Common menu bar
Breadcrumb
Home > Energy Reports > Energy Futures > 2008 Energy Futures Workshop - Session 2A - Outlook and Issues for Canadian Oil Sands Supply2008 Energy Futures Workshop - Session 2A - Outlook and Issues for Canadian Oil Sands Supply
2008 Energy Future Workshop
Session 2A
Outlook and Issues for Canadian Oil Sands Supply
Ottawa, Ontario
Presented by
Bill Wall
Oil Supply Analyst
Oil/NGL
National Energy Board
22 January 2008
Speakers
Good afternoon, everyone. Welcome to our session on Canada's Oil Supply. My name is Bill Wall, I'm an Oil Supply Analyst at the NEB, and I'm the moderator for this session.
The first order of business is to introduce our three speakers. On my immediate left is Bob Dunbar, Bob runs a private consultancy called Strategy West. Next to Bob we have Rob Bedin, Vice President, US Energy Equities at Ross Smith Energy Group. On my far left is Dan Woynillowicz. Dan is a Senior Policy Analyst at the Pembina Institute. These gentlemen represent a wealth of knowledge regarding oil sands, and we're certainly pleased to have them with us today.
Our session this afternoon is scheduled for 90 minutes. Our intent is to highlight some of the opportunities and challenges facing the oil sands industry. I'll be providing a brief summary of the oil supply projections from our Energy Futures Report, then each of our speakers will give a 20 minute presentation. We have allocated about 15 to 20 minutes at the end of the session for questions, and we encourage you to pose questions to our expert panel, but ask that you hold questions until after all speakers have presented.
Crude Oil and Natural Gas Prices
Energy Prices
- Crude oil prices range from $35 to $85 per barrel (WTI, 2005 US dollars). In the Reference Case, energy prices are assumed to be $50 per barrel.
- Oil prices bottom out at in 2010 in the RF/CT case, and in 2020 in the TE scenario. In formulating our supply projections, we don't assume that industry has perfect foresight regarding oil prices, we do assume they can see ahead 2 to 3 years.
- Natural gas prices are important inputs for oil sands operators, and they range from $5.50 to $12 per mmBTU (Henry Hub, 2005 US dollars) over the RF and 3 scenarios.
Key Scenario Assumptions
This slide lists some of the major assumptions we've made that influence oil supply. We've already talked about oil and gas.
In general, oil producers sell their product in US dollars and incur expenses in Canadian dollars, so the exchange rate is a very important variable. In the Reference Case, the exchange rate averages 93 US cents per Canadian dollar, while in the three scenarios, the average varies between 98 cents and 103 cents.
The light/heavy differential determines the price discount relative to light oil that heavy oil producers must absorb, and is set at 30% for all scenarios, based on the average differential over the last 10 years.
Technology has been a major driver, especially for the oil sands industry, and the high oil prices of the Fortified Islands scenario are the most conducive to enhancements in oil production technology.
The cost of environmental compliance is an important factor, and this cost is highest in the TE scenario.
WCSB and East Coast Supply
WCSB conventional oil supply has been in decline for some time, consistent with a maturely explored basin. While an uptick in oil drilling in the 2006-2007 time frame has softened the rate of decline in the near term, longer term declines across the reference case and 3 scenarios are on the order of 3 to 5 percent.
In CT, WCSB conventional production, after a brief period of lesser decline, resumes its long-term decline of about 5.5 % per year.
Although the Triple E scenario is not conducive to oil production in general, it is assumed that government initiatives to reduce GHG emissions will lead to the implementation of several major CO2 EOR projects, including the construction of a backbone CO2 pipeline in Alberta. Some 1.5 billion barrels of oil are added due to CO2 EOR, significantly reducing the decline rate.
Higher oil prices and greater profitability in FI lead to greater drilling activity and production decline rates about 1% less than in the CT scenario.
Turning to the East Coast, the assumption that the Hebron Field begins production in 2013 is common to all scenarios.
The CT scenario features a newly discovered 500 million barrel field, offshore Newfoundland and Labrador, coming on in 2015, and contributions from smaller satellite pools in the Jeanne d'Arc Basin are also included.
In the TE scenario, no satellite pools are included, no additional large pool is assumed.
In the FI scenario, a number of satellite pools are brought on, and a second 500 million barrel sized field pool comes on production, in 2018, allowing for peak production of nearly 120 000 barrels per day, after which a relatively rapid decline begins.
While these regions have been assigned considerable undiscovered potential, the discovery of such a field, and its timing, is somewhat speculative, and depends in large part on the availability of suitable drilling rigs.
Oil Sands
Oil sands production in the CT scenario is basically an extrapolation of the Reference Case; the $50 oil price is considered sufficient to allow active expansion of oil sands production.
In the TE scenario, producers respond to the lower oil price track, with no new projects coming on and production decreasing marginally after 2018. After a period of adjustment, slow growth resumes.
In FI, with higher oil prices, emphasis on security of supply and less stringent environmental conditions, oil sands production expands rapidly.
By 2030, production levels range between 2.8 and 4.8 million barrels per day over the 3 scenarios.
The expansion of existing upgraders, plus the implementation of new upgrading projects, including merchant upgraders, allows the proportion of upgraded bitumen to remain relatively stable at near 65 percent after about 2010.
Total Crude Oil Supply
By 2030, total crude oil production in Canada ranges between 3.1 and 5.6 MMb/d across the 3 scenarios.
In the Reference Case, production reaches 4.1 MMb/d by 2015.
In the TE scenario, production declines after 2015, due to stagnating oil sands development and declining East Coast and WCSB production.
Light and Heavy Oil Net Exports
Canada is a net exporter of crude oil and the largest supplier of crude oil to the United Sates.
Although there is some expansion of refining capacity in Canada, supply outpaces domestic demand by a considerable margin, except in the TE scenario.
Total exports levels reach 3.4 MMB/d by 2030 in the CT scenario, and 4.4 MMb/d in the FI scenario.
Oil Sands Wildcards
We've listed here a number of wildcards or uncertainties regarding oil sands development. This list is not inclusive, but the intent is to highlight some of major issues regarding oil sands development.
As you see, we're focusing on gas demand for oil sands, oil sands economics and the environmental and socio-economic impacts of oil sands development. Our speakers this afternoon will elaborate on this issues.
Primary navigation (left column)
The NEB
- Who we are & our governance
- Public Participation
- News Releases
- Careers
- Hearings and Information Sessions
- Major Applications and Projects
- Regulatory Documents
- Cost Recovery
- North / Offshore
- Site Map
- Links