Market Diversification for

Canadian Oil and Gas

Presented by: John Foran

Natural Resources Canada

June 17, 2013

Canada/US Energy Trade Relationship

51 TWh

14 TWh

840

MMb 3.1

Tcf 1.0

Tcf

2600

tU

% US Market

Electricity 1%

Crude Oil 16%

Natural Gas 12%

Uranium 20%

Canada’s Energy Policy Agenda Market oriented energy policy

Maximize benefits of resources for Canadians

Ensure public health, safety, environmental protection

Address concerns of Canadians

Changing context

Outlook for increased Canadian energy production from shale gas, oil sands and tight oil

Prices less than global prices for same product. Infrastructure required to connect them

US becoming self sufficient

Social license

Energy Market Diversification is a

priority for Canada

“it is increasingly clear that Canada’s commercial interests are best served through diversification of our energy markets.” To this end, our Government is committed to ensuring that Canada has the infrastructure necessary to move our energy resources to those diversified markets.” – Prime Minister Stephen Harper

Canadian oil and gas production far exceeds domestic requirements; resources are huge and growing; greater volumes will be available to export

99% of crude oil exports and 100% of Canada’s natural gas exports go to the United States

US is becoming more self-sufficient, while global demand is growing

North American prices are lower than global prices

Growing need for, and reality of, foreign investment

Market Diversification:

Natural Gas / LNG

Global prices are higher

Brent

Crude Oil

NYMEX Alberta

0

5

10

15

20

25

Jan-

03

Jul-0

3

Jan-

04

Jul-0

4

Jan-

05

Jul-0

5

Jan-

06

Jul-0

6

Jan-

07

Jul-0

7

Jan-

08

Jul-0

8

Jan-

09

Jul-0

9

Jan-

10

Jul-1

0

Jan-

11

Jul-1

1

Jan-

12

Jul-1

2

Jan-

13

$/M

MB

tu Natural

Gas,

Europe

Japan LNG

0

5

10

15

20

25

$ / MMBtu

US becoming more self-sufficient

Canadian Supply will be available to export

2025

21

0

5

10

15

20

0

5

10

15

20

2000 2005 2010 2015 2020

Dry Gas Bcf/d

13

History Forecast

CBM

1616

Associated Gas

Conventional Gas

73%

2%

14%

11%

Shale Gas

Montney and Other Tight Gas

Dry Gas Bcf/d

Source: Ziff Energy

Export Terminals Being Pursued

Kitimat LNG Up to 10 mtpa; In service: 2017

Chevron, Apache Export license approved

Douglas Channel LNG Up to 1.8 mtpa; In service: 2015

BC LNG Export Co-operative Export license approved

Proposed Pipelines

West Coast (Proposed)

Pacific Northwest LNG Up to 18 mtpa; In service: 2018

Petronas/Progress Reg. applications pending

LNG Canada Up to 24 mtpa

In service: 2019/20 Shell, Mitsubishi,

Kogas, PetroChina Export license

approved

Prince Rupert LNG 14 mtpa, expandable to 21 mtpa

In service: 2020 BG Group

Regulatory applications pending

East Coast (Potential)

Halifax

Goldboro LNG Up to 10 mtpa; In service: 2019

Pieridae Energy Canada Regulatory applications pending

Saint John

Canaport LNG Existing import facility, up to

7.5 mtpa Potential to convert to an

export terminal

Proposed Liquefaction terminals

Market Diversification:

