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Economic Impact Beyond the Oil Sands - Dinara Millington

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Economic Impact Beyond the Oil Sands The Alberta oil sands are obviously an economic boom for Fort McMurray and the surrounding area, but the economic impact stretches much further than that. Suppliers to oil sands development are located throughout the entire Ports-to-Plains region from Eastern Alberta to Mexico. Hear directly from researchers and businesses that create jobs in the Ports-to-Plains area by supplying the oil sands.
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Relevant • Independent • Objective www.ceri.ca 1 Economic Impacts of Oil Sands Development 15 th Annual Ports-To-Plains Alliance Conference Canadian Energy Research Institute Dinara Millington Senior Research Director Canadian Energy Research Institute October 2-4, 2012 Medicine Hat
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Page 1: Economic Impact Beyond the Oil Sands - Dinara Millington

Relevant • Independent • Objectivewww.ceri.ca1

Economic Impacts of Oil Sands Development

15th Annual Ports-To-Plains Alliance Conference

Canadian Energy Research Institute

Dinara MillingtonSenior Research DirectorCanadian Energy Research InstituteOctober 2-4, 2012Medicine Hat

Page 2: Economic Impact Beyond the Oil Sands - Dinara Millington

Relevant • Independent • Objectivewww.ceri.ca2

Agenda

Who We Are and What We Do Canadian Oil and Oil Sands Economic Benefits But… What are Some of the Problems? Summary

Page 3: Economic Impact Beyond the Oil Sands - Dinara Millington

Relevant • Independent • Objectivewww.ceri.ca3

Canadian Energy Research InstituteOverview

Founded in 1975, the Canadian Energy Research Institute (CERI) is an independent, non-profit research institute specializing in the analysis of energy economics and related environmental policy issues in the energy production, transportation, and consumption sectors. Our mission is to provide relevant, independent, and objective economic research in energy and related environmental issues. A central goal of CERI is to bring the insights of scientific research, economic analysis, and practical experience to the attention of government policy-makers, business sector decision-makers, the media, and citizens in Canada and abroad.

Core members of the Institute include the Canadian Government, the Government of the Province of Alberta, the University of Calgary, the Canadian Association of Petroleum Producers (CAPP) and the Small Explorers and Producers Association (SEPAC). In-kind support is also provided by the Energy Resources Conservation Board (ERCB).

All of CERI’s research is publically available on our website at www.ceri.ca

Page 4: Economic Impact Beyond the Oil Sands - Dinara Millington

Relevant • Independent • Objectivewww.ceri.ca4

2011-2012 Reports Released

Canadian Oil Sands Supply Costs and Development Projects (2011-2045) (March 2012)

Canadian Energy: Pacific Access – Foreign Investment in the Oil Sands and British Columbia Shale Gas (March 2012)

Canadian Energy: Pacific Access – Oil Spills and First Nations: Exploring Environmental Land Issues Surrounding the Northern Gateway Pipeline (February 2012)

Canadian Energy: Pacific Access – Overview of Transportation Options (January 2012) Overview of Eastern and Atlantic Canada’s Petroleum Industry and Economic Impacts

of Offshore Atlantic Projects (November 2011) Applicability Abatement Potential for the Alberta Oil Sands Industry and Carbon

Capture and Storage (CCS) Applicability to Coal-fired Electricity Generation and Oil Sands (October 2011)

North American Natural Gas Market Dynamics: Global LNG – A Review (June 2011) Economic Impacts of Drilling, Completing and Operation of Gas Wells in Western

Canada (June 2011) Economic Impacts of Drilling, Completing and Operating Conventional Oil Wells in

Western Canada (June 2011)

Page 5: Economic Impact Beyond the Oil Sands - Dinara Millington

Relevant • Independent • Objectivewww.ceri.ca5

2012 Reports Released (July/August 2012)

Pacific Access Part I – Linking Oil Sands Supply to New and Existing MarketsPacific Access Part II – Asia-Directed Oil Pathways and Their Economic ImpactsPacific Access Part III – Economic Impacts of Exporting Horn River Natural Gas

to Asia as LNG Natural Gas Liquids in North America: Overview and Outlook to 2035

