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2014-02-10_Agenda Packet--Dossier de l'ordre du jourCity of Saint John Committee of the Whole Special Meeting AGENDA Monday, February 10th, 2014 5:00 p.m. Council Chamber 1. Call to Order 1.1 Energy: Emerging Opportunities 1.2 Shale Gas Economics 101 Emerging Opportunities in the Energy Sector: Executive Summary Energy: Emerging Opportunities — Colleen Mitchell, President , Atlantic Center for Energy • About the Atlantica Centre for Energy Who we represent, our perspective • Energy in this region and world issues The world is interconnected Global supply and demand have local repercussions • The importance of ample, competitive, sustainable energy sources Changes in supply, technology, and demand Local significance of supply of competitively priced energy • Emerging opportunities for this region Windows of opportunity Projects that may become reality Shale Gas Economics 101— John Adams, Sr. V.P. International, Stantec Ltd. The presentation will provide an overview of what is involved in gas development from exploration through production and, as such, will touch on some of the technical, economic, socio, and environmental drivers that impact the decision making process. Examples, illustrations, and descriptions will help to demystify some of the oil and gas development processes that we all read about but sometimes have a hard time visualizing. The talk will include an overview of the economic case study done by the Canadian Energy Research Institute on shale gas development. This presentation is aimed at providing information that will allow and hopefully encourage the interested observer to further investigate and expand their own knowledge base in this area. UNIVERSITY OF NEW BRUNS. Energy: Emerging Opportunities February 10, 2014 T j 0 H N UNB ,;aintJohn U N I V E R S I T Y OF NEW B R U N S W I C K SAINT J O H N About us �l'67S� ATLANTICA CEWME FoaENERGY An industry association dedicated to the sustainable growth and economic development of the re _ ional energy sector. ATLANTICA�' CENTRE FOR ENERG 1 UN' I E R I T D F NEW B R U I C S I T J O H N 0 tawgie NO mower IRVIN J,9el BY PEOPLE FOR PEOPLE VRPRISF ATLANTICA' CENTRE FOR E N E RG 1 Er A s2ro u rces A.. rid! I RI N B s +lPrfmvr 4 D I 1 t! . suwftc -�-;iexp. qp4nr �l ,VL,s BRUNSWICK TIPELI E rlgxA r AMIMAITA swn Resources Canada �� �.. Fes. L.- aa,,, a Conan rt LN T UCANADA ,9e1.4fif4'— a. .4&. ds Syy1N�+i,: Yp*R:a�hw�c: Vjue. dada - -4 UNB Sa4lir n LINIVERSITY OF N E W B R U N I C A I N T J O H N Global Demand 111,1MM) H'IMM] 6,1x»1 Ongoing reliance on fossil fuels 4,1,1»1 (share of energy consumption): 2010: 1% 2,1xx] 2035: 75% 0 'hi 111 216 21120 21125 ATLANTICA ftwna6owl ey FOUEnffU Oudmk2012 -. CENTRE FOR E N E RGY 7ri�r� 1.5 Billion people have no access to modern energy services and electricity 2nd} y UNB rNI1 n tam- A aVia: eF 21],I�IA] I Ok r P neiables 16,1» I Hydro I Nuclear 16,111»1 t Natural Gas ON 1,111»] 0 C`-'' � 111,1MM) H'IMM] 6,1x»1 Ongoing reliance on fossil fuels 4,1,1»1 (share of energy consumption): 2010: 1% 2,1xx] 2035: 75% 0 'hi 111 216 21120 21125 ATLANTICA ftwna6owl ey FOUEnffU Oudmk2012 -. CENTRE FOR E N E RGY 7ri�r� 1.5 Billion people have no access to modern energy services and electricity 2nd} y UNB UNIVERSITY OF NEW BRUNSWICK SAINT JOHN Major Everts and World Il Prices. 1 990 - 2012 160 VVTI Crude @ Chicago 141 120 Sustained global growth " I "" I Increased cocnmoditys�reculation ---► Recession Geopolitical instability too :a 8 0 Hurricanes {Katrina & Flita }_ 60 Inuasio n Iraq invades Kuwait of 9 ra q Eeonomics�kawdorrvra f 40 t Warm winter+ Mild hurricane season 0 Terrozist attaa on the U1 , /4Sfa11 h1t71'[11[ Cf151S ° OPEC quota ruts + Strong warld demand o �v r+ti +mn +aL+ � n Ln +I T ? 