Key Priorities and Challenges for Canadian Oil Canadian Heavy Oil Association April 15, 2013 Greg Stringham 1 Photo: Cenovus Enabling Responsible Development 2
Global Primary Energy Demand 20,000 18,000 16,000 14,000 million tonnes oil equivalent Other Renewables Bioenergy Hydro Nuclear Natural Gas Oil Coal 12,000 10,000 8,000 6,000 4,000 2,000 0 Source: International Energy Agency New Policies Scenario World Energy Outlook 2011 2010 2015 2020 2025 2030 2035 Source: International Energy Agency World Energy Outlook 2012 Global Crude Oil Reserves by Country billion barrels 300 250 200 150 100 298 265 173 Includes 169 billion barrels of oil sands reserves 155 141 102 92 World Oil Reserves 80 Restricted (81%) Open to Private Sector Open to Private Sector Oil Sands 56% Other 44% 50 48 37 30 26 25 21 0 Venezuela Saudi Arabia Canada Iran Iraq Kuwait Abu Dhabi Russia Libya Nigeria Kazhakhstan China Qatar United States Source: Oil & Gas Journal Dec. 2012
1. Global Market Disconnect WTI vs Brent Prices (spot) US$/bbl 140 120 100 80 60 40 20 0-20 -40 Jan-10 May-10 Daily Differential WTI Brent Sep-10 Jan-11 May-11 Sep-11 Jan-12 May-12 Sep-12 Jan-13 5 2. North American Market WTI (Cushing, OK) vs Edmonton Par Light Both price benchmarks have been volatile recently US$/bbl 120 100 WTI @ Cushing Edm Par Monthly Discount to WTI US$7.05 in Jan 13 US$6.75 in Feb 13 US$1.16 in Mar 13 US$1.00 Apr 11 th (spot) Tight pipeline capacity amplifies volatility 80 60 40 20 0 Jan-09 May-09 Sep-09 Jan-10 120 110 100 90 80 70 60 50 May-10 Sep-10 Jan-11 May-11 Daily 3-Jan 2-Feb 3-Mar 2-Apr 2-May 1-Jun 1-Jul 31-Jul 30-Aug 29-Sep 29-Oct 28-Nov 28-Dec 27-Jan 26-Feb 28-Mar Sep-11 Jan-12 May-12 Sep-12 Jan-13
3. Light/Heavy Differential Canadian $ in Edmonton Light/Heavy differential is a quality discount as it takes costs/energy to convert heavy into light oil Cdn$/bbl 120 100 80 Has widened since 2012 Jan 2013 = C$26.24 Feb 2013 = C$29.48 Mar 2013 = C$21.19 Apr 11 th (spot) = C$13.76 60 40 20 0-20 Cdn Light/Heavy Diff WCS @ Hardisty MSW @ Edm -40 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Canadian Oil Sands (Bitumen and SCO) & Conventional Production Forecast
Light/Tight Oil Production Thousand b/d 1,800 1,600 1,400 1,200 1,000 800 600 400 200 0 + 750,000 b/d in 2 years Eagle Ford (Texas) N. Dakota SK Light AB Light Jan-2005 Jul-2005 Jan-2006 Jul-2006 Jan-2007 Jul-2007 Jan-2008 Jul-2008 Jan-2009 Jul-2009 Jan-2010 Jul-2010 Jan-2011 Jul-2011 Jan-2012 2011 Canada and U.S. Demand for Crude Oil by Source Thousand Barrels per Day
U.S. Oil Demand and Sources of Supply U.S. Imports U.S. Other Liquids Production U.S. Crude Oil Production Source: U.S. Energy Information Administration Annual Energy Outlook 2013 Changing Global Oil Import Needs 14 12 Net oil imports in the New Policies Scenario TRADITIONAL MARKET FUTURE MARKETS? mmb/d 10 8 6 4 2 2005 2011 2020 2035 0 United States Source: IEA World Energy Outlook 2012, EIA China Japan Korea India European Union
