Upload
louisa-cain
View
213
Download
0
Tags:
Embed Size (px)
Citation preview
1
Natural Gas: A Foundation Fuel for Canada
Paul CheliakSenior Advisor CGA
Taxation Committee MeetingJune, 2010
2
Canadian Gas Association
Founded in 1907, CGA is the voice of Canada's natural gas delivery industry
Members deliver gas to 6.1 million homes, businesses and industries
Members include gas distribution, transmission and service providers
3
Overview Natural gas in Canada
Gas in the Energy Mix, Canadian Gas Snapshot, Pipelines, Prices, Supply/Demand, Resources
End use trends Industrial, Residential, Commercial, Power
Generation, Transportation
The policy landscape CGA Policy Initiatives
Energy Framework Initiative Canadian Natural Gas Initiative QUEST
5
First Canadian well drilled in 1889
Canada is the world’s third largest gas producer and exporter.
Produce 6 Tcf/yr, export 3 Tcf to US markets
Gas provides 25% of Canada’s total energy demand• 48% residential• 45% commercial• 32% industrial• <1% transportation
Export revenues between $20-30 billion/year
Natural Gas in the Energy Mix
Motorcycle Gas Delivery – 1920’s
Canada Energy Use 2007 - by Fuel
25%
22%
43%
10%
Natural Gas
Electricity
RPP's
Other
6
Canadian Natural Gas Snapshot
Commercial
Mid-West
Residential
Industrial
2008 Supply Breakdown
25%
20%
55%
West
East
Power 13%20%
27%
40%
Exports 55%
Dem
and 45%
AB
80%B
C 1
3%
SE
7%
Note: SE = Sask + East Coast
-
1,000
2,000
3,000
4,000
5,000
6,000
7,000
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
Canadian Sales
Exports to US
Production
7
A Reliable Supply Network
• Over 480,000 km of pipeline forms an interconnected North American pipeline network that provides reliable and safe delivery of natural gas.
• Backstopped by storage facilities that can hold 55 days of average daily North American natural gas consumption.
• Market supply:• 78% of supply from US• 21% from Canada• 2% LNG.
North American Natural Gas Supply - 2008
21%
78%
1%
Canada
US
LNG
8
The Natural Gas Market Landscape Prices
• Disconnect between crude oil and natural gas prices since 2005 with gas currently lagging by 50%.
• Gas and coal competing for some market share in electric market
Natural Gas Supply• Shale gas has been a game changer putting gas on the map as a key fuel in
the future energy mix• Renewable natural gas garnering interest
Natural Gas Demand• Stable or declining core and industrial markets• Growing gas in power generation• Growing interest in transportation
9
Changing Prices: Oil and Gas Split Natural gas prices track each other
because of market integration.
Gas to remain an excellent value due to domestic resource abundance
Crude to maintain price premium due to high world demand and tighter supply.
Natural Gas and Petroleum Product Prices ($US/MMBtu)
$-
$5
$10
$15
$20
$25
$30
1994 1999 2004 2009 2014 2019
Sources: NEB, EIA
Natural Gas
RFO
Heating Oil
Crude Oil
Natural Gas Price Tracking Analysis
$0
$5
$10
$15
$20
$25
Jan-02 Jan-04 Jan-06 Jan-08 Jan-10
Soucse: EIA, NEB
$US
/MM
Btu
St. Stephen
Alberta
Louisiana
10
Changing supply/demand portfolio
Supply portfolio becoming increasingly unconventional (20% by 2020) driven by shale and other unconventional gas and the north.
Future demand to be driven by power generation and industrial (oil sands).
New residential and commercial gas users outweighed by furnace efficiency gains.
Canadian Natural Gas Demand to 2020 (tcf/year)
0
1
2
3
4
5
2000 2004 2008 2012 2016 2020
Source: NEB
Residential CommercialIndustrial Electric
Canadian Natural Gas Production to 2020 (tcf/year)
0
1
2
3
4
5
6
7
2000 2004 2008 2012 2016 2020
Source: NEB
Solution ConventionalCBM ShaleFrontier
12
Canadian Gas Balance to 2020
Canadian production falls from 6.5 Tcf in 2000 to 5.8 Tcf in 2020 as conventional fields decline.
Demand grows from 3 Tcf in 2000 to 4 Tcf in 2020 driven by oil sands and electric power.
Residential and commercial demand growth offset by gains in efficiency.
Net exports fall from 3.2 Tcf in 2000 to 1.8 Tcf in 2020.
Canadian Production/Demand/Exports
0
1
2
3
4
5
6
7
2000 2004 2008 2012 2016 2020
Source: NEB
Supply Net ExportsDemand
13
LNG Exports From Canada
Kitimat LNG proposal to export up to 0.7 bcf/d by 2014 – equal to 20% of current BC production.