0 0. C 0 MD I', W 2 o W C% 0 cv , CL — _ £ ++ 0 T Soufce: KLM MaFket €ng Serafces ATLANTICA Price today is UNB CENTRE L N E RGY $100.11 �rphn LJ N I V E R S. I T Y O F N E W B R L N S W I C K A I N T J 0 H N Global Supply of Natural Gas Ira � Q atai IJon u� China Saudi Arabia Indonesia Algeria ATLANTICA ..5 CENTRE FOR E N E RGY Tip Natural Gas Producers in 2010 1 Sri � 5 Trillion C,.i is Feet 20 UNB I E R I T D F NEW B R U N S W I C K S A I N T J O H N Global Survey • New Brunswick improved its ranking from 102 (of 147) to 81 (of 157) Fraser Institute Global Petroleum Survey, 2013 ATLANTICA UNB CENTRE ririfftAn I E R I T D F NEW B R U N S W I C K S A I N T J O H N Global Survey "However, in spite of these improvements, New Brunswick is next to last in Canada, after Quebec, in terms of attractiveness for exploration and development investment." ATLANTICA * � CEM ORE NERG 1 UNB Srxfnthhn L) N I 1! E R S I T Y O F N E W B R L N S W I C K A I N T J 0 H N Energy in our region • Hydro ATLANTICA' CENTRE FOR E N E RG 1 UNB L) N I 1! E R S I T Y O F N E W B R L N S W I C K 'S A I N T J () H N Energy in our region • Hydro • Nuclear ATLANTICA�' CENTRE FOR ENERG 1 UNB L) N I 1! E R S I T Y O F N E W B R LJ N S W I C K 'S A I N T ! () H N Energy in our region • Hydro • Nuclear • Coal ATLANTICA�' CENTRE FOR ENERG 1 UNB lJ N I 1! E R S. I T Y O F N E W B R L N S W I C K A I N T J 0 H N Energy in our region • Hydro • Nuclear • Coal • Refined Petroleum (and non - refined) ATLANTICA' CENTRE FOR E N E RG 1 UNB L) N I 1! E R S I T Y O F N E W B R L N S W I C f A I N T J 0 H N Energy in our region • Hydro • Nuclear • Coal • Refined Petroleum (and non - refined) • Natural gas ATLANTICA' CENTRE FOR E N E RG 1 UNB Sa4rif An lJ N I 1! E R S. I T Y O F N E W B R L N S W I C K A I N T J 0 H N Energy in our region • Hydro • Nuclear • Coal • Refined Petroleum (and non - refined) • Natural gas • Renewables — Wind, Biomass, Anaerobic, Solar ATLANTICA' CENTRE FOR E N E RG 1 UNB Sa4rif An lJ N I 1! E R S. I T Y O F N E W B R L N S W I C K A I N T J 0 H N American oil production is projected to increase, particularly from shale sources, which has led to projections the U.S. could become energy (oil) independent by 2030. ATLANTICA�' CENTRE FOR ENERG 1 UN' Sa4rif An I L R I T Y D F NEW B R U N S W I C K S A I N T JOHN Future Supply of Natural Gas �Iirra r.• ars coutC TOM Irxrrlc ■1w lnfr4swrCK = Z -.. - rTT; jd -,'4T7 ru��rcf p�Mara I ruAMa � nr =y `a�r..�e twM+,� i ;Yr►sltlri - } Wilx OWTIA M&N Us -. _ ilee+e i.prr a.aw.r � 1 rrr�s MI*glf� ro..r Mapof Pipelines: Meal go $ Norineasl Pipeline Rtw Jo+nny owned W1101 *S* rf±llorri IrarlrxrintF At ongrlirl Ears transmissrai Cpnp"y moos PNG IS Pjpthn� & � flw kUxef +C lennewt Gas Poel.ae Company Frx.re c«w.«� srfo._ ti'C N4 lrsnsQut"c and Marltrrnts 1 _ Other Pipelines and Supply Pr©yects i w!r�eGrw ayrso iris �t Sable OtfsAore Ene(of Owndtrr Resources Supply 4Jteral rxs'sx�russris BOOM Brunsw#ck Pipeline % RJpw- Irwrnq Gana"t LNG ilrmrnal 7GP AG;" t 'i!M�Mr Ii r1� i IfR f l i! !1 . � dM�� '�i01lllirtl�ief�M'ar�A•reu4 Q1 ._il...... _ UNB 1 t;7 %S ATLANTICA ��"� CENTRE FORENERGY UNIVERSITY DF NEW BRUNSWICK SAINT . r,� . CEN OR E I r E G! 1 0 H N NB UNIVERSITY DF NEW BRUNSWICK SAINT JOHN f' K t;�S- ATLANTICA CENTRE FOR E N E RGY 4r NEW BRUNSWICK -'A IF, r y d P saint An LEGEND P. ew. 11.4. :�t 9-1 a tOYN!/! 7 awe„ w ct*w flea l7 a. n.r Z3 Rw9rr.tSa�N� J� yHfti�,d'1SMMRM "t /{arm K t;�S- ATLANTICA CENTRE FOR E N E RGY 4r NEW BRUNSWICK -'A IF, r y d P saint An I E R s I T o f NEW B R U N S W I C K S A I N T J O H N Atlantic Bridge A potential expansion on the Algonquin Gas Transmission system which could bring natural gas supply from the Marcellus and Utica basins to Algonquin and Maritimes & Northeast. ATLANTICA UNB irj kn •� CENTRE FOR E N E RGY sf I E R I T D F NEW B R U N S W I C K S A I N T Canaport LNG Import/ and potential Export Terminal ATLANTICA CENTRE FOR E N E RGY J o H N UNB Srxfnthhn I v E R I T ` ' r ' ' D