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Canadian Oil Sands
February 21, 2012
Cindy Schild, API
Senior Manager
Downstream Operations
Energy and Economic Security
Canadian Oil Sands
Overview • Security of Supply
– Energy Security
– Economic Security
• Pipeline Transportation
– Safety
– Corrosion
• Keystone XL Pipeline Proposal
– Job Creation
– National Interest
• Exports
Canadian Oil Sands
Crude oil and petroleum products are global commodities
Canadian Oil Sands
Energy Security
Canadian Oil Sands
Did you know?
• Canada is the US’ top supplier of imported oil
• Canada and the US enjoy the world’s largest trading relationship
• More Canadian oil in the US means decreasing reliance on less friendly, unstable oil producing nations
Canadian Oil Sands
Sources of Crude & Product Supplies
Canadian Oil Sands The North American heavy crude production outlook is dominated by the decline of Maya supplies, and the emergence
of Canadian production…
• North American heavy oil production
comes predominantly from Mexico (through the Maya blend) and Canada (through oil sands)
• US refineries have built on the basis of supplies from Mexican grades, however given the declining trend, investments are now geared to match the increasing supply from Canada
• Future of heavy oil production growth in North America will come from Canada’s oil sands
Source: Wood Mackenzie Analysis – Heavy Oils Study 2009 © Wood Mackenzie
U.S. Demand for W. Canadian Crude Oil:
2010 vs. 2015 Potential
Source: CAPP
Thousand Barrels per Day
Canadian Oil Sands However Canada’s heavy oil production growth
depends on access to appropriate refining markets
© Wood Mackenzie
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kbd
Canada Demand Trans Mountain PADD II
PADD IV PADD III* Market Access Shortfall
*Considers Keystone-XL’s pipeline expansion by 2013
Western Canada Heavy Crude Oil Disposition (2008-2020) Access to PADD III
through Keystone XL
depends on presidential
permit
Volumes may flow to
other refining centers as
pipeline proposals to the
west coast of Canada
may provide an
alternative solution to
access constraints of US
markets
Source: CAPP (2010), Wood Mackenzie Analysis – Refining Evaluation Model
Canadian Oil Sands
Canadian Oil Sands and Conventional Production
Source: CAPP
US Demand for Canadian Crude Oil (2010)
Source: CAPP
US oil production
Oil from Canada
Biofuels
Oil from rest of world
FILLING AMERICA’S GAS TANK Within 15 years Canada & US can provide all our liquid fuel needs
32%
12%
12%
45%
12%
16%
72%
EIA forecast Potential
Sources: EIA; Wood Mackenzie
Sources of liquid
fuel supply: 2026
Canadian Oil Sands
Economic Benefits
Canadian Oil Sands
Canadian oil sands development a boon to U.S. economy
For every two jobs supported in
Canada, one job will be
supported in the U.S
Canada’s oil sands can support
600,000 U.S. jobs by 2035.
At least 2,400 US companies
support oil sands development
in Canada and expansion
projects in US
45 Florida companies
$775 billion dollars added to our
GDP over next 25 years.
Canadian Oil Sands
$0.90
$0.71
$0.37
$0.33
$0.37
$0.75
$0.50
$0.25
$0.00 $0.10 $0.20 $0.30 $0.40 $0.50 $0.60 $0.70 $0.80 $0.90 $1.00
Canada
Mexico
Saudi Arabia
Venezuela
OPEC
European Union
Japan
China
For every dollar the US spent on imported goods in 2010, this is how much returned through exports:
Canadian Oil Sands Canada’s Oil Sands: Partners in the American Economy
17
Canadian Oil Sands
Pipeline Transportation
Canadian & U.S. Crude Oil Pipelines & Some Proposals
20
Canadian Oil Sands
Americans Want More Canadian Oil November 3rd API National Canadian Oil Survey
21
6% 3% 6%
18%
61%
A lot more
A little more
About the same amountas it does today
A little less
A lot less
79%
Canadian Oil Sands
Yes to Canadian Oil & Pipeline Safety November 3rd API National Canadian Oil Survey
22
.