Page 6: Economic Impact Beyond the Oil Sands - Dinara Millington

Relevant • Independent • Objectivewww.ceri.ca6

2012-2013 Current Work

Potential Impact of Shale Gas Development in QuebecNorth American Natural Gas Demand Pathways

(ICF/MARBEK, whatIf? Technologies)Energy Metrics HandbookPotential Transportation Options for Alberta Land-Locked Oil

For a list of all CERI publications, please visit our website at www.ceri.ca

Page 7: Economic Impact Beyond the Oil Sands - Dinara Millington

Relevant • Independent • Objectivewww.ceri.ca7

CERI ConferencesCERI hosts three major conferences each year (Oil, Natural Gas and Petrochemicals)

attended by over 100 delegates from across North America.

Dates and venues for our 2013 conferences can be found on our website. For further information, contact our Conference Manager, Deanne Landry, at403-220-2395 or [email protected].

CERI 2012 Oil Conference“Achieving Super Power Status”April 23-24, 2012

CERI 2012 Petrochemical Conference“Pathways to the Future”June 3-5, 2012

CERI 2012 Natural Gas Conference“Going Global – Shifting the Focus of the Natural Gas Industry”February 27-28, 2012

Page 8: Economic Impact Beyond the Oil Sands - Dinara Millington

Relevant • Independent • Objectivewww.ceri.ca8

“Western Canada’s Upstream Oil and Gas Industry”

Page 9: Economic Impact Beyond the Oil Sands - Dinara Millington

9

Land AcquisitionCrown Land Sales

Evaluation

Construction

Operation and Maintenance

Production

Wages

Royalties

Western Canada’s Oil and Gas Industry

Land AcquisitionCrown Land Sales

Conventional Drilling

Completion and Tie in

Operation and Maintenance

Production

Wages

Royalties

2011 Expenditures: $68.1 billion 2011 Expenditures: $45.3 billion

Oil and Gas Drilling Oil Sands Developments

Page 10: Economic Impact Beyond the Oil Sands - Dinara Millington

Relevant • Independent • Objectivewww.ceri.ca10

“CanadianOil and Oil Sands”

Page 11: Economic Impact Beyond the Oil Sands - Dinara Millington

Relevant • Independent • Objectivewww.ceri.ca11

2011 Facts about Canadian CrudeProduction:

• Western Canada (AB,BC,SK,NWT) Conventional LIGHT Crude 561,929 bbls/day• Western Canada (AB,BC,SK,NWT) Upgraded Bitumen 846,112 bbls/day • Western Canada (AB,BC,SK,NWT) Condensate (C5+) 128,498 bbls/day• Western Canada (AB,BC,SK,NWT) Conventional HEAVY Crude 421,618 bbls/day • Western Canada (AB,BC,SK,NWT) Non Upgraded Bitumen 758,919 bbls/day • Eastern Canada (NF/LAB,ON) Conventional LIGHT Crude 271,778 bbls/day • Total 2011 Production of Crude Oil and Equivalent 2,988,854 bbls/day

Exports:• PADD I (74% Light, 26% Heavy) 171,182 bbls/day• PADD II (21% Light, 79% Heavy) 1,439,447 bbls/day• PADD III (12% Light, 78% Heavy) 111,358 bbls/day• PADD IV (17% Light, 83% Heavy) 213,709 bbls/day• PADD V (61% Light, 39% Heavy) 167,295 bbls/day• Non-US (67% Light, 33% Heavy) 35,261 bbls/day• Total US (28% Light, 82% Heavy) 2,138,260 bbls/day

Imports: % of Capacity

• Atlantic Canada Conventional Crude 333,990 bbls/day (80%)• Quebec Conventional Crude 298,775 bbls/day (84%)

• Ontario Conventional Crude 52,836 bbls/day (15%) • Total Canadian Imports 685,560 bbls/day

Page 12: Economic Impact Beyond the Oil Sands - Dinara Millington

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WCSB Conventional Oil Production ForecastRealistic Scenario (2010-2035)

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

2027

2028

2029

2030

2031

2032

2033

2034

2035

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

British Columbia Existing Wells British Columbia New Wells Alberta Existing Wells Alberta New Wells

