J. David Hughes

.

B.C. LNG: Myths and Realities

Skeena Watershed Conservation Coalition

September 20, 2016

1

Points to be covered:

- Gas Supply and energy security

- Environmental Impacts: Fracking, land use,

greenhouse gas emissions

- Economic Viability

2

© Hughes GSR Inc, 2016 (from BC Government website, February, 2016)

2013 Throne Speech – 100,000 jobs;

$100 Billion Prosperity Fund3

0

50

100

150

200

250

300

350

Entire2015

GlobalLNG trade

Total ofBC LNG

proposals

B.C. Gov'tHigh

B.C. Gov'tMedium

CCPAMedium

KPMGMedium

CCPALow

Millio

n T

on

ne

s p

er

Ye

ar

Scenarios

5 Terminals

82 mtpa

Global LNG Trade compared to B.C. LNG Scenarios

2-4 Terminals

34-50 mtpa

1 Terminal

17.7 mtpa

© Hughes GSR Inc, 2015 (B.C. Government literature and websites; CCPA reports; Wood Mackenzie, 2016)

20 Terminals

300+ mtpa

4

0

2

4

6

8

10

12

14

16

18

20

2001 2003 2005 2007 2009 2011 2013 2015

Bil

lio

n c

ub

ic f

ee

t p

er

Da

y

Year

BCNWT & YukonEast CoastSaskatchewanAlberta

Marketable Gas Production by Province, 2001-2016

© Hughes GSR Inc, 2016 (data from National Energy Board, 1998-2016, 12 month centred moving average)

BC

30%

Alb

erta

66%

Peak 2001

14% Below Peak

5

0

5000

10000

15000

20000

25000

0

2

4

6

8

10

12

14

16

18

20

2000 2005 2010 2015 2020 2025 2030 2035 2040

We

lls D

rilled

pe

r Ye

ar

Bil

lio

n c

ub

ic f

ee

t p

er

Da

y

Year

Rest of CanadaSaskatchewanB.C.AlbertaWells Drilled per Year

NEB 2016 Reference Gas Forecast by Province – 2000-2040

© Hughes GSR Inc, 2016

2013 Trough

Peak 2001

53%

46%

Renaissance

(data from National Energy Board Energy Futures, January, 2016)

B.C.+85% 2015-2040

6

0

2

4

6

8

10

12

14

16

18

20

2000 2005 2010 2015 2020 2025 2030 2035 2040

Pro

du

cti

on

(B

illio

n c

ub

ic f

ee

t p

er

da

y)

Year

Peak 2001

NEB 2016 Reference Case Production, Exports and

Domestic Demand, 2000-2040

Canadian Demand

LNG Exports

Land Exports

(data from National Energy Board Energy Future, January, 2016)© Hughes GSR Inc, 2016

ForecastHistory

7

-14

-12

-10

-8

-6

-4

-2

0

2

4

6

8

10

12

2000 2005 2010 2015 2020 2025 2030 2035 2040

Bil

lio

n c

ub

ic f

ee

t p

er

Da

y

Year

CCPA Low

KPMG Medium

CCPA Medium

B.C. Gov't Medium

B.C. Gov't High

NEB Reference Case without exports

Net Natural Gas Available for Export, 2000-2040

© Hughes GSR Inc, 2016 (data from NEB Energy Futures Reference Case, January, 2016; BC Government literature; CCPA reports)

-10 Tcf 12.7Tcf

-31.7 Tcf

No LNG Exports

-22.4 Tcf

-75 Tcf

Cumulative 2016-2040 Surplus/Deficit illustrated

based on NEB 2016 Reference Case production

and domestic demand projections

Five LNG Terminals

Shortfall

8

0

5

10

15

20

25

30

35

2000 2005 2010 2015 2020 2025 2030 2035 2040

Pro

du

cti

on

(B

illio

n c

ub

ic f

ee

t p

er

da

y)

Year

Peak 2001

NEB Reference Case Gas Production, Exports and Demand

including 5 LNG Terminal Case, 2000-2040

BC Gov’t LNG Exports

(5 Terminals in total)

NEB LNG Exports

Land Exports

(data from National Energy Board Energy Future, January, 2016; BC Government literature)© Hughes GSR Inc, 2016

ForecastHistory

47%

102 Tcf exported by

2040 with 5 terminals

Canadian Demand

9

Montney65%

Horn River19%

Other Shale gas10%

Conventional6%

BC Marketable Gas Resources in 2014

Total = 416 Tcf (94% unconventional) © Hughes GSR Inc, 2016 (data from National Energy Board Energy and BC O&G Commission, 2013; per CCPA report, May, 2015)

10

© Hughes GSR Inc, 2016 (data from National Energy Board Energy Future, January, 2016)

Key Producing Regions According to NEB 2016

Montney

Horn River

11

0

1

2

3

4

5

6

1985 1990 1995 2000 2005 2010 2015

Billio

n C

ub

ic F

ee

t p

er

Da

y

Year

Montney

Horn River

Other

B.C. Raw Gas Production by Reservoir,1985-2015

© Hughes GSR Inc, 2016

64%

64% of production now

comes from just 2 plays

All other plays

Montney

(data from Drillinginfo, December, 2015; 12 month centred moving average)