F NEW B R U N I C S A I N T J o M Nova Scotia Terminals • Two proposed terminals Have stimulated other inquiries for further on -shore and off -shore exploration aTLaNTICa UNB irj kn •� CENTRE FOR E N E RGY sf I L R I T ` ' r ' ' D F NEW B R U N S W I C K S A I N T J O H N Pipelines Three key pipeline proposals TransCanada Pipeline's Keystone XL project proposed to carry crude southerly into the U.S. Gulf to access refineries ATLANTICA CENTRE FOR E N E RGY UNB Srxfnthhn I v L R I T ` ' r ' ' D F NEW B R U N S W I C K S A I N T J O H N Pipelines Three key pipeline proposals TransCanada Pipeline's Keystone XL project proposed to carry crude southerly into the U.S. Gulf to access refineries Enbridge's Northern Gateway pipeline and Kinder Morgan's Trans Mountain Expansion to access markets in the Pacific Rim via British Columbia ATLANTICA CENTRE FOR E N E RGY UNB Srxfnthhn U I E R d T Y OF NEW B R U N S W I C K A I N T J O H N Pipelines Three key pipeline proposals TransCanada Pipeline's Keystone XL project proposed to carry crude southerly into the U.S. Gulf to access refineries Enbridge's Northern Gateway pipeline and Kinder Morgan's Trans Mountain Expansion to access markets in the Pacific Rim via British Columbia TransCanada Pipeline's proposed West -East pipeline from Alberta to New Brunswick K l5 ATLANTJCA UNB ce FOR ENERGY S6 I E R I T D F NEW B R U N I C S A I N T J O H Energy East Pipeline Hardisty x aTLaNTICa UNB CENTRE �rirj()1qn FOR E N E RGY I L R I T D F NEW B R U N S W I C K S A I N T J O H N The region requires an ample supply of competitively priced energy ATLANTICA CENTRE FOR E N E RGY UNB Srxfnthhn I L R I T D F NEW B R U N S W I C K S A I N T J O H N The region requires an ample supply of competitively priced energy They will source it from foreign markets, regional markets, or proposed New Brunswick sources ATLANTICA CENTRE FOR E N E RGY UNB Srxfnthhn I L R I T D F NEW B R U N S W I C K S A I N T J O H N There is a finite window of opportunity for all of these opportunities ATLANTICA CENTRE FOR E N E RGY UNB Srxfnthhn UNIVERSITY DF NEW BRUNSWICK SAINT Demand ATLANTICA CENTRE FOR E N E RGY 1 0 H N UNB Srxfnthhn I L R I T D F NEW B R U H I K S A I N T J O H N Demand Industry must be able to operate under a competitive cost structure ATLANTICA CENTRE FOR E N E RGY UNB Srxfnthhn I L R I T D F NEW B R U N I K S A I N T J O H N Demand If energy sources are not competitively priced, industry will be operating at a competitive disadvantage ATLANTICA CENTRE FOR E N E RGY UNB Srxfnthhn UNIVERSITY DF NEW BRUNSWICK SAINT JOHN Demand And that is not sustainable aTLaNTICa UNB )qn •� CENTRE FOR E N E RGY 5f I L R I T D F NEW B R U N I K S A I N T J O H N Demand Residential users also require reasonable energy costs ATLANTICA CENTRE FOR E N E RGY UNB Srxfnthhn I v E R I T D F NEW B R U N S W I C K S A I N T J O H N Summary • Natural gas and oil development Some on -shore production Potential further investment on -shore and off -shore aTLaNTICa UNB iri An •� CENTRE FOR E N E RGY sf I v L R I T D F NEW B R U N S W I C K S A I N T J O H N Summary • Natural gas and oil development Some on -shore production Potential further investment on -shore and off -shore • Proposed crude oil pipeline: Energy East Requires regulatory approval and significant investment ATLANTICA CENTRE FOR E N E RGY UNB Srxfnthhn I v E R I T D F NEW B R U N S W I C K S A I N T J O H N Summary • Natural gas and oil development Some on -shore production Potential further investment on -shore and off -shore • Proposed crude oil pipeline: Energy East Requires regulatory approval and significant investment • Export terminals: NB part of Energy East Pipeline NS supply and customer contracts required aTLaNTICa UNB irj kn •� CENTRE FOR E N E RGY sf I v E R I T D F NEW B R U N S W I C K S A I N T J O H N Summary • Electricity infrastructure: Mactaquac, Coleson Cove, Point