Toronto Star Editorial Board

Toronto Star
Editorial Board
April 3, 2014
1
CAPP Scotiabank
Investment Symposium
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2
April 3 & 4, 2014
~90 companies
~600 investors
Theme is “Market
Pathways”
Plenaries on
transportation, LNG and
provincial policies
Oil & gas sector is the
largest private investor in
Canada
$68 billion in forecast
investment coast-tocoast
~20% of Toronto Stock
Exchange
Global Primary Energy Demand – The “Reality Check”
Energy
Demand
Growth
20,000
• Population growth
• Standard of living
18,000
16,000
14,000
million tonnes oil equivalent
Other Renewables
Bioenergy
Hydro
Nuclear
Natural Gas
Oil
Coal
12,000
10,000
All Forms of
Energy,
Developed
Responsibly
Technology Key Lever
for
Sustainable
Growth
• Ongoing high reliance
on hydrocarbons
• Increasing role for
renewables
• Shift to non-conv. oil
& natural gas
• Production
• Cost competitiveness
• Environmental
performance
8,000
6,000
4,000
2,000
0
2011
2020
2025
2030
Ongoing reliance on fossil fuels
(share of energy consumption):
2011: 82%
2035: 76%
Source: International Energy Agency – New Policies Scenario
World Energy Outlook 2011
Source: International Energy Agency World Energy Outlook 2013
2035
The Oil and Natural Gas Industry
A Key Driving Force in the Canadian Economy
● Invested $67 billion in Canada in 2013 (largest single
private sector investor – consistently $60-70B per annum)
● $18 billion to governments per annum (royalties, land
bonuses, taxes)
● Global rank:



5th largest natural gas producer
6th largest oil producer
3rd largest oil reserves
● Employs more than 550,000 in Canada
Upstream Oil
& Gas
Canada’s Energy Circumstance: A
Resource-Based Export Economy
Auto
Manufacturing
Forestry
& Logging
4
Wheat &
Barley
Uranium
Ontario & the Oil and Gas Sector
7% of total oil sands
jobs will be in Ontario.
317,00 natural
gas jobs
across Canada
by 2035.
Oil sands could potentially
surpass Ontario’s trade with
traditional export market such
as Hong Kong, China.
- Former Ontario Finance
Minister Dwight Duncan
5
Ontario Energy By the Numbers
6
Oil and natural gas
supplies 70% of
Ontario’s energy
requirements.
Natural Gas
Natural Gas Power
Generation in Ontario
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Affordable natural gas in Ontario’s energy
mix can lead to lower electricity rates for
consumers.
Opportunity to increase the use of natural
gas in a variety of applications, including
electricity generation.
Lower energy costs and greater access to
competitively priced electricity enhances
the overall competitiveness of businesses
and industries, resulting in economic
benefits and employment opportunities.
A cost-effective opportunity to add
additional capacity to the electricity grid
because they require less capital costs
than alternatives, such as nuclear power,
and they can be implemented more
quickly.
Cleaner-burning alternative because it
burns 50 per cent cleaner than coal and
emits far fewer pollutants.
9
Canadian Natural Gas - A foundation fuel
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Canadian - Job creator, large source of revenue for provinces and federal
government, accounts for more than $15 billion in exports.
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Abundant – More than 100 years supply at current production levels. Unconventional
gas has fundamentally changed North America’s supply picture, providing long-term
security and reliability.
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Affordable - Used by over 6 million Canadian customers – over 3.2 trillion cubic feet
yearly to meet over 30% of our energy needs in homes, businesses, and industry;
Canada’s robust supply outlook provides increased confidence in future price
competitiveness.
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Clean – Efficient and clean-burning energy choice; fewer emissions than many other
fuels; Important partner for renewables and emerging low-emission technologies.
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Versatile – Can improve end-use efficiency, contribute to lower emissions, and
provide flexible partner in power generation and transportation.
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Reliable - Comes from a variety of sources and supported by extensive storage and
pipeline network.
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Safe - World leaders in complying with stringent safety standards and regulations at
all stages of natural gas exploration, production, transportation, distribution and use.
10
Broader use of Natural Gas
• Natural gas currently meets over 30% of Canada’s energy needs in homes, businesses,
and industry.
• Abundant supply outlook means more affordable energy choice over the long-term.