Saskatchewan Existing Wells Saskatchewan New Wells Manitoba Production NWT Production

Prod

uctio

n (b

bls/

day)

+ 150,000 bbls/day

Page 13: Economic Impact Beyond the Oil Sands - Dinara Millington

Relevant • Independent • Objectivewww.ceri.ca13

Western Canadian Oil Sands Potential

0

500

1,000

1,500

2,000

2,500

3,000

3,500

2007 2009 2011 2013 2015 2017 2019 2021 2023 2025 2027 2029 2031 2033 2035 2037 2039 2041 2043 2045

('000 bpd)

Total In Situ Bitumen Volumes Total Mined Bitumen Volumes

Page 14: Economic Impact Beyond the Oil Sands - Dinara Millington

Relevant • Independent • Objectivewww.ceri.ca14

Western Canadian Oil Sands Potential

2007 2009 2011 2013 2015 2017 2019 2021 2023 2025 2027 2029 2031 2033 2035 2037 2039 2041 2043 2045-

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

5,000

5,500

6,000

('000 b/d)

Announced Awaiting Approval

Approved Suspended

Under Construction Onstream

Page 15: Economic Impact Beyond the Oil Sands - Dinara Millington

Relevant • Independent • Objectivewww.ceri.ca15

Options for Canadian Crude By Pipeline

Source: Canadian Association of Petroleum Producers, Crude Oil Forecast, Markets & Pipelines, June 2011

Churchill

Page 16: Economic Impact Beyond the Oil Sands - Dinara Millington

Relevant • Independent • Objectivewww.ceri.ca16

“Economic Impacts of Oil Sands Staged Development”

Page 17: Economic Impact Beyond the Oil Sands - Dinara Millington

Relevant • Independent • Objectivewww.ceri.ca17

Input-Output (I/O) Logic

Oil Sands

Steel Trucks Natural Gas

Water Engineering Services

Otherinputs

Oil Sands Industry

Page 18: Economic Impact Beyond the Oil Sands - Dinara Millington

Relevant • Independent • Objectivewww.ceri.ca18

• There are two types of shocks:– Investment – Operation

Impacts on Alberta

Impacts on BC

Impacts on the US

Operations in Alberta Oil Sands

Investments in Alberta Oil Sands

ImpactsImpactsImpacts

Economic Impacts by UCMRIO 2.0

UCMRIO 2.0

Multipliers

Page 19: Economic Impact Beyond the Oil Sands - Dinara Millington

Relevant • Independent • Objectivewww.ceri.ca19

How Does it Work?

$1 InvestmentOil Sands

$1 OperationsOil Sands

$0.55 Oil Sands

$0.20 Construction

$0.25 OtherManufacturing

UCMRIO 2.0

Multipliers

UCMRIO 2.0

Multipliers

Investment &Operations Impacts

$2.02 GDP

$0.95 Oil Sands

$0.05 FIRE

$0.6Compensationof Employees

11.2Employment Opportunities

$0.42Taxes

Page 20: Economic Impact Beyond the Oil Sands - Dinara Millington

Relevant • Independent • Objectivewww.ceri.ca20

Economic Impacts of Alberta’s Oil SandsCase 1 - “No Expansion” Scenario

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

2027

2028

2029

2030

2031

2032

2033

2034

2035

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

AB Conventional Prodn SK Conventional BC Conventional MB Conventional

NWT Conventional Diluent for Primary/Eor Existing&Under Construction US Bakken prodn

Existing Export Operational Capacity

'000 bbl/d

Note(s): 1) Operational Capacity is 95% of total design capacity. 2) Conventional crude volumes are net production volumes available for export (i.e., net of domestic demand). 3) Oil Sands volumes comprise of net bitumen SCO available for export and diluent volumes required to move bitumen as per pipeline specifications. February 2, 2012

Mainline Expansion (2014)

