Alberta s Oil Sands Role of Government, Value-added Processing, Ways of Participating in Projects

Transcription

1 Alberta s Oil Sands Role of Government, Value-added Processing, Ways of Participating in Projects Duke du Plessis,, Senior Advisor Alberta Energy Research Institute and Alberta Economic Development October 18, 2004

2 Role of the Alberta Government in the Development of Alberta s Resources Government owns the Resource Provides permits and leases to industry to develop specific resources: Alberta Department of Energy (ADOE) Reviews and Approves applications by industry for commercial development of the property: - Energy Utilities Board (EUB) - Department of the Environment (AE) - Department of Sustainable Resource Development: Surface Rights Sets & receives royalties for commercial operations 2

3 Role of Industry in the Development of Alberta s Resources Acquires permit (up to 5 years) for specific properties (Tenure Agreement) Evaluates resource and the technical & economic feasibility of commercial operation Prepares and submits application for commercial development to EUB Before 5 years converts permit to a primary lease (up to 15 years) Lease (Tenure) can be extended to commercial life of project 3

4 Fees Paid by Industry Permit & Lease (Tenure) Costs: One time permit fee: $500 plus $3.50/ha/year for duration of lease Pays Royalty to Government when the plant is in production 1% of gross revenue until capital cost has been recovered Post-Payout: Payout: 1% of gross revenue or 25%of net revenue (whichever is larger 4

5 Project Development Steps Project Announcement Public Disclosure EUB Application Public Hearing EUB Approval IDENTIFY SELECT DEFINE EXECUTE OPERATE Opportunity Identification Concept Screening & Selection Front End Engineering (FEED) Detailed Eng. Procurement Fabrication & Construction Start Up & Operate Project Close Typical Project Announcement Typical Project Appropriation Source: Petrocanada 5

6 Typical Cumulative Revenue and Cost Cumulative Revenue and Cost $14,000 Cost Revenue $12,000 $10,000 millions $8,000 $6,000 Phase 1 (Preproduction) Phase 2 (Cost Recovery) Phase 3 (Profit) $4,000 PAYOUT $2,000 $ Year 6

7 Typical Cumulative Royalty Royalty $1,400 $1,200 $1,000 Phase 1 Phase 2 Phase 3 millions $800 $600 (Royalty: 1% of annual gross revenue) (Royalty: greater of 1% annual gross revenue or 25% of annual net revenue) $400 $200 $ Year 7

8 Bitumen Supply Cost Typical Athabasca SAGD Project Bitumen Supply Cost Plant Gate Fuel Royalties Income Tax Fixed Capital Other Operating Costs Return on Investment Source: CERI 8

9 Styrene Ethylene Refined Products and Petrochemicals Increase Value and Market Options for Rapidly Growing Oil Sands Production Propylene 16.6 Xylene Ethylene Gasoline Propane Jet Fuel Natural Gas Diesel SCO Increasing Value and market options Bitumen U.S. Cents per Pound. Constant 2003 Dollars 9 Adapted from Purvin & Gertz, March 30,2004

10 Propylene is a component of existing process streams KTA Extracted & produced by Williams Energy Suncor Syncrude NOVA Dow PC Refinery Imperial Ref 10

11 Propylene Potential Kilotonnes/year Refineries 320 Existing Upgraders 230 Petrochemical Plants 110 Total 660 Other sources Existing upgrader expansions BA Energy Upgrader Opti 11

12 Oil Sands-Petrochemical Integration Water Synthetic Crude Oil(SCO) Mined Oil Sands Extraction Bitumen Distillation,Coking,Upgrading Diluent In situ Extraction Steam Bitumen Pipeline Bitumen 120,000 bpd Markets Vacuum Gas Oil 37,000bpd Off Gases 73,000bpd Integrated Cluster for new world scale production of refined products and petrochemicals 12

13 Future Co-production of clean fuels and Petrochemicals is technically and economically feasible (IRR= 15%) KTA Petrochemicals Ethylene and Derivative Plants Existing Production Fuels Petrochemicals New Gasoline Diesel Naphtha Ethylene Propylene Benzene P-Xylene 13

14 Petrochemical Capacity: Existing Ethylene KTA Dow LHC-1 1,135 Nova E-1 E 715 Nova E-2 E 820 Nova-Union Carb E-3 1,270 Current Capacity 3,940 Potential Expansions Existing crackers 360 Fifth cracker 820 Ethylene Derivatives Ethylene KTA Dow -PE (EG,VCM) 545 Union Carbide PE 500 Nova PE 350 Shell (EG,SM) 400 BP/Amoco LAO 350 Existing/New New Potential KTA Ethylene 1,200 Propylene 1,400 Benzene 500 P-Xylene 700 Refined products bpd Alkylate/Gasoline 25,000 Jet/Diesel Fuels 45,000 Naphtha s 25,000 14

15 Market Study Shows that Refining and Petrochemicals in Alberta Improve IRR U.S. Midwest California % IRR SCO Base Case Refining Refining + Petrochem 15

16 Getting the Oil to Markets Transportation Considerations 16

17 North America Petroleum Supply & Demand Million Barrels Per Day Demand Oil Sands Supply Conventional Supply Market Potential ~15 million bpd Source: EIA, ADOE

18 3500 Alberta Supply vs. Take Away Capacity Thousand barrels per day Existing Pipeline Capacity Expansion Source: ADOE SCO Bitumen Conventional Heavy Conventional Light Pipelines Expansion 18