Natural Gas Use in Canada
Natural Gas Sales in Canada in 2010 = 74.661 billion cubic metres
Public Admin
0.7%
Commercial and
Other Institutional
13.6%
Transformed into
Electricity
10.1%
Transformed into
RPPs
Transformed into
0.8%
Steam
0.7%
Producer Use & Non
Energy Use
18.9%
Residential
18.5%
Agriculture
0.7%
Motive
Transportation
0.1%
Pipeline
3.5%
Source: Statistics Canada 57-003-x
Industrial
32.6%
North American Natural Gas –
Supply Outlook
•
Shale gas supply a
game-changer
…100+ years supply
•
Technology success
(horizontal drilling,
fracturing,
completions)
•
Implications:
 New producing
regions
 Shifting S / D
dynamics
 Changes in p/ l flows
 Emerging stakeholder
challenges (env. &
social)
North American Natural Gas Supply
12
What does it mean for Canada?
• Dramatic increases in supply and limited growth in
demand has meant the lowest natural gas prices in
North America in a decade
• Demand-supply picture changes outlook for the
future and presents the Canadian natural gas
industry with challenges
100 Years + Supply
• Increasing shale gas supply creates greater
competition for domestic North American market
and much lower / more affordable consumer prices
• Growing US supply continues to redraw traditional
market flows, as western Canadian gas supply is
potentially displaced in eastern US and Canada
Horn River
Montney
• Creates need to find new domestic & export
markets for western Canadian gas supply
• Stiff competition from Alaska, Australia and other
players in expanding Asian markets
Canada’s natural gas industry can add:
•145,000 new jobs - direct, indirect, induced
•$1.3 trillion to Canadian GDP over next 25 years
Source: CERI 2011
13
Infrastructure and Expanded Markets
”Emerging markets represent the greater
opportunity for Canadian exporters. Since
the recession, these economies have
accounted for roughly two-thirds of global
economic growth and one-half of the
growth in global imports,” Mark Carney,
Governor of the Bank of Canada, April 2,
2012
Existing natural gas transmission
pipeline Infrastructure in Canada
● 72,000 km
● Transported 5.3 trillion cubic feet of
natural gas in 2011
Natural Gas development critical to
expanding markets
● Development of new pipeline
assets is critical to open new
markets
● New supply needs to be connected
to new export markets
● Industry makes, and must continue
to make, huge investments in
pipelines to provide cost
competitive infrastructure
● Timely regulatory decisions critical
to competitiveness
CAPP Operating Practices for r
Hydraulic Fracturing
 Guide development.
 Expected practice, but not
mandated by CAPP.
 Inform / complement regulations.
 Contribute to safe, responsible
operations.
Oil & Oil Sands
15
Global Crude Oil Reserves by Country
300
World Oil Reserves
298
265
Open to
Private
Sector
Restricted
(81%)
173
141
102
100
92
80
48
50
37
30
26
25
21
United States
150
Other
44%
Qatar
155
Oil Sands
56%
China
200
Source: Oil & Gas Journal Dec. 2012
Kazhakhstan
Nigeria
Libya
Russia
Abu Dhabi
Kuwait
Iraq
Iran
Canada
Saudi Arabia
0
Venezuela
billion barrels
250
Open to
Private Sector
Canadian Oil Sands (Bitumen and SCO) &
Conventional Production
17
2012 Canada and U.S. Demand for Crude Oil by Source
Thousand Barrels per Day
W. Canada
supplies 92%
of Ontario’s oil
refinery
feedstock.
35
Canada
Mexico
Saudi
Venezuela
30
per cent
25
20
15
10
5
0
2000
18
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
Access to Markets – Pipeline Expansion Projects
Under Development
Plus Significant Rail
Expansion: ~1 million b/d
by end-2014
Ontario Suppliers to the Oil Sands
20
Economic Benefits
21
Ontario “Clean Tech” Sector Opportunities
● Alberta Technology Fund
& Climate Change and
Emissions Management
Corporation have
enabled $1.2B to invest
in GHG emissions
reduction technology.
● Science and Technology
Canada collaborating
with Ontario technology
providers to match
technology to industry
needs, e.g. energy
efficiency improvements,
CO2 capture, water
treatment.
22
“Clean Tech” Projects Tied to Ontario
Lead Organization
SDTC Funding
Total Project Value
CO2 Solution inc.
$1,000,000
$5,881,558
Saskatchewan Power
Corporation
(SaskPower)
InvoDane Engineering
Ltd.
N-Solv Corporation
$2,682,900
$11,149,608
$2,467,125
$8,797,123
$10,000,000
$27,044,748
Pure Technologies Ltd.