Support for Canadian oil &
pipelines
Safest way to move Canada’s
oil to the U.S. is by pipeline
5%
4%
6%
7%
8%
11%
36%
33%
44%
40%
Strongly disagree Somewhat Disagree Neither Agree not Disagree Somewhat Agree Strongly Agree
11%
11% 73%
80%
Canadian Oil Sands
Pipeline Safety
• Pipelines are safest and most efficient way to move crude and refined product overland for long distances
• DOT’s Pipeline and Hazardous Materials Safety Administration regulations for liquids pipelines
– Design, construction, operation, inspection, maintenance, repair and emergency response
Canadian Oil Sands
Transporting Canadian Crude
• Oil sands have been shipped via pipeline for decades
• Once oil sands crudes have been upgraded for transportation they are just “crude oil” with characteristics similar to crudes from California, Mexico and Venezuela
• Canadian crudes pose no more of a threat to U.S. pipelines than any other crude
Canadian Oil Sands
Oil Sands Crudes are Not More Corrosive Than Other Crude Oils
• Corrosion experts support the fact: Oil sands crudes do not pose a unique threat to pipelines:
“Corrosivity of diluted bitumen is largely similar to crude oil, which is considered to be low” according to:
• Dr. Oliver Moghissi is President of NACE International and the Director of the DNV Corrosion and Materials Technology Center
There is no indication that pipelines transporting blended crude bitumen, crude oil or synthetic crude oil have an increased risk of internal corrosion issues.
• According to the Alberta regulator, the Energy Resources & Conservation Board (ERCB)
Canadian Oil Sands Dramatic Improvement:
Liquids Pipeline Industry Onshore Pipe Spill Record
364
615
0
200
400
600
800
'01
'03
'05
'07
'09
2.0
0.8
0.0
0.5
1.0
1.5
2.0
2.5
Source: Pipeline Performance Tracking System, a voluntary spill
reporting system involving 85% of the U.S. liquids pipeline mileage.
Percentage decline from 1999-2001 average to 2007-2009 average.
Number of Spills per 1,000 Miles Barrels Released per 1,000 Miles
3-Year Averages Ending in Year Shown
-59% -41%
Canadian Oil Sands
Keystone XL Pipeline
Canadian Oil Sands
Keystone XL Pipeline
• 1,661 mile pipeline
• Bring oil sands derived
crude from Alberta, Canada
to Gulf Coast refineries
• 25% of capacity for domestic
production from Bakken
• Pick up inventories stored in
Cushing
Canadian Oil Sands
KXL is in our Nation’s Interest • Stability of US/Canada trading relationship
• Significant economic benefits
• Larger, more dynamic pipeline system benefits consumers
• Canadian crudes are replacing supplies from Venezuela and Mexico where production has declined
• Gulf coast refiners expected to demand similar volumes of supply
– If not Canada, just more distant sources
• KXL to be built to most advanced specifications and monitored by state of the art technologies Source: CERA 2011
Canadian Oil Sands
XL: Economic Contribution • Largest US shovel-ready
infrastructure project
• Jobs
• 20,000 construction and manufacturing jobs over project life
• Thousands additional indirect/induced jobs
• $7 billion private investment
– No subsidies
Canadian Oil Sands
XL 20,000 Jobs Breakdown • 17 US segments or “spreads”
– 500 workers per = 8,500 jobs
• 30 pump stations
– 100 workers per = 3,000 jobs
• Oversight
– 1,000 jobs
TOTAL = 13,000 Construction Jobs
PLUS another 7,000 Manufacturing Jobs
Canadian Oil Sands A typical union-based pipeline spread/segment for KXL
would employ Americans in the following positions:
Keystone XL – Jobs per pipeline spread/segment
Quality Control 16 Laborer Premium 5 Purchasing Agent 2 Teamster semi 24
Environmental Coordinator
1 Welding Foreman 2 Operator 152 Teamster regular 23
R.O.W. Coordinator
1 Welder Premium 29 Oiler 28 Mechanic 16
Safety Coordinator
4 Welder backend 16 Straw Boss 27 Security 2
Engineer 1 Journeyman 8 Laborer 111 Timekeeper/clerk 1
Foreman 24 Graded Helper 9 Project Manager 1 Superintendent 2
Office Manager 2 Welder Helper 66 Assistant
Superintendent 2
TOTAL:
561
Canadian Oil Sands
Exports
Canadian Oil Sands
Exports: Add value to Our Economy
• Crude oil is a global commodity as are finished products
• U.S. is now a net exporter of finished products
• U.S. doesn’t import crude just to then turn around and export it
• The primary export market for our refined petroleum products is Mexico. Mexico exports oil to us, we refine it (adding significant value), and export some of it back to them. This creates and retains high-paying U.S. jobs, more U.S. tax revenue, and boosts the U.S economy.
