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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
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
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
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)
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
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
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
Relevant • Independent • Objectivewww.ceri.ca8
“Western Canada’s Upstream Oil and Gas Industry”
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
Relevant • Independent • Objectivewww.ceri.ca10
“CanadianOil and Oil Sands”
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
Relevant • Independent • Objectivewww.ceri.ca12
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
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
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
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
Relevant • Independent • Objectivewww.ceri.ca16
“Economic Impacts of Oil Sands Staged Development”
Relevant • Independent • Objectivewww.ceri.ca17
Input-Output (I/O) Logic
Oil Sands
Steel Trucks Natural Gas
Water Engineering Services
Otherinputs
Oil Sands Industry
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
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
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
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)
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
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
Relevant • Independent • Objectivewww.ceri.ca24
“Let’s Talk AboutPipelines”
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
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
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
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
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
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 $27 1
Ports-to-Plains Alliance Member States
Relevant • Independent • Objectivewww.ceri.ca31
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
AB Conventional Prodn SK Conventional BC Conventional MB ConventionalNWT Conventional Diluent for Primary/Eor Existing&Under Construction US Bakken prodnApproved Approved-on Hold Awaiting Approval AnnouncedNorthern Gateway Addition TMX Expansion KXL Addition Expansion of Enbridge mainlineExisting Export Operational Capacity
'000 bbl/d
Note(s): 1)Operational Capacity is 95% of total design capacity. 2) Conventional crude volumes are net production volumes available for export (i.e., net of do-mestic demand). 3) Oil Sands volumes comprise of net bitumen and SCO available for export and diluent volumes req'ed to move bitumen as per pipeline spe-cifications. August 23, 2012
TMX (2017)
Keystone XL (2015)
Northern Gateway (2018)
Looping/Expanding Existing Pipelines
Mainline Expansion (2014)
Western Canadian Potential
Relevant • Independent • Objectivewww.ceri.ca32
Economic Impacts of Alberta’s Oil Sands - CanadaComparison of CasesIncremental GDP Impacts
Incremental Employment Impacts
Alberta Ontario British Columbia Saskatchewan
Case 1 1439.9 44.3 19.4 3.052
Case 2 583.2 18.6 8.3 1.37
Case 3 291.3 9.00000000000001
4 0.637
Case 4 352.3 11.4 5.1 0.866
100
300
500
700
900
1,100
1,300
1,500
(Bln CDN$)
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)
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)
Relevant • Independent • Objectivewww.ceri.ca34
“BUT”
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?
Relevant • Independent • Objectivewww.ceri.ca36
Jan-
2005
Apr
-200
5
Jul-2
005
Oct
-200
5
Jan-
2006
Apr
-200
6
Jul-2
006
Oct
-200
6
Jan-
2007
Apr
-200
7
Jul-2
007
Oct
-200
7
Jan-
2008
Apr
-200
8
Jul-2
008
Oct
-200
8
Jan-
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
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
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
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
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 ????
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
Relevant • Independent • Objectivewww.ceri.ca42
Canadian Energy Research Institute
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