Crude Oil

Global light oil prices are higher

$0

$20

$40

$60

$80

$100

$120

$140

$160

Jan

. 08

Apr

. 08

Jul.0

8

Oct

. 098

Jan

. 09

Apr

. 09

Jul.0

9

Oct

. 09

Jan

.10

Apr

. 10

Jul.1

0

Oct

. 10

Jan

.11

Apr

. 11

Jul.1

1

Oct

. 11

Jan

.12

Apr

. 12

Jul.1

2

Oct

. 12

Jan

.13

Apr

. 13

Brent Oil Price Edmonton Par

$US

/Bar

rel

For many years Canadian crudes

track Brent

North American oil price differentials increase with

rising oil sands and tight oil

production and insufficient pipeline capacity to access

global markets

Global heavy oil prices are higher

$0

$20

$40

$60

$80

$100

$120

$140

$160

Jan

. 08

Mar

.08

May

. 08

Jul.0

8S

ep. 0

98N

ov. 0

8Ja

n. 0

9M

ar.0

9M

ay. 0

9Ju

l.09

Sep

. 09

Nov

. 09

Jan

.10

Mar

.10

May

. 10

Jul.1

0S

ep. 1

0N

ov. 1

0Ja

n.1

1M

ar.1

1M

ay. 1

1Ju

l.11

Sep

. 11

Nov

. 11

Jan

.12

Mar

.12

May

. 12

Jul.1

2S

ep. 1

2N

ov. 1

2Ja

n.1

3M

ar.1

3

Maya WCS Oil Price

$US

/Bar

rel

Maya trades at a slight premium to

WCS

Heavy oil price differentials widen with rising oil sands

and tight oil production and insufficient pipeline capacity

to access global mar kets

US Demand for Crude Imports Falling

Canadian Supply has grown, expected

to keep growing

Canadian Crude Oil Production

0.0

0.5

1.0

1.5

2.0

2.5

3.0

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

Source: Statistics Canada

Million B

arr

els

Per

Day

Oil Sands Synthetic

Oil Sands Bitumen

Pentanes & Condensates

Conventional Heavy

Conventional Light & Medium

Crude Oil Production Forecast

Source: Canadian Association of Petroleum Producers

Source: CAPP / NRCan

TransCanada

Keystone XL

(700k b/d)

US Portion

Under Review

Enbridge

Northern

Gateway

(525k b/d)

Under NEB

Review

Kinder

Morgan

Trans

Mountain

Expansion

(590k b/d)

Proposed

Québec ●

a) Enbridge Line 9A, Sarnia-

Westover Re-reversal

(152k b/d), Approved

b) Enbridge Line 9B, Westover

Montreal Re-reversal

(300k b/d), Under NEB Review

TransCanada

Energy East

(conversion)

(500-850k b/d)

Potential

Prince Rupert

Saint John

Enbridge Bakken

Pipeline (for US

production)

(145k b/d)

Approved

Enbridge Oil Market Access

Projects (400 k b/d):

a) Alberta Clipper Expansion

b) Spearhead/Flanagan South

Expansion

c) Seaway Reversal and

Expansion

TransCanada

Energy East

(500-850k b/d)

Potential

Pipelines

Enbridge Pipelines, including Alberta Clipper

to US Mid West (2,345 kb/d)

Kinder Morgan Express (282 kb/d)

Kinder Morgan Trans Mountain (300 kb/d)

TransCanada Keystone (591 kb/d)

Proposed Pipelines to West Coast

Existing / Proposed to Gulf Coast

Expansions

Pipelines proposed to South, West and East

Canada is a Responsible

Resource Developer

Pipeline Safety

National Energy Board (NEB) administers a rigorous regulatory regime, industry achieves a strong safety record

Canada and US – NEB and PHMSA – similar approaches

Canadian pipelines transport light crude oil, tight light oil, conventional heavy, synthetic light oil, and heavy oil blends (diluted bitumen)

All Canadian crudes transported in pipelines are similar to US crudes transported in pipelines

Bitumen-derived crudes (e.g. Western Canada Select) are heavy crudes similar to Mexico Maya, Venezuela or California heavy.

NRCan pipeline information

http://www.nrcan.gc.ca/pipeline/6698

Environmental Responsibility

Canada is one of the few top 10 global oil producers that committed at Copenhagen to reduce its GHG emissions 17% from 2005 levels by 2020

From 2005 to 2011, overall GHG emissions have declined in Canada. We project this will get us half way to our emissions goal

GHG emissions per barrel have fallen 26% in the oil sands since 1990. The federal government, Alberta and industry are committed to further reductions

Canada will announce GHG regulations for the oil and gas sector in 2013

Canada and Alberta have established a robust monitoring system for air, water and land impacts from oil sands development

Conclusions

US is Canada’s biggest and most valued market

Canada shares US goals of responsible, safe resource development

Government and industry focussed on market diversification

Projects being pursued to realize opportunities

Resource is there; geology is destiny