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Eric Marsh | Executive Vice-President,
Natural Gas Economy
The Natural Gas Economy
Creating Increased Markets for Natural Gas
The New Encana: Calgary | March 16, 2010
the clear energy choice New York | March 18, 2010
www.encana.com
Natural Gas Economy Mission
Our mission is to establish natural gas as the foundation of
North America’s energy portfolio
• Abundant!
• Affordable!
• Clean!
• Reliable!
• Domestic Solution!
www.encana.com
1
Encana’s Future Vision
Cleaner, More Attractive Energy Solutions
Abundance of Natural Gas enables an energy plan that
will include…
• Natural gas as preferred fuel for power generation
• Clean, price competitive and improved health benefits
• Addresses large component of emission targets
• Creation of Natural Gas Highways
• New industry creates jobs, government revenue, economic
growth
www.encana.com
Natural Gas Future Has Changed
Technology Unlocks Shale Plays
Evolution of the Haynesville Play Canada and U.S. Resource Estimates
First month Production Well Cost Years of Supply
(MMcfe/d) (US $MM/well)
Tcf
18 $18 120 Recoverable Resource 3,300
16 $16 Proved Reserves
Facility 97 102 2,750
14 Constraints $14
85 90 92
12 $12 80 2,200
10 $10 60
8 $8
1,650
6 $6 40 1,100
4 $4
2 $2
550
0 $0
0 0
Q4-08 Q1-09 Q2-09 Q3-09 Q4-09 Q1-10F
PGC 2006EIA/NEB Navig't ICF EIA/NEBPGC 2009
2007 2008 2008 2009
• Stronger wells for less cost • 2,600 Tcf of total resource
• Well costs down 20% • 100+ year supply at 70 Bcf/d
• Production up over 100% • 70+ year supply at 100 bcf/d
Gas shale plays are an industry Target new market
changing breakthrough 25 Bcf/day or 30% increase
Source: EIA, CSUG, IHS Energy www.encana.com
2
New Abundance Has Changed Price
Natural Gas - The Most Economically Competitive Fuel
NYMEX Oil, Coal and Gas Spot Prices
Price per MMBTU
• Abundant natural gas
$25
supply minimizes price
NYMEX Oil fluctuations
$20
Hurricanes
Katrina and Rita • Cost of natural gas is at
$15
least 50% lower than oil
$10
$5
NYMEX Gas
NYMEX Coal
$0
Jan- Jul- Jan- Jul- Jan- Jul- Jan- Jul- Jan- Jul- Jan- Jul- Jan- Jul- Jan-
03 03 04 04 05 05 06 06 07 07 08 08 09 09 10
Source: EIA, NYMEX www.encana.com
New Abundance Has Changed Price
Natural Gas - The Most Economically Competitive Fuel
NYMEX Oil, Coal and Gas Spot Prices
Price per MMBTU
$25
• Natural gas can have
more than 60% greater
$20
NYMEX Oil efficiency in power
Hurricanes generation
Katrina and Rita
$15
$10 • Can be price equivalent
on a unit of power basis
$5
NYMEX Gas
$0
Effective NYMEX Coal • In certain markets,
Jan- Jul- Jan- Jul- Jan- Jul- Jan- Jul- Jan- Jul- Jan- Jul- Jan- Jul- Jan- natural gas is the most
03 03 04 04 05 05 06 06 07 07 08 08 09 09 10
economic choice
Source: EIA, NYMEX www.encana.com
3
Natural Gas is the Most Affordable Choice
Levelized Cost Profile of New Generation
Average Cost for Plants Entering Service by 2016
US$/kWh
$0.40
$0.40
$0.35
$0.30
$0.26
$0.25
$0.20
$0.14
$0.15
$0.11 $0.11 $0.10 $0.10 $0.08
$0.10 $0.08
$0.05
$0.00
Solar PV Solar Wind Hydro Advanced Advanced Conv Coal Baseload Baseload
Thermal Nuclear Coal Nat Gas Nat Gas
Conv. CC Advanced
CC
Levelized Capital Cost Fixed O&M Variable O&M (incl. fuel) Transmission Investment
Source: EIA, Annual Energy Outlook 2009 www.encana.com
Where are the largest opportunities?