Eastern Canada Importing 680,000 b/d Mostly light oil refineries Price differential World price imports are higher than domestic Transportation options: Pipelines: Line 9 reversal - Montreal TransCanada conversion Quebec city & beyond Rail Shipments have begun to NB Expanding quickly Ports: Montreal, QC Panamax Quebec, QC - Aframax St. John, NB VLCC + Portland, Maine US flag 13 United States South & East Canada to replace declining supplies from other countries Markets: Gulf Coast (heavy) Eastern Seaboard (light) Transportation options: Keystone XL Enbridge Flanagan South/Seaway Rail increasing quickly Shifting market due to tight oil surge Bottleneck in pipeline capacity from Cushing to Gulf Coast Light crude going east by rail and pipe/rail 14
Re-connecting to World Market Cushing, OK to US Gulf Coast Capacity and Timing West Coast of Canada Markets B.C. refineries Washington state California Asia Transportation Options: Enbridge Northern Gateway 525,000 b/d Kinder Morgan Trans Mountain 450,000 b/d Rail proposals 16
Access to Markets Pipeline Expansions in Development WCSB Takeaway vs Supply Forecast
Western Canada Crude Oil Rail Exports Q3/2012 = 70,000 b/d Q1/2013 ~ 120,000 b/d Q4/2013 ~ 200,000 b/d ~4% of WCSB production Opportunities: Relatively quick Flexibility different markets East Less diluent Use rail in both directions Challenges: Higher costs Limited loading and tank car availability 19 Oil Sands Environmental Performance
Environmental Performance Production COSIA GHG emissions Water oil sands/tight oil Land/tailings Pipelines Integrity & operations Marine Prevention, response and recovery tankers/ports Regulation and Monitoring Enhanced oil sands monitoring more sites, more transparency Up to $50M/yr paid by industry Greenhouse Gas Emissions Carbon regulation Provincial Regulation Covers 100% of oil sands Mandatory 12% reduction Carbon price since July 2007 Federal Regulation Alignment with US (17% target and vehicle emissions standards) Coal sector done, moving ahead with oil sector regulation in 2013 Reducing GHG Emissions Using energy more efficiently Capturing CO2 Governments investing over $3 billion partners with industry Shell Quest CCS proceeding g co2 eq./mj 25 20 15 10 5 0 Oil Sands GHG Emissions/bbl 26% 1990 2010
Full-cycle GHG Emissions Oil Sands & U.S. Refined Crudes U.S. Barrel Refined in the U.S. (2005) Most Recent Oil Sands In Situ +5% Most Recent Oil Sands Mining +2% Avg US Barrel Refined in the U.S. (2005) Well-to-tank Refined product Combustion 0 100 200 300 400 500 600 kgco 2 e per barrel of refined product Source: IHSCERA Oil Sands Dialogue Getting the Numbers Right 2012 Full-cycle GHG Emissions Oil Sands & U.S. Refined Crudes 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 Cdn Oil Sands: Low SOR SAGD Dilbit US - Mars +5% Venezuela Bachaquero Mexico - Maya Cdn Oil Sands: Mining Dilbit (PFT) Iraq - Kirkuk Blend US Barrel Refined in the U.S. (2005) Saudi Arabia - Arab Light Brazil - Tupi North Sea - Forties +2% Well-to-tank Refined product Combustion 0 100 200 300 400 500 600 kgco 2 e per barrel of refined product Source: IHSCERA Oil Sands Dialogue Getting the Numbers Right 2012
Jobs and Economic Benefits The Oil and Natural Gas Industry A Key Driving Force in the Canadian Economy Investing $61 billion in Canada in 2012 $21 billion to governments in 2011 (Royalties and Taxes) 20% of the value on Toronto Stock Exchange Approx. 18% of Canada s exports Employs more than 550,000 in Canada Upstream Oil & Gas Auto Manufacturing Forestry & Logging Wheat & Barley Uranium 26
Suppliers across Canada Real People, Real Issues
Improving Environmental Performance Generating Economic Benefits Enabling Responsible Development 30