Canadian Oil Sands
Exports: Add value to Our Economy
• Exportation of refined product is part of global trade to balance supplies.
– The vast majority (>90%) of on-road motor fuel refined in the U.S. is for use in the U.S.
– Exports consist primarily of heavier products that are not in demand in the U.S. – diesel, resid fuel oil, petroleum coke.
– Having a stable, secure source of crude oil enhances U.S. energy security regardless of how much may ultimately be exported as product.
Canadian Oil Sands
KXL and Exports
• U.S. refineries need heavy crude oil
– Major suppliers of heavy crude to U.S. include:
• Mexico, Venezuela, and Canada
– Imports from Venezuela and Mexico are declining
• Crude imports from Canada increased nearly 50% since 2000
– EIA – U.S. Gulf coast refineries are “natural customers” for oil sands crude
– Because of this, EIA concludes “there would be no economic incentive to ship Canadian oil sands [crude] to Asia via Port Arthur.”
Canadian Oil Sands
For more information:
• API Oil Sands Web Page
– http://www.api.org/en/oil-and-natural-gas-overview/exploration-and-production/oil-sands.aspx
• API Keystone XL Web Page
– http://www.api.org/policy/keystone-pipeline.cfm
Canadian Oil Sands
Any Questions?
Cindy Schild
202.682.8482
Canadian Oil Sands
Foreign Trade Zones
• Claim: FTZs allow oil sands crude transported through KXL to be exported w/o paying U.S. taxes.
• The Facts:
– FTZs are areas where goods may be imported for storage, assembly, manufacturing or processing w/o being immediately subject to customs duties.
– If the goods enter the U.S. stream of commerce, custom duties would apply. If, on the other hand, the goods were exported, then custom duties would not.
Canadian Oil Sands
Foreign Trade Zones
• An example: Crude oil from Canada and Venezuela are imported into a FTZ, refined, and exported.
– Both crude oils would face the same customs duties.
– In both cases, refiners would pay the same income tax from sales irrespective of where the crude came from and regardless of whether or not the crude is exported or consumed in the U.S.
• The FTZ status of the Keystone XL terminus has no impact on the U.S. tax revenue from Canadian oil
sands crude imports or exports.
Advertising
Canadian Oil Sands
Canadian Oil Sands … thus additional Canadian supplies from oil sands
can help meet domestic energy security goals
© Wood Mackenzie
Oil sands has a major part to play supporting future US Energy Security
0
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6,000
7,0002005
2007
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Pro
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, kb
d
US X-Light
US Light*
US Medium
US Heavy
Canada Conventional Light
Canada ConventionalMediumCanada ConventionalHeavy SourOil Sands Synthetic
Oil Sands Bitumen
Canadian oil sands
production annual
growth rate ~ 7%
US-Canada Crude Production Profile (2005-2025)
Canadian Oil Sands
Reduction in releases along the ROW reflects diverse strategies
4134
2618 16
1
35
14 17 1810 9
4
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osion
Third
Par
ty
Equip
men
t
Pip
e M
atl/S
eam
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er
Oper
ator
Error
Nat
ural F
orces
2001 2009
3-year average ending: 132
Source: Pipeline Performance Tracking System, a voluntary spill
reporting system involving 85% of the U.S. liquids pipeline mileage
Num
ber
of
Rele
ases
-73% -66% -50% -30% -45% -40% 300%