Lepreau, Belledune ATLANTICA CENTRE FOR E N E RGY UNB Srxfnthhn I v E R I T D F NEW B R U N S W I C K S A I N T J O H N Summary • Electricity infrastructure: Mactaquac, Coleson Cove, Point Lepreau, Belledune • Continued development in energy technologies Biomass, wind, solar, small hydro, geothermal, biofuels, hydrogen, and research partnerships ATLANTICA CENTRE FOR E N E RGY UNB Srxfnthhn UNIVERSITY SITY OF NEW BRUNSWICK SAINT JOHN Energy: Emerging Opportunities With sources from the International Energy Agency World Outlook, Deloitte, the Canadian Association of Petroleum Producers, and the Fraser Institute UNB �xijjtjohn UNIVERSITY OF NEW BRUNSWICK SAINT JOHN Shale Gas Economics 101 John Adams SVP International Stantec February, 2014 UNB �xintjohn I E R I T D F NEW B R U FBI I C S A I N T E RIGZONE - Commodities - Windows Internet Explorer provided by Stantec Consulting Ltd.. OL J. I J http:/ /www,rigzene .tern/neays/commociity,asp b +t I_X -io- Bing 0 Favorites HEAT Self Service Odl Suggested Sites o RIGZONE - Commo— y RIGZONE - Comm.... RIGZONE - Com... X ® - Page Safety Tools Most Popular k News Categories 0 IN Topics k Regional News r Search Articles Downstream News k Finance Headlines Commodity Prices k Image Library Conversion Calculator RSS Feeds Mobile News Get free industry updates F_ Daly News r Weekly News r Equipment Updates r Weekly Job Register r Monthly Event Guide srrascxis� ow mr The following graphs present commodity future prices over the periods ofthe last week, last three months and last year. All changes are measured in US Dollars and reflect daily closing prices for the forward month futures. LIGHT CRUDE OIL Lest? Cah _:...... .. _c.. _ . $89.40 5145. DD 5124: &D- S33. DO 51 DO; DO S1 D4.4D $97.D0 595.40 S96. D0 $0000 590.40 a 3Q 31 3 4 5 6 Oec Jar, Fb EIRENT CRUDE OIL $109 00 $108.00 $1394Q $110.00 $107.00 $110;00 $60.40 $106.00 3105.00 $10_ DO'S — 30 31 3 4 5 6 M_ Dec Jae Feb LL a t - H z o. NATURAL GAS La31 12 M-,,ths $5.6D %.04 56.00 $544 $5:44 SS.00 $5.20 Sd.94 S4 24.80 $3. D4 $3 Prepared 34 31 .00 — _ 3 4 5 6 �v Der Jar, F b LL f a t w z o COMMODITY NEWS Dane a, @ Internet I Protected Mode: Off 1 0 I 0 &:24 AM 2 _014 i�. UNIVERSITY OF NEW BRUNSWICK SAINT JOHN Shale Gas Development and Hydraulic Fracturing • CAPP Canadian Association of Petroleum Producers • New Brunswick Oil and Natural Gas Association (NBONGA) • CERI Canadian Energy Research Institute • EIA U.S. Energy Information Administration UNB I E R I T ` ' r ' ' D F NEW B R U N S W I C K S A I N T J O H N What is Shale? Shale is afine- grained sedimentary rock that forms from the compaction of silt and clay -size mineral particles that we commonly call "mud ". This composition places shale in a category of sedimentary rocks known as "mudstones ". Shale is distinguished from other mudstones because it is fissile and laminated. "Laminated" means that the rock is made up of many thin layers. "Fissile" means that the rock readily splits into thin pieces along the laminations. ,h UNB Srxfnthhn I E R I T D F NEW B R U FBI I C S A I N T J O H N Global Primary Energy Demand • - Significantenergy demand growth: ■ Po pulation r stand ards of I iving • r4eed all forms of -energy: ■Increasing role for renewwa bles ■ Conti n u ing reliance can herd rocarbons ■ Increasi ng ml e for non - conventional crude nil & natural gas • Technology is a key lever for sustainable growth ■ Prod uc on ■ Cost competitiveness 'Environmental performance 2 11 1 14 12M 1 r 1 4M l 0iher refit;a-dNe� ■ R 7ma and u e R- H.�k,rc ■ Nucj ■ Natural gas 0 ■ Coat -md 1sg0 2008 2020 -1 = SoUTP: lFA Works Err:rgy oLrfook 20' "! UNB I E R I T D F NEW B R U N S W I C K S A I N T J H N How i I I demand be met? -2000 F390 TC F' -70 years -f suppfy -2010 •700 - 1300 TCF "' -100+ years of sU.PPty Technological advances hawe''unlockect" YastunconventionaI gas resources, Resource assessments are ongoing ] -G.K, NEB, and others) in rnany ne%v areas, and new - opportunities continue to emerge I Eastern C.a,nad is n .shale gas, etc.] ,*Ec91mraldd R&Nmratslie Karkmtmb6r Oap& UNB Srxfnthhn I V E R S I T Y D F N E 106 105 104 10 10° 2 1Q E W CL 100 10_s 10-2 1013 10.4 B R U N S W I C I 7 Newly .