The Oil Sands: What is Needed to Realize the Potential?

Transcription

1 The Oil Sands: What is Needed to Realize the Potential? National Buyer/Seller Forum March 25-27, 2008 Edmonton, Alberta Bob Dunbar Strategy West Inc. 1 Photo Source: Syncrude Canada Limited Presentation Outline Oil Sands Industry Challenges and Sustainability Overview Energy Requirements Greenhouse Gas Emissions Oil Sands Industry Production Outlook Unadjusted Case Adjusted Case Conclusions 2 The Oil Sands: What is Needed to Realize the Potential? 1

2 Oil Sands Industry Sustainability The Triple Bottom Line Healthy Environment Planet Sustainable Development Strong Economy Profit Social Well-Being People 3 Oil Sands Industry Economic Challenges Capital Costs Labour Availability and Productivity Services and Materials Project Execution Operating Costs Purchased External Energy Non-Energy Operating Costs Energy and Hydrogen Supply Options Fiscal and Regulatory Uncertainties Provincial Royalties Corporate Income Taxes Greenhouse Gas Emissions Markets Integration/Final Product (Bitumen, SCO, RPPs, or Petrochemicals)? Market Access Product Prices Light Sweet Crude (WTI/MSW) Heavy-Light Differentials 4 The Oil Sands: What is Needed to Realize the Potential? 2

3 Oil Sands Industry Environmental Challenges Air Emissions Greenhouse Gases Criteria Air Contaminants (SOx, NOx, PM, VOCs, CO, NH 3 ) Water Use Consumption Recycle Liquid Waste Disposal Solid Waste Disposal Tailings Other Solid Wastes Reclamation and Abandonment Cumulative Effects 5 Oil Sands Industry Societal Challenges Public Services Health Education Other Public Infrastructure Road Water & Sewer Rail Other Pace of Development First Nations Regulatory Agencies Staffing & Expertise Workload Funding Project Legacies 6 The Oil Sands: What is Needed to Realize the Potential? 3

4 Oil Sands Energy and Hydrogen Requirements Energy In situ steam and process heat Mining/extraction process heat Upgrading process heat Electricity Hydrogen Hydro-conversion processes (upgrading) 7 Current Sources of Thermal Energy, Hydrogen and Electricity Thermal Energy Purchased natural gas Produced gases (in situ projects) Process gases (upgraders) Liquid hydrocarbon fuels Crude bitumen Coke and other bitumen residues (upgraders) Hydrogen Steam Methane Reforming (natural gas) Electricity On-site generation Purchased electricity 8 The Oil Sands: What is Needed to Realize the Potential? 4

5 Purchased Natural Gas Demand for Oil Sands Operations actual forecast Billion Standard Cubic Feet In Situ Cogeneration In Situ Mining and Upgrading Cogeneration Mining and Upgrading Source: Alberta EUB; Report ST ; June 2007 Conventional Marketable Gas Production in Alberta 6000 actual forecast 5000 Billion Standard Cubic Feet Source: Alberta EUB; Report ST ; June 2007 The Oil Sands: What is Needed to Realize the Potential? 5

6 Purchased Natural Gas as a Percentage of Conventional Marketable Gas 25% Percent of Conventional Marketable Gas Production 20% 15% 10% 5% 0% Actual Forecast Oil Sands Total Including Cogen Oil Sands Total Excluding Cogen Source: Alberta EUB; Report ST ; June 2007 Industry Options to Reduce Purchased Gas Requirements Conservation/Energy Efficiency Improvements New Bitumen Recovery Technologies In Situ Mining and Extraction Alternative Sources of Thermal Energy, Electricity and Hydrogen Gasification of Bitumen Residues Combustion of Bitumen/Bitumen Residues Nuclear 12 The Oil Sands: What is Needed to Realize the Potential? 6

7 Canada s GHG Emissions GHG Emissions (MT CO2 Equivalent) Annual Emissions 1990 Emissions Kyoto Target Source: Environment Canada Canada s Top GHG Emitters 14 Source: CanWest News Services The Oil Sands: What is Needed to Realize the Potential? 7

8 Proposed Federal GHG Emission Strategy Introduced April 2007 GHG emission intensity reductions Existing facilities 6% annual reduction every year until 2010 (18% reduction in intensity by 2010) 2% annual improvement thereafter New facilities 3-year grace period - 2% annual improvement thereafter Clean fuel standard Alternative compliance options Climate Change Technology Fund Various trading mechanisms Credit for early action The expectation is to achieve a total reduction in GHG emissions of 20% by Source: Environment Canada Proposed Federal Regulatory System 16 Source: Environment Canada; Turning the Corner; March 14, 2008 The Oil Sands: What is Needed to Realize the Potential? 8

9 Projected Canadian GHG Emissions under the Federal Plan 17 Source: Environment Canada; Turning the Corner; March 14, 2008 Next Steps Federal Plan Draft regulations are expected to be published in Canada Gazette, Part I for public comment in fall 2008 Final regulations are expected to be approved and published in Canada Gazette, Part II in fall 2009 Greenhouse gas provisions of the regulations are to come into force, as planned, on January 1, 2010 Air pollutant elements will be added to the draft regulations once the regulatory framework for air pollutants has been finalized in spring Source: Environment Canada; Turning the Corner; March 14, 2008 The Oil Sands: What is Needed to Realize the Potential? 9