Rail volumes

Page 21: Economic Impact Beyond the Oil Sands - Dinara Millington

Relevant • Independent • Objectivewww.ceri.ca21

GDP0

200000

400000

600000

800000

1000000

1200000

1400000

1600000

Alberta$1,440 Bil-

lion

Rest of Canada$80.9 Billion

Ontario

55%

British Co-lumb

ia24%

Quebec12%

Saskatchewa

n4%

Manitoba4%

Rest of Canada2%

Total GDP Increase as a result of Oil Sands Investment & Operations 2011-2035

1. Ontario $44.30 billion 4. Saskatchewan $3.05 billion2. BC $19.45 billion 5. Manitoba $2.93 billion3. Quebec $9.59 billion 6. ROC $1.56 billion

Economic Impacts of Alberta’s Oil Sands - CanadaCase 1 - “No Expansion” Scenario

GDP Impacts (2011-2035)

Page 22: Economic Impact Beyond the Oil Sands - Dinara Millington

Relevant • Independent • Objectivewww.ceri.ca22

Economic Impacts of Alberta’s Oil Sands - CanadaCase 1 - “No Expansion” Scenario

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

2027

2028

2029

2030

2031

2032

2033

2034

2035

0

50

100

150

200

250

300

350

400

450

InducedIndirectDirect

0

50,000

100,000

150,000

200,000

250,000

300,000

Alberta $298 billion

Rest of Canada $26 Billion

Alberta & Rest of Canada Total Taxes paid2011-2035

$CD

N b

illio

ns

Total Employment Impacts in Canada 2011-2035

Saskatchewan:• $0.95 bln in total taxes paid• 37 thousand person-years of employment• $1.33 bln in employee compensation

Alberta:• 7,209 thousand person-years of

employment• $399 bln in employee compensation

Page 23: Economic Impact Beyond the Oil Sands - Dinara Millington

Relevant • Independent • Objectivewww.ceri.ca23

Economic Impacts of Alberta’s Oil Sands - USCase 1 - “No Expansion” Scenario

Total Employment Impacts in US (2011-2035)

GDP Compensation Employment

Mln $CDN Mln $CDNThousand person-yrs

Colorado $3,305 $1,563 35Kansas $2,008 $977 24Montana $3,176 $1,504 32Nebraska $593 $280 9New Mexico $610 $214 7North Dakota $209 $89 3Oklahoma $1,368 $556 16South Dakota $252 $98 4Texas $12,935 $5,116 119Wyoming $382 $98 3

Ports-to-Plains Alliance Member States

Page 24: Economic Impact Beyond the Oil Sands - Dinara Millington

Relevant • Independent • Objectivewww.ceri.ca24

“Let’s Talk AboutPipelines”

Page 25: Economic Impact Beyond the Oil Sands - Dinara Millington

Relevant • Independent • Objectivewww.ceri.ca25

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

2027

2028

2029

2030

2031

2032

2033

2034

2035

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

AB Conventional Prodn SK Conventional BC Conventional MB Conventional

NWT Conventional Diluent for Primary/Eor Existing&Under Construction US Bakken prodn

Approved Approved-on Hold Awaiting Approval Announced

KXL Addition Expansion of Enbridge mainline Existing Export Operational Capacity

'000 bbl/d

Note(s): 1)Operational Capacity is 95% of total design capacity. 2) Conventional crude volumes are net production volumes available for export (i.e., net of do-mestic demand). 3) Oil Sands volumes comprise of net bitumen and SCO available for export and diluent volumes req'ed to move bitumen as per pipeline spe-cifications. August 23, 2012

Keystone XL (2015)

Mainline Expansion (2014)

Economic Impacts of Alberta’s Oil Sands – CanadaCase 2 - Inclusion of the Keystone XL Pipeline (Incremental Impacts)

Canada AB SK

GDP (bln) $617 $583.2 $1.4

Tax Revenues (bln) $131 $121 $0.4

Employment (‘000 person-years)

3,497 3,016 17

Page 26: Economic Impact Beyond the Oil Sands - Dinara Millington

Relevant • Independent • Objectivewww.ceri.ca26

Economic Impacts of Alberta’s Oil Sands - USCase 2 - Inclusion of the Keystone XL Pipeline (Incremental Impacts)

GDP Compensation Employment

Mln $CDN Mln $CDN Thousand person-yrs

PADD I $37,696 $18,235 417PADD II $74,995 $35,897 827PADD III $20,349 $9,231 216PADD IV $12,751 $6,040 140PADD V $26,358 $12,469 285Total US $172,149 $81,872 1,883