[#epcas ,..,..,..,..,..,.., .,..:..:......:...._. a. ._..................._......... d sands poorly consolioated .0stones € .,,.,. ..........,. _ .,..,...,..,..,a.. ..,..,., ,.,,.,,.,,.,.. ��tl�olid� #etl sands #ones. .............................•.••.• 4••:..,................. ............................... NNS one tight gos = sarne� 10 20 30 40 so Porosity, % 0 AIPVT 1 0 H, N UNB UNIVERSITY DF NEW SRUNSWICK SAINT JOIN North America wtll ;Ww TAW ol-w� r r ll :-L'x»ti iY- yjLzwlll:-0 C7 9 UNB I E R I T D F NEW B R U N I S A I N T Y / aMngir r Figure 1.5: Major Shale Gas Basins in North America McClure Cann. we NVor�lsr� F1ov E Shale Gas Basins Devon an /Mississippian Shale Fairway t- Mains PAehrcw m �c�afMvliry GoNt P�rrr+ oMwi o en w eep+ Pulp Ovre Lswis M9a'W08 8ornolI weadferd a a Najrn lsr/ rt J Wit V*Ka FloRfaw t Mluncetlu E Floyd/ fv as"aP Nee$ N 4 1 0 H N Source: NEB website, http:// vvwev. neb. gc. ca/ ci f- nsi/ rnrgynfmtnj nrgyrprt/ nrgyvrvw /cndnnrgyvr-vw2OO9/mg /fg5_5- �� eng.jpg (accessed on November 23, 2010) 'V o UNIVERSITY DF NEW BRUNSWICK SAINT JOHN Y;h.jle Ua4 Ar -v:a ThIr.K, UryaarilL, U-w in Play "M') � fm� G�nEa I iT t I'� T� Fi KLa r�tlk 12.3513 -A. a2 r PlAyM±tMvIAM S S.'!•GU -1!0 '-'@,4 wb1 r"rvaIR� ; Mr onr; - ­0 ll!F" Pprrn Fr4w r 19.9713 -11:0 - :34 o1.3 M iYeS i11,as4 --2-M 2zm ull" t w,F G. -i -i a.e -70 nz=4C :ol 1.9Iw "Q-q =74 UNIVERSITY DF NEW BRUNSWICK SAINT JO Outlook for U.S. shale oil and gas A -# Argus Americas Crude Summit January 22, 2014 1 Houston, TX By Adam Sieminski, EIA Administrator TNB UNIVERSITY D NEW BRUNSWICK SAI NT Six key plays account for nearly all recent growth in oil and natural gas production n-LL-- Source: EIA, Drilling Productivity Report 1 0 H N UNB Sa4ri(phn I E I T D F NEW B R U N I C SAINT J O H N Key insights on U.S.. drilling productivity and production trends • The U.S. has experienced a rapid increase in natural gas and oil production from shale and other tight resources • The number of wells drilled nationwide that produce both oil and natural gas increased from 37% in 2007 to 56% in 2012 • Higher drilling efficiency and new well productivity, rather than an increase in the rig count, have been the main drivers of recent production growth • Steep legacy production decline rates are being offset by growing production from new wells • Six shale plays account for nearly 90% of domestic oil production growth and virtually all domestic natural gas production growth over the last few years • The Bakken and Eagle Ford plays account for about two - thirds of oil production growth; the Marcellus play accounts for about three - quarters of natural gas production growth UNB Se4nrin],n LI N I V E R S I T E N E W B R U N S W I C K S A I N T The U.S. has experienced a rapid increase in natural gas and oil production from shale and ether tight. resources U.S. tight ail production million barrels of ail per day 3.5 ■ Eagle Ford (TX) 2000 2002 2004 2006 20 08 2010 2012 U.S. dry shale gas production billion cubic feet per day 35 1.0 0.5 2000 2002 2004 2006 2008 . 2010 2012 30 25 20 15 10 5 0 Sources: EIA derived from state administrative data collected by Drillinglnfo Inc. Data are through December 2013 and represent EIA's official tight oil & shale gas estimates, but are not survey data. State abbreviations indicate primary state(s) 1 0 H N UNB sa4rjr n ■ Marcellus (PA & WV) 3.0 ■ Eagle Ford (TX) ■ Haynesville (LA & TX) 2.5 ■ Barnett (TX) ■ Fayetteville (AR) 2.0 ■ Woodford (OK) Bakken (ND) 1.5 ■ Antrim (Ml, IN, & OH) ■ Rest of US 'shale' 1.0 0.5 2000 2002 2004 2006 2008 . 