Canada and U.S. Energy Consumption by Sector
Input Energy Consumption Annual CO2 Emissions
(281 Bcfe/d) (6.1 Billion Metric Tonnes)
79 Bcfe/d
Transport
Transport
28%
33%
Electric
39%
Industrial
2.0 Billion MT
21%
110 Bcfe/d 2.3 Billion MT
Electric
39%
Commercial Industrial Residential
5% 18% 6%
Residential Commercial
7% 4%
Need to focus on Electric Power and Transportation Sectors
(70% of total emissions) to move the “Emission Reduction Needle”
Source: EIA AEO 2010 preliminary release, CANSIM, Environment www.encana.com
Canada, Encana
4
Canada and U.S. Emissions Solutions
Federal Targets Aligned for 2020
Million metric tons CO2
8,000 Business as
usual case
7,000
6,000 1.3B metric tons
5,000 17% reduction
by 2020
4,000
3,000
2,000
1,000
83% reduction
by 2050
0
2005 2020F 2050F
2020F Impacts
• Proposed natural gas plans can accomplish the emissions reduction goal through:
• Displacement of coal-fired electricity generation
• Partnership with renewable sources of electricity generation
• Evolution of natural gas for transportation
Source: Environment Canada, EIA, World Resources Institute www.encana.com
Solutions to Emission Reduction Plan
Canada and U.S. 2020 Emission Reduction Options
What can 15 Bcfe/d in electricity generation and 10 Bcfe/d in transportation achieve?
Industrial/Res/ Total
Scenarios Electricity Transportation
Com Savings
All sectors responsible for -534 -443 -342 -1,319
meeting 17% reduction
target -17% -17% -17% -17%
Natural gas solution for: -1,455 -227 +363 -1,319
electricity (+15 Bcfe/d) and
transportation (+10 Bcfe/d) -51% -7% +24% -17%
Natural gas enables the 1,319 million tonne target for 2020
• First row - emissions reductions from business as usual in million tonnes of CO2
• Second row percent reductions are from 2005 levels
• Assumes gas 34% and renewable 25% of electrical generation mix
Source: EIA, StatsCan, Encana www.encana.com
5
Natural Gas - Cleanest and Affordable Choice
Electrical Generation Options to 2020
Current Mix (2009) – 4,500 TWH
Coal Natural Gas Nuclear Renewables Emissions Cost
42% 21% 20% 17% = 2,340 MMT 0.09 $/kWH
Case 1: 2020 Mix (Growth in Renewables) – 5,200 TWH
Coal Natural Gas Nuclear Renewables Emissions Cost
42% 13% 20% 25% = 2,490 MMT 0.10 $/kWH
Case 2: 2020 Mix (Growth in Renewables and Natural Gas) – 5,200 TWH
Coal Natural Gas Nuclear Renewables Emissions Cost
21% 34% 20% 25% = 1,837 MMT 0.10 $/kWH
If growth in renewable energy and natural gas
displace coal, the cost will be the same,
but the emissions will be 30% lower
Source: EIA, StatsCan, Encana www.encana.com
The Natural Gas Solution to Better Air Quality
Additional Social and Economic Benefit
Increased natural gas use creates significant reduction in other
harmful emissions
• Less NOX, SO2, mercury, arsenic and others
• Better human health
• Study indicates health cost can contribute up to ~$0.03/KWhr for coal power generation
Large improvements to hazardous NOX (38%) and SO2 (52%) emissions
Case 1: Coal Weighted Case 2: Natural Gas Weighted
NOX Emissions (million metric tons) SO2 NOX Emissions (million metric tons) SO2
3.5 14 3.5 14
3.0 12 3.0 12
2.5 10 2.5 10
2.0 8 2.0 8
1.5 6 1.5 6
1.0 4 1.0 4
0.5 2 0.5 2
0.0 0 0.0 0
NOX SO2 NOX SO2
Sources: National Academy of Science, Encana estimates with www.encana.com
15 Bcf/d of coal displacement
6
North American Opportunity: Transportation
Natural Gas Vehicle Growth by Continent
Natural gas vehicles by Italy as an analog
continent