$1,000,000
$3,000,000
GHGSat Inc.
$2,017,648
$6,193,614
Switchable Solutions
Inc.
Total
$5,200,000
$15,600,000
$24,367,673
$77,666,651
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Skilled Workforce Availability
● Workforce skills & capacity is key
to competitiveness
● Significant projected shortfall
● Challenge arises from growth
opportunity and demographics
● “Canadians First”:
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Training
Mobility
Under-represented groups
● Immigration:
•
•
•
Numbers & skills
Temporary (TFW)
Permanent – mix & #s
● Workforce supply and productivity
is key to managing costs
24
Aboriginal Participation in Oil Sands Development
• Aboriginal Companies:
• Wood Buffalo & Lac La Biche contracts in 2012 = $1.8B
• Value of contracts over last 14 years = $8B
• Aboriginal Employees in permanent jobs in 2010 = 1,700+
• Contributions to Aboriginal communities in 2011 & 12 = $20M
• Aboriginal consultation funding in 2010 = $12M
Source: OSDG (OSCA)
Oil Sands Environmental Performance –
Context & Performance Improvement Opportunities
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Water Use
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Water Quality
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Oil sands 0.14% of global GHG emissions; 2011 emissions 55 mega tonnes (4.3% of 2011 emissions from US coal-fired
power generation sector); similar GHG emissions to other heavy oils; 26% improvement in GHG intensity since 1990
Performance Improvement – Reduce energy intensity of in situ recovery process; ongoing focus on energy efficiency;
targeted application of CCS
Environmental Monitoring
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~ 200 sq. kms (included in 0.02% above); largely a legacy issue
Performance Improvement: Eliminate need for new ponds, accelerate drying time; accelerate reclamation pace
GHG Emissions
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0.02% of Canada’s boreal forest disturbed by oil sands mining over 40 years (~ 800 sq. kms – size of San Diego); ABMI
(biodiversity monitoring) indicates living resources 94% intact
Performance Improvement – Reduce disturbance, accelerate pace of reclamation
Tailings Ponds
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“No current evidence that oil sands are a threat to aquatic ecosystem”……Royal Society of Canada
Performance Improvement – Enhanced government monitoring system
Land
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0.6% flow from Athabasca River (mining); new in situ projects 00% saline water; 80-95% recycle
Performance Improvement – Reduce overall use; waste water recycle; water technology development centre
Extensive monitoring system in place
Performance Improvement – Enhanced government-driven monitoring system being implemented ($50M per year
funding from industry)
In Context….N.A. GHG Emissions (2011) Coal-fired Power Plants & Oil Sands
AK
GHG Emissions from Oil Sands
 7.8% of Canada’s GHG emissions
 Accounts for 0.14% of global GHG’s
 26% reduction in intensity from 1990 - 2011
MT
ND
MN
OR
WY
NV
WI
SD
NE
UT
IN
CO
MO
OK
16-50 mtonnes
0-15 mtonnes
NJ
VA
WV
NC
TN
AR
SC
Legend
51-100+ mtonnes
OH
KY
IL
NM
NY
IA
KS
AZ
NH
MI
AL
GA
Canadian coal-fired power
generating plants
TX
LA
MS
FL
Sources: U.S. DOE/EIA & Environment Canada
Canadian oil sands
U.S. Coal fired power
generating plants
Performance Improvement Opportunity –
Full-Cycle GHG Emissions Better Than U.S. Imports
U.S. Barrel Refined in
the U.S. (2005)
Venezuela - Petrozuata
US -Kern River
Cdn Oil Sands: Mining SCO
Nigeria - Bonny Light
Canadian Oil Sands: SAGD Dilbit
Iraq-Basra Light
+5%
Cdn Oil Sands: Low SOR SAGD Dilbit
US - Mars
Venezuela Bachaquero
Mexico - Maya
+2%
Cdn Oil Sands: Mining Dilbit (PFT)
Iraq - Kirkuk Blend
US Barrel Refined in the U.S. (2005)
Well-to-tank
Saudi Arabia - Arab Light
Refined product
Combustion
Brazil - Tupi
North Sea - Forties
0
Source: IHSCERA Oil Sands Dialogue Getting the Numbers Right 2012
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100
200
300
400
kgCO2e per barrel of refined product
500
600
+ Canada’s Oil Sands Innovation Alliance
(COSIA) Vision
……….to enable responsible and sustainable grow th of
Canada’s Oil Sands w hile delivering accelerated im provem ent in
environm ental perform ance through collaborative action and
innovation.