Incremental GDP Compensation Employment

Mln $CDN Mln $CDNThousand person-yrs

Colorado $4,830 $2,293 53Kansas $3,171 $1,513 35Montana $6,430 $3,054 70Nebraska $558 $265 6New Mexico $544 $238 6North Dakota $206 $95 3Oklahoma $1,244 $566 14South Dakota $241 $109 3Texas $13,159 $5,974 138Wyoming $316 $128 3

Ports-to-Plains Alliance Member States

Page 27: Economic Impact Beyond the Oil Sands - Dinara Millington

Relevant • Independent • Objectivewww.ceri.ca27

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

2027

2028

2029

2030

2031

2032

2033

2034

2035

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

AB Conventional Prodn SK Conventional BC Conventional MB Conventional

NWT Conventional Diluent for Primary/Eor Existing&Under Construction US Bakken prodn

Approved Approved-on Hold Awaiting Approval Announced

TMX Expansion KXL Addition Expansion of Enbridge mainline Existing Export Operational Capacity

'000 bbl/d

Note(s): 1)Operational Capacity is 95% of total design capacity. 2) Conventional crude volumes are net production volumes available for export (i.e., net of do-mestic demand). 3) Oil Sands volumes comprise of net bitumen and SCO available for export and diluent volumes req'ed to move bitumen as per pipeline spe-cifications. August 23, 2012

TMX (2017)

Keystone XL (2015)

Mainline Expansion (2014)

Economic Impacts of Alberta’s Oil Sands - CanadaCase 3 - Inclusion of TMX Expansion (Incremental Impacts)

Canada AB SK

GDP (bln) $308 $291 $0.64

Tax Revenues (bln) $65 $60 $0.2

Employment (‘000 person-years)

1,705 1,471 7

Page 28: Economic Impact Beyond the Oil Sands - Dinara Millington

Relevant • Independent • Objectivewww.ceri.ca28

Economic Impacts of Alberta’s Oil Sands - USCase 3 - Inclusion of the TMX Expansion (Incremental Impacts)

GDP Compensation Employment

Mln $CDN Mln $CDNThousand person-yrs

PADD I $8,081 $4,088 93PADD II $10,393 $5,137 119PADD III $4,126 $1,624 40PADD IV $1,635 $761 18PADD V $5,100 $2,378 54Total US $29,335 $13,989 324

Incremental GDP Compensation Employment

Mln $CDN Mln $CDNThousand person-yrs

Colorado $677 $320 7Kansas $410 $199 4Montana $636 $301 7Nebraska $124 $58 2New Mexico $128 $45 1North Dakota $44 $18 0Oklahoma $287 $116 4South Dakota $53 $21 1Texas $2,691 $1,064 25Wyoming $79 $20 0

Ports-to-Plains Alliance Member States

Page 29: Economic Impact Beyond the Oil Sands - Dinara Millington

Relevant • Independent • Objectivewww.ceri.ca29

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

2027

2028

2029

2030

2031

2032

2033

2034

2035

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

AB Conventional Prodn SK Conventional BC Conventional MB ConventionalNWT Conventional Diluent for Primary/Eor Existing&Under Construction US Bakken prodnApproved Approved-on Hold Awaiting Approval AnnouncedNorthern Gateway Addition TMX Expansion KXL Addition Expansion of Enbridge mainlineExisting Export Operational Capacity

'000 bbl/d

Note(s): 1)Operational Capacity is 95% of total design capacity. 2) Conventional crude volumes are net production volumes available for export (i.e., net of do-mestic demand). 3) Oil Sands volumes comprise of net bitumen and SCO available for export and diluent volumes req'ed to move bitumen as per pipeline spe-cifications. August 23, 2012

TMX (2017)

Keystone XL (2015)

Northern Gateway (2018)

Mainline Expansion (2014)

Economic Impacts of Alberta’s Oil Sands - CanadaCase 4 - Inclusion of Northern Gateway (Incremental Impacts)

