Economic Outlook for Canada s Energy Sector. Saskatchewan Oil and Gas Supply Chain Forum November 17, 2015

Transcription

1 Economic Outlook for Canada s Energy Sector Saskatchewan Oil and Gas Supply Chain Forum November 17,

2 Outline CAPP Who we are Economic Outlook Capital investment Oil and Gas Prices Production and Drilling Activity Markets Canadian and foreign Infrastructure Canada s Energy Citizens 2

3 Canadian Association of Petroleum Producers Who we are: Represent large and small companies that produce about 90 per cent of Canada s natural gas and crude oil. Mission: Our mission, on behalf of the Canadian upstream oil and gas industry, is to advocate for and enable: Economic competitiveness; and, Safe, environmentally and socially responsible performance. 3

4 Economic Outlook

5 Canada s Oil and Natural Gas Industry Invested $81 billion in Canada in 2014 Upstream sector largest private sector investor in Canada Payments to governments average about $17 billion/year Oil and natural gas account for 21% of Canada s merchandise exports Employs approximately 500,000 in Canada (direct & indirect) Source: ARC Financial & CAPP

6 Industry Capital Spending Cdn $billions Northern Canada E 2016F $0.1 $0.5 $0.3 Oil & Gas Investment Spending: 2014: $81 billion 2015E: $48 billion 2016F: $42 billion Oil Sands E 2016F $34 $23 $21 Note: Excludes spending on mergers & acquisitions 6 Western Canada E 2016F $42 $21 $ E 16F AB $27 $14 $13.2 BC $7 $3.5 $2.6 SK $7 $3 $1.7 MN $1 $0.4 $0.5 East Coast Offshore E 2016F $5.3 $3.3 $3.0

7 $ billion $ billion Capital Investment in Canada % = Year/year change Combined Capital Investment Oil Sands Conventional % -16% -33% -10% % -12% Conventional Oil Sands F 2016F F 2016F F 2016F 7

8 Impact of Declining Commodity Prices in Capital Investment Canadian capital investment down 38% to $48 billion in 2015 Conventional spending down 47% to $25 billion in 2015 Oil sands down 33% to $23 billion Drilling down 49% to 5,300 wells Source:: Statistics Canada Upstream Oil & Gas Capital Investment by Industry (2014) $ billions 2015 Utilities Transportation & Warehouse Manufacturing Real Estate & Rental & Leasing

9 Impact of Declining Commodity Prices in Revenues Industry revenues down 40% From $150 billion in 2014 to $90 billion in 2015 Royalties will decrease by $7 billion from last year Oil and gas share of TSX down from 20% in 2014 to 12% Upstream Oil & Gas Annual Revenues ($ Billions) Major Canadian Products Selling Industries Auto Manufacturing Forestry & Logging Wheat & Barley Uranium Source: ARC Financial & CAPP 9

10 Oil & Gas Prices

11 US$/bbl ( Current dollars) Crude Oil Spot Price West Texas Intermediate Source: U.S. DOE/EIA, CAPP Note: Posted WTI WTI Spot

12 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 International Markets: WTI vs Brent Prices Brent: benchmark used to price 65% of world s oil WTI is lighter than Brent, and has historically traded at a premium Growing disconnect btw landlocked crude and globally traded crude such as Brent Since 2011, WTI has traded at a discount to Brent Feb 13 ~US$20.54 Jun 13 ~US$2.44 Jan 14 ~US$13.26 Jan 15 ~US$0.43 Sept 15 ~ US$ US$/bbl Daily Differential WTI Brent 12

13 Crude Oil Prices US$15.31

14 Oil & Gas Production and Drilling Activity

15 Impact of Oil Price on Drilling Activity & Production Oil Price Production Profile 15

16 Canadian Oil Sands (Bitumen & SCO) & Conventional Production Operating & In Construction + Growth

17 Western Canada Conventional Production

18 Thou. bbls/day Saskatchewan Production Light & Heavy ACTUAL FORECAST Light Heavy

19 Oil & Gas Wells Drilled - Saskatchewan Estimate Gas Wells Oil Wells E

20 Total Wells Drilled in Western Canada 28,000 24,000 20,000 16,000 Dry/Susp. Gas Oil Yr/yr Reduction in Drilling: % % E 2016F Alberta 5,961 2,839 2,521 British Columbia Saskatchewan 3,356 1,709 1,662 Manitoba ,000 8,000 4, E = 5, F = 4, E 2016F Source CAPP. Based on Rig Release E=estimate; F=forecast

21 Markets

22 Western Canadian Crude Oil Markets Husky-Prince George Edmonton Shell Canada Petro-Canada Imperial Husky-Lloydminster ChevronTexaco-Burnaby ConocoPhillips-Ferndale BP-Cherry Point Tesoro-Anacortes Shell-Anacortes Coop-Regina Montana Ref-Great Falls Tesoro-Mandan Murphy-Superior ConocoPhillips-Billings ExxonMobil Cenex MAP-St.Paul Koch-Pine Bend San Francisco Los Angels Sinclair-Casper Sinclair-Rawlins Salt Lake City Tesoro ChevronTexaco Flying J Holly Valero Frontier-Cheyenne Suncor ExxonMobil-Joliet ConocoPhillips-Wood NCRA-McPherson River Frontier-El Dorado Farmland-Coffeyville ConocoPhillips-Ponca City Sinclair-Tulsa ConocoPhillips - Borger Houston Citgo-Lemont MAP-Robinson Imperial Shell Suncor PetroCanada-Oakville Sarnia MAP-Detroit Premcor-Lima MAP-Catlettsburg Imperial-Nanticoke BP -Toledo BP-Whiting Sunoco -Toledo MAP-Canton United-Warren Core Markets Extended Markets New Markets

23 Transportation Capacity vs 2015 Supply Forecast Enbridge Mainline PADD IV Trans Mountain Express

24 Jan-04 Jul-04 Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Rail Cars tonnes Canadian Fuel Oil and Crude Oil Moved by Rail: Car Loadings & Tonnage 20,000 18,000 16,000 rail cars 14,000 tonnes 12,000 10,000 8,000 6,000 4,000 2,000,0 1600, , , , , , , ,000,0 Source: Statistics Canada 24

25 Challenges The current oil and gas price climate is very challenging. A number of factors creating uncertainty for the industry. Demand and supply imbalances combined with infrastructure and transportation limitations continue to contribute to the challenges we face today. By 2020, Canada could produce more oil and natural gas than can be moved by existing rail and pipeline systems. Most of Canada s oil and natural gas exports go to one customer the United States Events in other oil producing countries will also impact price / future trends in the industry. Industry s capital investment expected to continue on a downward trend.

26 Opportunities Global demand will continue to grow International Energy Agency s long-term world energy outlook 37% increase in energy demand over the next 25 years Improved infrastructure will allow Canada to meet domestic and international energy demands With improved infrastructure, we could displace foreign oil imports with Canadian oil Energy infrastructure projects are crucial to the competitiveness of the energy sector Saskatchewan is a competitive jurisdiction Stable royalty regime 7 competitive major oil plays attractive netbacks in tight oil plays SK ranks high as an attractive jurisdiction

27 Become an Energy Citizen Raise Your Hand Advertising 27

28 28 Thank You