COSIA focus areas – Land, water, GHGs, tailings, monitoring.
COSIA Companies
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BP Canada Energy Company
Canadian Natural Resources Limited
Cenovus Energy Inc
ConocoPhillips Canada Resources Corp
Devon Canada Corporation
Imperial Oil
Nexen, A CNOOC Ltd. Co.
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Shell Canada Energy
Statoil Canada Ltd
Suncor Energy Inc
Syncrude Canada Ltd
Teck Resources Ltd
Total E&P Canada
COSIA first year results – Globally significant legal agreements,
sharing IP - 560 technologies shared ($900M development costs),
185 new projects launched.
29
Social License
30
Feelings about Energy Sources
For each of the following types of energy, please indicate if your overall feelings are very
negative, negative, neutral, positive, or very positive?
Change in Positive
from 2012
-5
-3
-12
-6
-4
+2
-3
29% positive in 2010
23% positive in 2010
Not asked
-2
+1
12% positive in 2010
+1
-1
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Need slide from Evelyn Canadian Environmental Barometer Winter 2013
Public Support for the oil Sands…
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Do you use oil from Canada’s oil sands?
To the best of your knowledge, when it comes to your use of energy for transportation, for the movement of products
you use, for heating and cooling, would you say you personally use oil from the oil sands very often, often, a fair bit,
rarely, or never?
Region
Recall – Canada’s Energy
Vote Intention
Age
Gender
2011 Vote
TV Ad Recall
Often
A fair bit
Rarely/Never
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Social License
● Acceptance / support of public, key stakeholders, FNs, policy makers
 Assessed in context of societal values (energy, economic, environment, social)
● “Governments grant permits but the public grants permission”
 Larger than any one project or any one company
 Increasingly role of gov’ts / industry to create conditions for success for specific
projects
● Two dimensions to environmental / social conflict
 Local / regional
 Environment (air, land, water, biodiversity impacts) & social (noise, dust, activity
levels, impact on local services, infrastructure & wages, local benefits, employment,
etc.)………P rim ary focus of landow ners, com m unities, m any FNs, “local” ENGOs, m any
in public.
 National / global (first oil sands, now shale gas)
 Global climate change (and related policy) + role of fossil fuels in future energy
system…….P rim ary focus of m ost international ENGOs, som e in the public.
What’s Changed?
● Industry’s Prior Approach
 Focus on local / regional issues near operations
 Do the right thing, expect to be recognized for doing right thing
 Low public profile for upstream oil and gas industry
● What has Changed?
 Social media / internet
 Focus on short term
 Lack of trust in institutions and business
 Increasing public concern about social inequality
 Risk aversion (or lack of understanding of risk) – health, safety, environment
 Power of private / local interests (NIMBYism, BANANAism)
 Increasing activism by Aboriginal peoples
 Values-based conflict (e.g., climate)
CAPP’s Social License Framework
Performance
+
Communication &
Outreach
=
Reputation/ Social
License
● Performance
•
Continuous environm ental & social perform ance im provem ent
(across the value chain)…..including monitoring, timely & transparent
reporting
•
Clear line of sight to econom ic and social benefits to Canadians
•
World class policy & regulatory system
•
Solutions-oriented advocacy for balanced policy and regulation
● Communications & Outreach
•
Communications / outreach grounded in performance improvement
•
Evolving messaging, evolving channels, air & ground campaigns
● Requires leadership & collaboration….an industry challenge
36
Being Part of the Discussion – Fact vs. Fiction
@oilgascanada
www.facebook.com/OilGasCanada
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2010 CAPP OIL SANDS CAMPAIGN
Technology, Environment, People
The Way Forward – Responsible Growth
● Unprecedented growth opportunities in Canada’s energy sector……and
unprecedented challenges to growth
● Communications & Engagement
 Continue to evolve messaging…..grounded in performance, exhibit more pride
 Expand “ground campaign”
● Performance
 Accelerate industry environmental performance…….foundational
 Evolve industry RCE program – measurement, reporting, enabling tools
 Visibly support world class policy & regulation
 Ensure line of sight to benefits…….along value chain, by jurisdiction
 Invite pragmatic critics to the solution space
● Requires strong industry leadership via collaboration / coalitions
 A marathon, not a sprint
 Others won’t stand up for us if we won’t visibly stand up for ourselves……we all
need to step up!
QUESTIONS AND COMMENTS
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THANK YOU
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