Kitimat has initial upstream (Apache) and takeaway (Kogas) contracts.
The project hinges on success of BC shale gas production and differential between oil and gas.
Henry Hub vs. Japan LNG Prices
$0
$4
$8
$12
$16
Jan-07 Sep-07 May-08 Jan-09 Sep-09
$U
S/M
MB
tu
$0
$4
$8
$12
$16
Henry Hub
Japan
Sources: Federal Reserve Bank of St. Louis, World Bank
14
Changing Supply Basins
Shales are located across Canada and the US – both in traditional gas areas and areas new to gas development.
Shale basins economic the new low cost basis – 8 fold increase between 200 and 2008.
Shale to grow to 20% of NA gas by 2020 from 10% in 2009.
Maritimes shale – Horton Bluff. Some initial work being done.
16
How Gas Can Help Help meet ambitious GHG reduction targets
• Gas is available, clean burning and efficient
Help re-define power generation • 50% cleaner than coal• Compliment renewable generation
Help provide heat• Very efficient means to provide heat • Very good value
Help as a clean transportation fuel• 25% less emissions than diesel in a heavy duty truck application
Help economy• New production, pipelines, installations, create jobs and royalties
18
Changing Natural Gas Use Trends
Natural Gas Use in Canada
Residential
Commercial
Industrial
Electricity Production
0
500
1000
1500
2000
2500
3000
1990 1994 1998 2002 2006
PJ/
yr
Gas excluding Upstream Mining and Electricity Generation
Residential
Comercial
Industrial w/o Upstream
Mining
0
500
1000
1500
2000
2500
3000
1990 1994 1998 2002 2006
PJ/
yr
1990- 2007 Growth: 43%
1990- 2007 Growth: 12%
19
Industrial Sector Trends
Canadian Industrial Natural Gas Trends
0
200
400
600
800
1000
1200
1990 1992 1994 1996 1998 2000 2002 2004 2006
Source: NRCan, End Use Database
Te
rajo
ule
s
Chemicals Construction Food
Metal Mining Motors/VehiclesOil/Gas Refining Pulp/Wood/Paper Others
Upstream Mining
Upstream Mining 745%
Others 22%
Pulp/Wood/Paper -40%
Oil/Gas Refining 1%
Motors/Vehicles 10%
Mining 8%
Metal 14%
Food 8%
Construction -39%
Chemicals -19%
Total 33%
1990 vs 2007
• Increased industrial gas demand has been driven by increased use in upstream mining (oil sands +745%).
• There have been significant declines in major use sectors (pulp and chemicals).
• Increased energy efficiency and conservation playing a major role as well.
20
Residential Sector Trends
Source: NRCan National Energy Use Database
Space Heating- 6%
Water Heating- 21%
Appliances+22%
Total-11%
Natural Gas Use per Customer 1990-2007
Space Heating
Water Heating
Appliances
0
20
40
60
80
100
120
140
1990 1992 1994 1996 1998 2000 2002 2004 2006
GJ
/yr
• Natural gas meets close to 50% of residential energy demand .
• 70% of residential natural gas use is for space heating, 27% is for water heating.
• Gains in efficiency have led to an 11% decline in per customer residential natural gas use since 1990.
21
Investing in Solutions:DSM and Energy Efficiency
LDCs DSM Expenditures 2000-2007
0.010.020.030.040.050.060.070.080.0
2000
2001
2002
2003
2004
2005
2006
2007
Mill
ion
$
22
Commercial Sector Trends
Commercial Buildings Energy Intensity
0.30
0.50
0.70
0.90
1.10
1.30
1.50
1.70
1.90
19
90
19
92
19
94
19
96
19
98
20
00
20
02
20
04
20
06
GJ
/m2 Intensity – Canada
1.38 GJ/m2
Intensity – Manitoba
1.47 GJ/m2
.32 GJ/m2
23
Power Generation Trends
Canadian Power Generation Trends
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
1990 1992 1994 1996 1998 2000 2002 2004 2006
Source: NRCan End Use Database
Pet
ajou
les
Other 167.7
RPP -59.1
Natural Gas 345.3
Coal 31.8
Nuclear 9.7
Hydro 24.1
Total 28.4
1990 vs 2007• Power
generation energy demands have increased by 28% since 1990.
• Natural gas use for power generation has increased by 345% since 1990.
24
Transportation Trends
Marine4%
Off-Road4%
Air 10%
Rail 3%
Passenger Vehicles, Light Trucks
50%
Sweet Spot Medium/Heavy Trucks
& Urban Transit & Buses29%
Transportation Energy Use
Marine
Off-Road
Air (Freight & Passenger)
Rail (Freight & Passenger)
Passenger Vehicles, Light Trucks
Medium/Heavy Trucks & Urban Transit & Buses
Source: NRCan End Use Database
• Natural gas is a marginal transportation fuel at this point in time (0.1%).