Canada AB SK

GDP (bln) $374 $352 $0.9

Tax Revenues (bln) $80 $73 $0.3

Employment (‘000 person-years)

2,150 1,853 11

Page 30: Economic Impact Beyond the Oil Sands - Dinara Millington

Relevant • Independent • Objectivewww.ceri.ca30

Economic Impacts of Alberta’s Oil Sands - USCase 4 - Inclusion of the Northern Gateway Pipeline (Incremental Impacts)

GDP Compensation Employment

Mln $CDN Mln $CDNThousand person-yrs

PADD I $11,228 $5,668 128PADD II $13,388 $6,625 154PADD III $5,624 $2,214 55PADD IV $1,998 $927 22PADD V $7,054 $3,290 74Total US $39,292 $18,724 433

Incremental GDP Compensation Employment

Mln $CDN Mln $CDNThousand person-yrs

Colorado $847 $400 10Kansas $502 $245 6Montana $695 $329 7Nebraska $176 $83 2New Mexico $181 $65 2North Dakota $65 $28 1Oklahoma $404 $166 4South Dakota $77 $30 1Texas $3,683 $1,457 33Wyoming $105 $27 1

Ports-to-Plains Alliance Member States

Page 31: Economic Impact Beyond the Oil Sands - Dinara Millington

Relevant • Independent • Objectivewww.ceri.ca31

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

2027

2028

2029

2030

2031

2032

2033

2034

2035

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

AB Conventional Prodn SK Conventional BC Conventional MB ConventionalNWT Conventional Diluent for Primary/Eor Existing&Under Construction US Bakken prodnApproved Approved-on Hold Awaiting Approval AnnouncedNorthern Gateway Addition TMX Expansion KXL Addition Expansion of Enbridge mainlineExisting Export Operational Capacity

'000 bbl/d

Note(s): 1)Operational Capacity is 95% of total design capacity. 2) Conventional crude volumes are net production volumes available for export (i.e., net of do-mestic demand). 3) Oil Sands volumes comprise of net bitumen and SCO available for export and diluent volumes req'ed to move bitumen as per pipeline spe-cifications. August 23, 2012

TMX (2017)

Keystone XL (2015)

Northern Gateway (2018)

Looping/Expanding Existing Pipelines

Mainline Expansion (2014)

Western Canadian Potential

Page 32: Economic Impact Beyond the Oil Sands - Dinara Millington

Relevant • Independent • Objectivewww.ceri.ca32

Economic Impacts of Alberta’s Oil Sands - CanadaComparison of CasesIncremental GDP Impacts

Incremental Employment Impacts

Alberta Ontario British Columbia Saskatchewan

Case 1 1439.9 44.3 19.4 3.052

Case 2 583.2 18.6 8.3 1.37

Case 3 291.3 9.00000000000001

4 0.637

Case 4 352.3 11.4 5.1 0.866

100

300

500

700

900

1,100

1,300

1,500

(Bln CDN$)

Alberta Ontario British Columbia Saskatchewan

Case 1 7209 602 290 37

Case 2 3016 252 123 17

Case 3 1471 123 59 7

Case 4 1853 155 76 11

500

1,500

2,500

3,500

4,500

5,500

6,500

7,500

('000 person-years)

Page 33: Economic Impact Beyond the Oil Sands - Dinara Millington

Relevant • Independent • Objectivewww.ceri.ca33

Economic Impacts of Alberta’s Oil Sands - USComparison of CasesIncremental GDP Impacts by PADD Region

Incremental Employment Impacts

PADD I PADD II PADD III PADD IV PADD V

Case 1 38741.7947322463

50549.5999713198

19844.4432442498

8027.91842434178

24473.8469235217

Case 2 37695.890761284

74994.5940333985

20349.3569165745

12751.2444822194

26358.2083675434

Case 3 8080.88795749836

10392.8660279417

4125.65378272086

1635.31594431923

5100.22530948826

Case 4 11227.6352655253

13388.0828501713

5624.46569815929

1997.73409088331

7053.6770734243

5,000

15,000

25,000

35,000

45,000

55,000

65,000

75,000

(Mln CDN$)