19 Accessing New Markets for Alberta Products 19

20 Major Canadian and U.S. Crude Oil Pipelines FERNDALE/ ANACORTES VANCOUVER CANADIAN PIPELINES ENBRIDGE/LAKEHEAD TERASEN TMPL E.S.E.P. RANGELAND CRUDE CAPACITY (000 B/D) 1, BOW RIVER/ MILK RIVER WASCANA 45 7 Enbridge LINE EXPRESS ENBRIDGE Gateway TERASEN Corridor TERASEN TMX A BILLINGS SALT LAKE CITY O FT MCMURRAY 10 EDMONTON HARDISTY B 6 POPLAR 8 CASPER P Q C REGINA BAKER D GUERNSEY MIDLAND F 1 CUSHING G V E R HOUSTON ST. PAUL H CLEARBROOK T U S CHICAGO CORSICANA SUPERIOR X WOOD RIVER J N K L PATOKA W ST. JAMES I LOUISIANA OFFSHORE OIL PORT MONTREAL 7 SARNIA TOLEDO A B C D E F G H I J K L M M PORTLAND U.S. PIPELINES CONOCO SANTA RITA TEXACO BUTTE PLATTE AMOCO ARCO CUSHING-CHICAGO LOOP LOCAP CAPLINE CHICAP PORTLAND 20 CAPACITY (000 B/D) ,400 1,300 1, N WOODPAT 315 O AMOCO/CONOCO 50 P FRONTIER 40 Q AMOCO 32 R S SEAWAY MOBIL T KOCH 105 U MINNESOTA 270 V PORTAL 100 W SUN/MID-VALLEY 400 X ENBRIDGE Southern 250

21 Syncrude Sweet Blend can access most major North American markets Vancouver Portland Fort McMurray Edmonton Calgary Montreal Sarnia Portland AOSPL Trans Mountain Interprovincial Lakehead Wascana Arco Capline Midland Cushing Detroit Chicago Houston New Orleans 21

22 Enbridge New Market Access Plan Gateway Project 1200 km, 30 in dia line Far East Markets 5a Capacity 400,000 bpd 5 (2009) Edmonton Fort McMurray 1-5 are New Markets Hardisty Puget Sound Great Falls Billings Kerrobert Regina Cromer Gretna Mandan Clearbrook Superior Montreal California Markets 5b Casper St. Paul Salt Lake City Toronto Sinclair Buffalo Detroit San Francisco Cheyenne Toledo 4 Chicago Denver Wood River Canton (2007) Lima McPherson Robinson Bakersfield El Dorado Woodriver 3 Patoka Los Angeles Coffeyville (2007) Ponca City 1 Catlettsburg Cushing Tulsa (2005) Memphis Artesia Borger/Sunray Ardmore 2 (2005) El Paso Big Spring Port Arthur Houston Lake Charles Texas City Freeport New Orleans Corpus Christi Refineries Canadian Supplied Not Canadian Supplied 1 22

23 Asia Sea transport from Prince Rupert is the same distance to Asia as the Middle East 23

24 Costs Edmonton to Far East Estimated Delivery Costs (US$/bbl) Gateway Toll (Edm. to Cdn. West Coast) $1.75 Tanker Rate (approx N Miles) $1.25* Total Delivered Cost/bbl $3.00 (*Analysis based on historic 2002 posted rates for 250,000 DWT VLCCs) 24

25 Landed Supply Cost Comparison (US$/bbl) Arab Heavy Supply Ras Tanura Edmonton Transport to Asia: $1.25 Cold Lake Blend $22.11 $3.00 SCO/Bitumen Blend $22.76 $3.00 Landed China: $27.15 $25.11 $25.76 Source: Enbridge 25

26 Terasen- Staged Capacity Expansion for Heavy crudes and refined products 300km by , ,000 bpd Incremental capacity 26

27 Million tonnes Incremental Product Demand North America, Europe, Asia Naphtha Gasoline Jet/Kerosene Diesel/Gas Oil Fuel Oil North America Europe Asia Source: Nexant Chem Systems 27

28 Ways of Participating in Oil Sands developments Market studies to match oil sands product quality with Japan s refinery needs Research and Technology Development Industry R&D Consortia Industry field pilot consortia Buy into existing project Partner into developing project Construction capital being raised Regulatory approvals obtained Construction underway Partner into proposed project Acquire an oil sands lease Increase value and market options- upgrade to bitumen to SCO, refined products and petrochemicals 28

29 Summary 29

30 Market Outlook Alberta s oil sands strategic source of oil Global oil demand forecast to rise significantly Increase supplies Increase market access: North American and Asia Increase value.diversify products and markets Alberta s oil sands industry is responding Opportunity for foreign companies to participate 30

31 Vision for the Future million barrels per day rd OIL SANDS WAVE petrochemicals green fuels synthetic crude Oil sands: a sustainable competitive source of synthetic crude oil, refined products, petrochemicals and clean energy 2 1 conventional light and heavy crude energy/power/h2 bitumen Adapted from Oil Sands Technology Roadmap, Alberta Chamber of Resources, Jan 30,

32 Alberta s Oil Sands in 2020 World Scale Hub for Energy and Refined Products Electricity Generation Upgrading & Refining Petrochemical Development Alberta Bitumen Production 3 Million Barrels Per Day Offshore Exports Rest of Canada Exports United States Exports Exports of Crude Oil and Refined Petroleum Products 32

33 Sustainable Natural Environment 33

34 Alberta: A Good Place to do Business 34