Natural gas vehicles (millions)
• ~600,000 NGVs
• 37% growth since 2007
5.0
• NGVs have 7% market share of all
4.0 new vehicles purchased
3.0 • Cost of CNG is 50% to 60% less
expensive than gasoline
2.0
• Government incentives
1.0
• Italy imports 89% of natural gas
0.0
2000 2001 2002 2003 2004 2005 2006 2007 2008
Asia Europe N. America
S. America Africa
Fiat Qubo
Natural Power
Source: IANGV, NGVA Europe, Fiat www.encana.com
Natural Gas as Transportation Fuel
Most Affordable and Cleanest Choice
Retail Cost of Fuels
Price per gasoline litre equivalent (GLE) in C$
$1.50
Gasoline
$1.25
Diesel
$1.00
20% - 40%
cheaper
$0.75 per GLE
$0.50 Transportation,
Estimated CNG/LNG distribution,
compression,
$0.25 liquefaction
AECO
and taxes
$0.00
Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10
Source: Natural Resources Canada; Encana www.encana.com
7
U.S. & Canada Natural Gas Use Opportunity
Transportation Sector
2009 Consumption by Vehicle Type
Bcfe/d
60
60% Total Market Volume: 79 Bcfe/d
50
40
30
20 20%
16%
10
4%
0
Auto Rail, Air, Military, Int. Freight Trucks Comm. Trucks,
Shipping Buses, Dom.
Shipping
Source: Data and forecast from EIA www.encana.com
Canada’s Natural Gas Highways
Clean, Affordable, Job Creation, Economic Growth
• Proposed world leading clean energy transportation corridors
• East: Quebec City, QC to Windsor, ON
• West: Edmonton, AB to Vancouver, BC
• Industry partners, federal and provincial governments
Source: Encana www.encana.com
8
Canada’s Natural Gas Highways
Highlights of a New Canadian Industry
A Vision for 2025
• 145,000 clean burning natural gas trucks fueled by LNG
• 2.4 million light duty vehicles fueled by CNG
• Approximately 1.4 Bcf/d of natural gas consumption in transportation
• 15-30 medium size and 10-20 large size LNG plants
• Over 900 CNG and/or LNG natural gas fueling stations
• Over 50,000 new jobs
• 4-6 million tons per year CO2 emissions reductions
Source: EPA estimates, Encana reference case – illustrative example www.encana.com
Natural Gas Economy
Encana’s Natural Gas Transportation Project Activity
• Company CNG Stations forecast
• Clearwater Q4 2010
• Fort Nelson Q4 2010
• DJ Basin Partnership Q3 2010
• Colorado Western Slope Q3 2010
• Coushatta, Louisiana Q3 2010
• Conversion of company trucks (approx 150)
• Calgary and Edmonton Clean City Projects
• East and West Canada Natural Gas Highways
• Colorado Natural Gas Corridor
• Haynesville Clean Development Project
www.encana.com
9
Natural Gas Challenges & Opportunities
• Lower natural gas prices are likely
here to stay!
• The natural gas industry must be
advocates for increased usage of
clean natural gas in North America
• Expanded use for electricity
generation
• Develop a natural gas for
transportation fuel strategy
• Remove barriers to expanded
natural gas usage, and prevent
new barriers from being put in
place
www.encana.com
Supplemental
The New Encana:
the clear energy choice
10
Canadian Natural Gas Highway Project
Natural Gas Use Growth Projection
Canadian Highway Transportation Fuel (Bcfe/d)
23% 2025
Market Share
Actual
CAGR: 1.0%
0.8 Bcfe/d
1.0 Bcfe/d
0.4 Bcfe/d
3.9 Bcfe/d
Source: Encana reference case – illustrative example www.encana.com
Clean Cities Programs – Illustrative Example
Calgary Proposal for LNG/CNG Distribution Sites
Airport
Transit
Commercial
Truck Stops
Landfill
LNG Plant
Existing/Future CNG
Station
Calgary
Municipal Boundary
www.encana.com
11
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