PADD I PADD II PADD III PADD IV PADD V

Case 1 446.541279489758

579.620919684197

195.034523131693

88.3574279999255

258.112473694878

Case 2 416.620278774582

826.754740198933

215.769367861121

139.716316749841

284.628321931541

Case 3 92.9879896716847

119.265686676616

40.4842579709004

18.0292653248418

53.7224881566023

Case 4 128.137674163807

154.31358127467

54.8550773124096

22.2515635096761

73.870794209958

50

150

250

350

450

550

650

750

850

('000 person-years)

Page 34: Economic Impact Beyond the Oil Sands - Dinara Millington

Relevant • Independent • Objectivewww.ceri.ca34

“BUT”

Page 35: Economic Impact Beyond the Oil Sands - Dinara Millington

Relevant • Independent • Objectivewww.ceri.ca35

1. Canadian exports currently feed one market (flat demand and increasing domestic supply).

2. Western Canadian oil/oil sands are land-locked and need transportation options in order to grow either new barrels to the US or Asia.

3. Alberta needs oil hydrocarbon growth in the face of a tanking gas market (Growth = GDP, Employment, Taxes, Royalties).

4. The Cushing Oklahoma bottleneck is affecting PADD II and Canadian market prices “negatively”.

5. Tightening Canadian pipeline capacity will Affect Edmonton/Hardisty basis differential ($$$ left on the table) Potentially slow development of the Oil Sands Potentially slow development of Conventional Oil

6. Oil on Oil Competition for pipeline space and access to refineries Competition with Alberta/Saskatchewan conventional oil developments Competition with North Dakota Bakken oil developments Competition with US Shales (Niobrara, Eagle Ford, etc.)

What are the Problems for WCSB OIL?

Page 36: Economic Impact Beyond the Oil Sands - Dinara Millington

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2005

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Jul-2

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2009

Apr

-200

9

Jul-2

009

Oct

-200

9

Jan-

2010

Apr

-201

0

Jul-2

010

Oct

-201

0

Jan-

2011

Apr

-201

1

Jul-2

011

Oct

-201

1

Jan-

2012

Apr

-201

2

Jul-2

012

$35.00

$40.00

$45.00

$50.00

$55.00

$60.00

$65.00

$70.00

$75.00

$80.00

$85.00

$90.00

$95.00

$100.00

$105.00

$110.00

$115.00

$120.00

$125.00

$130.00

$135.00

$(28.00)

$(26.00)

$(24.00)

$(22.00)

$(20.00)

$(18.00)

$(16.00)

$(14.00)

$(12.00)

$(10.00)

$(8.00)

$(6.00)

$(4.00)

$(2.00)

$-

$2.00

$4.00

$6.00

$8.00

WTI - Brent Differential ($/b)

Europe Brent Spot Price FOB ($/b)

West Texas Intermediate (WTI) @ Cushing ($/b)

Problem WTI-Brent Differential

Page 37: Economic Impact Beyond the Oil Sands - Dinara Millington

Relevant • Independent • Objectivewww.ceri.ca37

Problem WTI-Brent Differential

Q3 2011

• WTI discount averaged $23 to Brent• Canadian Crude (Conventional, SCO, Bitumen) Exports

• 1,477,000 bbls/day to PADD II• 105,000 bbls/day to PADD III• 216,000 bbls/day to PADD IV• 157,000 bbls/day to PADD V

Simple Math: 2,152,000 bbls/day times $23/bbl = $50 million per day (discounted Value)

2012-2013 “The Pipeline Solution”

• Enterprise/ETP (Cushing to Houston) 400,000 b/d Q4 2012• Enbridge/Wrangler (Cushing to Houston) (light crude) 2013• Enbridge Monarch (Cushing to Houston) 350,000 b/d Q4 2013• Houston to El Paso reversal (bypass Cushing) 200,000 b/d Q2 2013• TCPL Keystone Market Link (Cushing to Houston) 150,000 b/d Q2 2013

