                                    Tight Gas




                                                      Source: CAPP, Price assumption: $5.50/mcf


Canada’s Natural Resources – Now and for the Future                                          12
 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.
Canada’s Natural Resources – Now and for the Future     13

								
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