10 Alberta s 2008 Climate Change Strategy Themes Conserving and using energy efficiently Implementing carbon capture and storage Greening energy production Source: Alberta Environment Targets & Results By Reduce emissions by 20 Mt Meet intensity target established in 2002 plan By Reduce emissions by 50 Mt Stabilize GHG emissions and begin reduction By Reduce emissions by 200 Mt 50% below BAU level 14% below 2005 level 19 Alberta s GHG Reduction Wedge 20 Source: Alberta Environment The Oil Sands: What is Needed to Realize the Potential? 10

11 Strategy West s Oil Sands Industry Outlooks Comprehensive Project Database Used to develop aggregated industry outlooks Unadjusted Outlook Assumes all existing and proposed projects are developed and meet their scheduled startup dates Adjusted Outlook Project-by-project timing adjustments Project-by-project probability assessment 21 Bitumen Production Outlook - Unadjusted Case Unadjusted Bitumen Production (kb/d) 7,000 6,000 5,000 4,000 3,000 2,000 1,000 Primary & Experimental Peace River In Situ Cold Lake In Situ South Athabasca In Situ North Athabasca In Situ Athabasca Mining Source: Strategy West Inc. The Oil Sands: What is Needed to Realize the Potential? 11

12 CAPEX Unadjusted Case Mining & Extraction In Situ Incremental Production Production Increase (million b/d) Initial CAPEX (2007 C$ per b/d) $40,000 (Bitumen) $10,000-$35,000 (Bitumen) Average Annual Initial CAPEX (2007 C$ billions) $6.7 $5.7 $12.4 Upgrading Total CAPEX 2.8 $50,000 (SCO) $10.9 $23.3 Note: does not include sustaining capital 23 Source: Strategy West Inc. Oil Sands Historical CAPEX Capital Spending ($ billions) $16 $14 $12 $10 $8 $6 $4 $2 $0 Includes Includes Sustaining Sustaining Capital Capital Source: Canadian Association of Petroleum Producers The Oil Sands: What is Needed to Realize the Potential? 12

13 Adjusted Industry Outlook - Project-by-Project Assessment Project Timing Lease evaluation Disclosure Application preparation and EIA Application review and approval Detailed engineering Internal approval Construction Phasing Project Probabilities Project status Owners Operating experience Financial capacity Technical capability Other factors Technology Existing operations Integration Timing 25 Source: Strategy West Inc. Bitumen Production Outlook - Adjusted Case Adjusted Bitumen Production (kb/d) 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1,000 Primary & Experimental Peace River In Situ Cold Lake In Situ South Athabasca In Situ North Athabasca In Situ Athabasca Mining Source: Strategy West Inc. The Oil Sands: What is Needed to Realize the Potential? 13

14 SCO and Non-Upgraded Bitumen Supply Outlook - Adjusted Case Adjusted SCO and Non-Upgraded Bitumen (kb/d) 4,000 3,500 3,000 2,500 2,000 1,500 1, Non-Upgraded Bitumen Synthetic Crude Oil Source: Strategy West Inc. CAPEX Adjusted Case Production Increase (million b/d) Initial CAPEX (2007 C$ per b/d) Average Annual Initial CAPEX (2007 C$ billions) Mining & Extraction 1.3 $40,000 (Bitumen) $4.0 In Situ 1.4 $10,000-$35,000 (Bitumen) $3.1 Incremental Production 2.7 $7.1 Upgrading 1.6 $50,000 (SCO) $6.0 Total CAPEX $13.1 Note: does not include sustaining capital 28 Source: Strategy West Inc. The Oil Sands: What is Needed to Realize the Potential? 14

15 Comparative Industry Outlooks 5,000 SCO and Non-Upgraded Bitumen Supply (kb/d) 4,500 4,000 3,500 3,000 2,500 2,000 1,500 CAPP Pipeline Planning 1,000 CAPP Moderate Growth EUB NEB Reference Strategy West Sources: Canadian Association of Petroleum Producers; Energy and Utilities Board; National Energy Board; Strategy West Inc. CAPP Canadian Total Crude Oil Supply Outlook Thousand Barrels per Day 5,000 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1,000 Oil Sands In Situ Oil Sands Mining E Canada W Canada Condensate W Canada Heavy W Canada L&M Source: Canadian Crude Oil Production and Supply Forecast; CAPP; June 2007 The Oil Sands: What is Needed to Realize the Potential? 15

16 World s Largest Oil Producers Saudi Arabia Russia United States Iran China Mexico Canada United Arab Emirates Venezuela Norway Kuwait Nigeria Brazil Algeria Iraq By 2020? Total World Production ,600 kb/d 0 2,000 4,000 6,000 8,000 10,000 12,000 Oil Production 2006 (kb/d) 31 Source: US Energy Information Administration Conclusions Canada s oil sands deposits are among the world s largest hydrocarbon accumulations. The industry is well developed and making a substantial contribution to global oil supply. Oil sands projects are experiencing cost pressures but are economically attractive at oil prices of US$60-70/b Cushing, OK). While the many challenges facing the industry will cause project delays and cancellations, these challenges are being addressed and the industry will continue to grow. 32 The Oil Sands: What is Needed to Realize the Potential? 16

17 Thank You Questions? Please visit for oil sands project lists and other detailed oil sands industry information 33 The Oil Sands: What is Needed to Realize the Potential? 17