Page 38: Economic Impact Beyond the Oil Sands - Dinara Millington

Relevant • Independent • Objectivewww.ceri.ca38

Future Problem WTI-Brent Differential

2011.00 2012.00 2013.00 2014.00 2015.00 2016.000

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

3,500,000

Pipeline Capacity Into and Out of Cushing

Total Flow Into CushingTotal Flow Out of Cushing

Year

Capa

city

BPD

RISK

Page 39: Economic Impact Beyond the Oil Sands - Dinara Millington

Relevant • Independent • Objectivewww.ceri.ca39

Western Canada WTI-WCS Differential Ja

n-20

05

Apr-

2005

Jul-2

005

Oct

-200

5

Jan-

2006

Apr-

2006

Jul-2

006

Oct

-200

6

Jan-

2007

Apr-

2007

Jul-2

007

Oct

-200

7

Jan-

2008

Apr-

2008

Jul-2

008

Oct

-200

8

Jan-

2009

Apr-

2009

Jul-2

009

Oct

-200

9

Jan-

2010

Apr-

2010

Jul-2

010

Oct

-201

0

Jan-

2011

Apr-

2011

Jul-2

011

Oct

-201

1

$5.00 $10.00 $15.00 $20.00 $25.00 $30.00 $35.00 $40.00 $45.00 $50.00 $55.00 $60.00 $65.00 $70.00 $75.00 $80.00 $85.00 $90.00 $95.00

$100.00 $105.00 $110.00 $115.00 $120.00 $125.00 $130.00 $135.00

WTI - WCS Differential ($/b) West Texas Intermediate (WTI) @ Cushing ($/b)Western Canadian Select (WCS) @ Hardisty ($/b)Average Light - Heavy Differential ($/b)Linear (Average Light - Heavy Differential ($/b))2005 - 2006 Median Differential ($/b)2007 - 2008 Median Differential ($/b)2009 - 2010 Median Differential ($/b)2011 Median Differential ($/b)

Risk of widening differentialif new pipelines are delayed

Keystone Base and Alberta Clipper new capacity

Production ramps up

Page 40: Economic Impact Beyond the Oil Sands - Dinara Millington

Relevant • Independent • Objectivewww.ceri.ca40

Problem WTI-WCS Differential

Q3 2011• WCS discount averaged $17 to WTI (net approximately $10)• Canadian Crude (Conventional, SCO, Bitumen) Exports

• 1,477,000 bbls/day to PADD II• 105,000 bbls/day to PADD III• 216,000 bbls/day to PADD IV• 157,000 bbls/day to PADD V

Simple Math: 2,152,000 bbls/day times $10/bbl = $21 million per day (discounted Value)

2012-2020 “The Pipeline Solution”

• Keystone XL (Hardisty to Houston) 700,000 b/d 2016• Trans Mountain Expansion (Hardisty to Vancouver) 450,000 b/d 2017• Northern Gateway (Edmonton to Kitimat) 525,000 b/d 2019• Line 9 Reversal (Sarnia to Westover, ON) 50,000 b/d Q2 2012• Line 9 Reversal (Westover to Montreal ) 100,000 b/d ????• Portland to Montreal Pipeline (Reversal) 400,000 b/d ????

Page 41: Economic Impact Beyond the Oil Sands - Dinara Millington

Relevant • Independent • Objectivewww.ceri.ca41

1. The production from conventional sources in Western Canada is growing as technology is able to unlock resources that were once thought to be difficult to extract. Nevertheless, oil sands will continue to dominate the future production growth in this region.

2. Presently, the crude pipeline capacity out of Western Canada is sufficient to transport production coming from on stream and under construction oil sands projects. Additional crude export capacity from Western Canada will be essential by as early as 2015.

3. Value of upgrading at the source in Alberta, Environmental Issues, Differentials, Refinery Configurations, Crude Competition, Politics, Energy Security.

4. Given that all oil sands development takes place in Alberta, it is clear that Alberta will be the largest beneficiary, followed by Ontario and then British Columbia.

5. In the US, PADD II (Midwest) is the biggest beneficiary from spin-off effects of Alberta’s oil sands development, followed by PADD I (East Coast) and PADD V (West Coast).

In Summary

Page 42: Economic Impact Beyond the Oil Sands - Dinara Millington

Relevant • Independent • Objectivewww.ceri.ca42

Canadian Energy Research Institute

Thank you for your timePlease visit us atwww.ceri.ca


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