• Return to base urban and road freight transportation is the area with most potential for natural gas use.
• Diesel represents over 72% of road freight transportation energy use.
27
Policy Landscape for Natural Gas
The Energy Debate
• Until recently natural gas was a blank to policy makers except to the extent that it was a fossil, running out, too expensive, GHG producing
• But new supplies and capacities to produce has sparked interest in gas
• Shift from climate driving energy to idea that if you get energy right the greenhouse gases will follow.
• Think tanks and Senate (Energy Environment and Natural Resources Committee) struggling to find a coherent story and a way forward.
• CGA working with others to tell the positive gas story
CGA working to position natural gas as a fundamental fuel• Energy Framework Initiative• Canadian Natural Gas Initiative (CNGI) • QUEST
28
QUEST
Big Energy Discussion
CNGI
EFI
Less Specific
More Specific
Asks
Principles
Broader Narrower
Principles
Utility of the Future
Asks
CGA Strategic Initiatives - Linkages
29
Energy Framework Initiative (EFI)
Environmental FoundationSocial Foundation
Economic Foundation
Environmental FoundationSocial Foundation
Economic Foundation
Security / Reliability / Affordability / Innovation / SustainabilitySecurity / Reliability / Affordability / Innovation / Sustainability
An Energy Framework for CanadaAn Energy Framework for Canada
Six Pillars of Policy Activity
1. A Commitment to Sustainable End-use of Energy
2. A Commitment to Sustainable Energy Resource & Extraction, Production & Transmission Capability
3. Ensuring a Sustainable Approach to Energy & Climate Change
4. An Ongoing Social License to Build & Operate
5. A Continuous Improvement in Capacity
6. A Collaborative Approach on Intergovernmental Engagement
Six Pillars of Policy Activity
1. A Commitment to Sustainable End-use of Energy
2. A Commitment to Sustainable Energy Resource & Extraction, Production & Transmission Capability
3. Ensuring a Sustainable Approach to Energy & Climate Change
4. An Ongoing Social License to Build & Operate
5. A Continuous Improvement in Capacity
6. A Collaborative Approach on Intergovernmental Engagement
30
Canadian Natural Gas Initiative (CNGI)
A nation-wide advocacy & communications initiative supported by the natural gas value chain in Canada to:
• develop objective, fact-based educational materials on natural gas;
• raise understanding among decision makers of the role that natural gas should play in achieving Canada’s energy, environmental, and economic objectives; and
• demonstrate that natural gas is a smart foundation for Canada’s evolving energy mix and encourage supportive policy.
• Target audience includes the public and key policy makers.
32
QUEST: Who and What
QUEST is a coalition for action drawing from a diverse group:
All three levels of Government Energy & Renewable Industries Environmental Groups Developers & Builders Academics & consultants
QUEST Vision: “By 2050 every community in Canada is operating as an integrated energy system, and accordingly, all community development and redevelopment incorporates an integrated energy system.”
33
The Opportunity in Canadian Communities
Communities represent about 50% of Canadian energy use and GHG emissions.
Communities are themselves energy using (and producing) entities.
An integrated approach – energy systems embedded in the community fabric of land use, density, transport, water and waste can deliver GHG reductions .
Just as importantly this creates more resilient & adaptable energy systems delivering safe, reliable , affordable energy services.
In short, a more sustainable approach.
Residential 13%
Industrial 6%
Non-Urban 52%
Transportation 18%
Commercial / Institutional 11%
Canada's Urban Energy Use - 2005
34
LDC Gas Demand by Scenario(Directional)
2010 2020 2030
LDC Gas Demand
GK
SC
WT&F
HJ
We Tried & Failed• Weak industrial demand
•Societal pressuresHidden Joules• BAU in ST
• Municipal relationships
Gigawatt Kings• Displace by electricity
• Stranded assets
Sustainable Canada• Major efficiency gains
• Integration opportunities
Gas Demand in Scenarios
35
Regulator Industry Dialogues
The R/I Dialogue has held eight self-financed sessions to-date including: Demand Side Management (4) Carbon Pricing (3), and most recently The Utility of the Future (1).
Next dialogue is in Vancouver in 2010.
Focus will be on the Utility of the Future Providing new services through energy convergence Operating in a carbon constrained world
36
Gas Value Chain Tax Positions
Supportive Canadian fiscal policy is needed to underpin and stimulate competitive development and transportation of Canadian natural gas supplies across North America.
In General Gas Value Chain seeks a fiscal structure that helps Canadian natural gas supplies compete in the competitive North American marketplace
Ensure similar fees and duties and/or exemptions for gas exports to the US.