2010 2012 30 25 20 15 10 5 0 Sources: EIA derived from state administrative data collected by Drillinglnfo Inc. Data are through December 2013 and represent EIA's official tight oil & shale gas estimates, but are not survey data. State abbreviations indicate primary state(s) 1 0 H N UNB sa4rjr n I E I T D F NEW B R U N I C SAINT J O H N U.S. natural gas prices remain well below crude oil prices energy spot prices 2012 dollars per million Btu 30 History 2012 Projections 2018 2040 u ; 25 20 ' Brent crude oil spot price Ratio: 15 3.2 Ratio. ail to gas 7.1 price ratio: 10 3.4 5 Henry Hub spot price 4 1990 1995 2000 2005 2014 2015 2420 2025 2430 2035 2040 Source: E[A, Annual Energy Outlook 2014 Early Release i * i + UN, 'Sa4 ( n U N I V E R S I T Y D F N E W B R U N S W I C K S A I T J O H N U.S. shale gas leads growth in total gas production through 2040 to reach half of U.S. output U.S. dry natural gas production trillion cubic feet billion cubic feet per day 40 History 2012 Projections 100 35 90 30 80 25 70 20 Shale gas 60 50 15 40 10 Non-associated onshore • .. 30 Non - associated offshore - 20 5 10 Associated with oil 0 Coalbed methane 0 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040 Source: E[A, Annual Energy Outlook 2014 Early Release UNB Se4nrin],n U N I V E R S I T Y OF N E W B R U N I C A I N T J O H N U.S. natural gas consumption growth is driven by electric power, industrial, and transportation use U.S. dry gas consumption trillion cubic feet 35 History Projections 30 25 20 15 10 5 0 I lectric ewer idustrial" 'ansportation 3.6 Commercial esidential 2005 2012 2020 2025 Source: EIA, Annual Energy Outlook 2014 ,Early Release 2030 2035 2040 'Includes combined heat- and -power and lease and plant fue — Includes pipeline fuel I UNB UNIVERSITY D NEW BRUNSWICK SAINT JOHN Figure 8. U.S. primary energy consumption by fuel, 1980-2040 (qUadrillion Btu) 120 100 so 60 40 20 0 1980 History 2012 Projections 1990 2000 2010 2020 2030 30% 18% 8% 2% 3 c - 2 '- 2040 cia U N I V E R S I T Y F N E W B R U N S W I C K S A I N T J O H N U.S. natural gas use in the transportation sector grows rapidly with the largest share in freight trucks natural gas use by mode trillion Btu billion cubic feet per day 900 _ 2.5 800 Approximate crude oil equivalent, 700 _ (thousand barrels per day) 2040 2.0 Freight trucks 290 600 Freight rail and marine 71 Buses 38 Light -duty vehicles 9 1.5 500 400 - ' 1.0 300 200 0.5 Light -duty vehicles 100 0 0.0 2010 2015 2020 2025 2030 2035 2040 Source: EIA, Annual Energy Outlook 2014 Early Release 1 UNB 'Sa4(n I E I T D F NEW B R U N S W I C K S A I N T J H N L.S. natural gas grass exports exceed 5 tcf in 2025 U.S. natural gas imports and exports trillion cubic feet per year billion cubic feet per day 10 History 2012 Projections 2025 8 5.4 tcf of exports (14.8 bcflday) 4 2 0 Alaska LNG exports -2 Pipeline imports from Canada -4 2.0 tcf of imports {5.4 bcf /day} -6 2000 2005 2010 2015 2020 Source: EIA, Annual Energy Outlook 2014 Early Release LNG imports 2025 2030 2035 -25 20 15 �+ 10 5 r0 -5 - -10 - -15 2040 UNB Se4nrin],n UNIVERSITY OF NEW BRUNSWICK IC AIN1T U.S. Natural Gas Monthly Supply and Disposition Balance Bcf 3,54{} 3.000 2,544 - 2,000 1 -roo 1,444 12 1 0 H N 4 1984 1 985 19CM A 5 2" 241}5 2410 — U.S. Natural Gas Gross ithdrawals — U.S. Natural Gas Total Consumption LL,urufi: U.S. Energy Information Ad ni in istrnk--- UNB Se4nrin],n I E R I T D F NEW B R U N I S A I N T Figure 3 Dollars per Million 14 BTU Natural Gas S13ot Price at Nana► Huh ff IIN 10 M on 0 CJ Five -Fear Flange (2006 - 2010) 2012 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Source: Energy Information Administration, U.S. Department of Energy, 1 0 H N UNB UNIVERSITY DF NEW BRUNSWICK SAINT s 15 1512 A $6 S3 so 1999 Monthly average Henry Hub prices N'1 ME 1999-2009 (by January 8) 1 0 H N 11 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 UNB Soume-- hrtp.