12

0

1

2

3

4

5

6

1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015

Bil

lio

n C

ub

ic F

ee

t p

er

Da

y

Year

Horizontal

Vertical/Directional

B.C. Raw Gas Production by Drill Type

1965-2015

© Hughes GSR Inc, 2016 (data from Drillinginfo, December, 2015; 12 month centred moving average)

82%

Vertical/Directional

Horizontal

13

© Hughes GSR Inc, 2016

Montney, Duvernay Drilling and Earthquakes

(data from Drillinginfo, 2015 and NRCan earthquake database, 2016)

M 3-4

M 4-5

14

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

B.C. Gov'tHigh

B.C. Gov'tMedium

CCPAMedium

KPMGMedium

CCPA Low NoTerminals

Pe

rce

nta

ge

of

Pla

y A

rea

Export level Scenarios

Land Disturbance in Montney and Horn River Plays in

addition to existing land disturbance, 2014-2040

© Hughes GSR Inc, 2015 (CCPA LNG Report, 2015)

Assuming Multi-well pads

With 10 wells per pad

15

0

200

400

600

800

1000

1200

1400

B.C. LNG (20year)

Chinese Coal (20year)

B.C. LNG (100year)

Chinese Coal (100year)

Kg

of

CO

2e p

er

Meg

aw

att

-Ho

ur

Coal vs Gas Comparison

Electricity T&DPower Plant OperationsLNG RegasificationTanker/Rail TransportLiquefactionPipelineProcessingExtraction

Greenhouse Gas Emissions, B.C. LNG versus

Best-technology Chinese coal on 20- and 100-year bases

© Hughes GSR Inc, 2015 (data from U.S. NETL, 2014; based on 46% efficient ultrasupercritical coal power plants per CCPA report, 2015)

B.C. LNG

27% worse

7% improvement

16

0

100

200

300

400

500

600

700

800

1990 1995 2000 2005 2010 2015 2020 2025 2030

Mil

lio

n T

on

nes

per

Year

CO

2eq

Year

GHG Emissions by Sector, with Oil Sands capped at

100 Mt and other O&G Projections from NEB Ref Case

© Hughes GSR Inc, 2016 (data from Environment Canada National Inventory, April 2016; NEB Energy Future 2016; COP21, December 2015)

Upstream Oil Sands

O&G Sector 45%

Electricity

Transportation

Heavy Industry

Buildings

Agriculture

Waste

Non–Oil and Gas

Must Contract by

47% from 2014

Levels by 2030

Paris Agreement

30% below 2005 by 2030

17

40

45

50

55

60

65

70

75

80

1990 1993 1996 1999 2002 2005 2008 2011 2014

An

nu

al E

mis

sio

ns

Me

ga

ton

ne

sC

O2e

Year

BC Emissions and Carbon Tax 1990-2014

© Hughes GSR Inc, 2016 (Environment Canada NIR 2016; CEAA draft report February 2016; Climate Leadership Plan, 2015)

Campbell’s Climate

Plan and Carbon Tax

implemented 2008Emissions down

0.9% from 2007

Campbell’s

2012 Target

18

CEAA on Pacific Northwest LNG

Emissions:

Mt/year

CO2e

% of total

BC emissions

Total 2014 BC Emissions 62.9

LNG facility 5.3 8.4%

Upstream production 6.5-8.7 10.3%-13.8%

Full cycle LNG

emissions11.8-14.0 18.7%-22.2%

© Hughes GSR Inc, 2016 (Environment Canada NIR 2016; CEAA draft report February 2016)

19

0

10

20

30

40

50

60

70

80

90

1990 1995 2000 2005 2010 2015 2020 2025 2030

An

nu

al E

mis

sio

ns

Me

ga

ton

ne

sC

O2e

Year

BC Emissions 1990-2014 with Projections to 2030

including Pacific Northwest LNG full-cycle emissions

© Hughes GSR Inc, 2016 (Environment Canada NIR 2016; CEAA draft report February 2016; Climate Leadership Plan, 2015)

Campbell’s Climate

Plan and Carbon Tax

implemented 2008

Emissions down

0.9% from 2007

in 2014

Pacific Northwest

LNG emissions

(28% of 2030 total)

Paris Agreement

30% below 2005

With Pacific Northwest

LNG the rest of the

BC economy must

reduce emissions by

48% from 2014 levels

BC must reduce

emissions by 27%

from 2014 levels

to meet the

Paris Agreement

LNG

48%

Red

uctio

n in

no

n-L

NG

secto

rs re

qu

ired

20

© Hughes GSR Inc, 2016 (data from FERC, September 2016)

LNG Landed Prices as of August, 2016

Minimum Break Even

Price for BC Exports

$10.00 (with no profit)

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FREE LUNCH

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