//b&srra. nm?-edWgo?aG)VMaAF ip-a - qjPfiGe!?..9spx UNIVERSITY DF NEW BRUNSWICK SAINT JOHN BIDIRECTIONAL FLOW PHYSICAL FLOW REVERSE BY BACKHAUL HENRY HUB OTHERS METER B-ME PIPE LINE LL HENRY HUB TEXACO SEA 'GAT HERING RID El;N SYSTEM ERIDGELIME NGPL iT 1 T TEXACO HENRY GAS PROCESSING PI.ANT I I I " I T I T TRUNKLINE N65PL SABINE TRUNK.LIN; TRANSCO ]EFFES43N [TRKW SOOTHER N TEXAS MAINLINE ACADIAN GULF ITRK) COLUMBIA ��IC�G�EiNE VS LAND NAIURAL GAS SOUTH GULF UNIVERSITY OF NEW BRUNSWICK SAINT JOHN -,, bj NEW ou _ �$ L V �' #6r FC _ }r LL LF - La i , ,a.. r• , si LLpr �2-aM MMLJ -., P IPM L3,r -,, bj NEW ou _ �$ L V �' #6r FC _ }r I E R I T D F NEW B R U N I C S A I N T J O H N New Brunswick Natural Gas: Pipelines, LNG, existing and potential resource production Campbelfton ,.! Bathurst ° _ -•'0 Edmundst-on 26 UNB Srxfnthhn I v E R I T F N E W B R U N S W I C K S A I N T J O H N Natural Gas and Oil Industry in New Brunswick: • First oil well drilled at Dover in 1859 • 300 oil and gas wells were drilled in NB by 2010 • Since 1990, 40 oil wells drilled and 40 Natural Gas wells • 29 natural gas and 18 oil wells are currently producing • Since 1990, 49 wells have been hydraulically fractured for oil and gas in NB UNB UNIVERSITY DF NEW BRUNSWICK SAINT JOHN New York Boston d Fredtnicton "anfax l 4 f ti � k k % NP . L =;!a' - . L< � a- -kpas 14 Lap wAft �F.tiie�k T O ® u Source : Corridor Web site UNB UNIVERSITY DF NEW BRUNSWICK AINT JOHN Figure 1.1: Schematic {Geology of Natural Gas Resources Land surface Conventional non - associated gas Coatbed methane Conventional • asscoated gas y Seal _ Oil Sandstone Tight sand gas ce a 11a) u.s. m-ro u ��to ► nay." Source: fittp. / /ea lefordshaleblog. corn /2010j03/03 /�.%rhat- is -a -. hole- a.s- I)Iay/ (C)eceiiii)er 15, 2010 UNB Srxfnthhn UNIVERSITY DF NEW BRUNSWICK SAINT JOHN Exploration Process: Normally 4 Stages; I, I n itma I ex orati a airborne ted-miques, SLIch as gravity gradinrnetr f this covers large areas acid sees signifijc nt q Io i l tt-uctur sf hick have th-e �ntentiar to contain h rocarbons. 2. Geochernical surreys m the ciround may he conducted, such as soil gas hydrocarbon geochemistry. . Geophysical sure ( ism is ) Iookinq for sp Fic locations where hydrocarbon may exist s t u �titi s (hydrocarbon traps) n signi 4. Grill Mloration yrell If successfLil the wells WOU Id be p rej -)a red for production, if not the cotupany would move to a iiother target. UNB I E R I T D F NEW B R U N S W I C K S A I N T J O H N Geophysical Exploration (Seismic): 1. Used to identify underg ro i geological stm-ctu r s such as farif ts, fractures and Petr0leLF111 bearing rin formations and ,aquifers. 2. A seismic wave is created on the surface of the ground tusing a controlled energy source (Vi rosers track, or small explosive ch a rge ). UNIVERSITY DF NEW BRUNSWICK SAINT JOHN Geophysical Exploration (Seismic): 3. -S ei sink too a ve tra ve Is into t he e a rth a rrd is reflec t ed off of su b s urfa ce fiD rm ati o ins ba ck to S Li rf aice where it is recoirde d by receivers (geopI ones). 4. Analyzing the time it takes for the seis•mic waves to redact off of subsurface formations and return to the surface, a geop ysici &t can map subsurface formations and anomalies. 0 a M Developing From Shale: Natural Gas From Leasing to Production 1. Signing Leases [Up to 9 Mos) We sign leases with landowners and secure permits from regulatory a ut ho rities. 2 10 Years SO- YearTimeline Years f. 2. � 1 d, i C+DnstrULtie.nActivity 5' 1 7 S. Building Pipelines (Up to2 Mos., Connecting pipelines are bulltto carry the natural gasfrom thewellstoa pipe system and onto market, 21 Partnering In the &I arcellus 2. Building the Well Pad (up to 8 Mos.} We build a well pad from which we can drill multiple wells. 20 Years 6. Recia inning the Site f, Upto 3Mos.} We strive to restore the landscape around the well pad to its original contours. Yea rs = 50 Yea rs In the Marcellus, it takes up to two yearstoplan and build a well site, and then drill and pre pare the well to produce natural gas. Marcel Ius wells are expected to produce for up to 50 years. 3. Drilling the Well p to 2 Mos.) We use a rig to drill thousands of feet dawn and then thousands of feet horizontally through the shale. o Years ter+ v- r± 1 7. Producing rUp to 50 Year;, We produce natural gas for decades from a " per manent" site.. ave rag ing less than an acre. We monitor the well throughout its life to verify its integrity. 4. Hydraulic Fracturing (Up to i Mo.) We use hydraulic fracturing to free natural gas trapped In the shale. 40 so Years Years B. Plugging and Restoration When the well stops producing, we plug It with cement at multiple depths to permanently seal It, remove all producing equipment and restore the surface to its natural state. UNIVERSITY DF NEW BRUNSWICK SAINT JOHN Drilling Operations: * Shale zone accessed through vertical, then directional or horizontal drilling Shale gas formations are deei) in N B (150 0 tu to greater t h a n 2000111) Water aquifers are typically 100 -250m deep layers of steel casing and grOL1t: ■ 5L1 rft9.L -. zas—n g 1 ntt i 11 9th- o7 casiI1c] UNIVERSITY DF NEW BRUNSWICK SAINT JOHN Responsible Development Means Building Layers of Protection Chevron's Marcellus wells are designed and drilled with control systems to protect groundwater throughout the life of the well, which can be decades. U 500' Lam' zoo0' 3.000' 4000' S,000- 6.CGU 7.000- GrcY naw 31er YWe11 _SOP n— AL a1 4000' r �+ An eaann+'re of our Marcellus Sna* owraLone.Seaic of r,eii site ana well bore ari! imreascd for cla i[y. 4 1 Partnering in the Marcel &us ,W�v UNIVERSITY DF NEW BRUNSWICK SAINT JOHN Figure 1,2: Multiple Horizontal tells Drilled from a Single Well Pad Source: Statoil website, Statoil strengthens US shale gas position, http:/ /www.statoil.com/en /NewsAndMe€ iajNews/ 2010 /Pages /26MarMarcellus.aspx (accessed on May 27, 2012) UNB I E I T D F NEW B R U N S W I C K S A I N T J O H N Multi -Well Pad a F Vertical Well Pad Advantages of Multi-Well Pads t Horizontal eI I Pad WI P. F Re d uctio n of I a iid use fof the- pad. access, roads & pipelines Ea si er m o nitorin g of' site a n d enf orc em ent of regL1 I ation s C on ducive to a st a blish i rig a n d enforce traffic /t w< ki r7 g c o rr[d ors Optinn ization of I ocati on ■Establish and enforce noise, light.. ak emission and wat -er Iii. its - 4•iur,r. E:RC'B b3lI I ER ITY DF NEW BRUNSWICK SAINT Figure 1.3: A Typical Horizontal Well and Multi -stage Fran rrcatn Alm Ora-undwatnr AgrjrfcrA r'rrve a Wr!! r anN:dvai Wat4r WeN; t Iran tf Source: http : / /www.hydraulicfracturing.com/ Process /P;�ges /informatioii.aspx ng !KL gnq Cd I— ..... -.,., v. ,r x041 1 0 H N UNB 5anr ft)hn U N I V E R S I T Y D F NEW B R U N S W I C K S A I N T JOHN How does hydraulic fracturing work? Approximately 4,000 cubic meters (4 million itres ) of water is used to fracture each stage of a well m rnm*6 =I Total water used at the 4 major Shale Plays in the US is less than 111/b of . total rater usage in each state Fracing f laid consists of 99.51% water and sand and 0.49'Dfio chemical additives ■ All chemical additives .are �. SC i:11 disclosed byr industry to regulators before (racing o cc.0 rs°:- Fypi.ca I Hoftonta I Shale Wel I UNB. s6r,ntphn UNIVERSITY OF NEW BRUNSWICK SAINT Figure 1.4: Composition of a Frac Fluid Gelling Agent Scale rt Acrdw . . . . olli Adjusting M, 1% Breaker 001% 0.0886 0.123% 1 0 H N Crosslinker 0,007% Iron Control 0,004% .o,rrosion WNW ).002% Source., Arthur, J. Daniel and Jon W. Seekins, "Water and Shale Gas Development", ALL Consulting, Presentation at the National Association of Royalty Owners, Pittsburgh, October 7, 2010, pp. 20. UNB Sa4lq(phn I E I T D F NEW B R U N S W I C K S A I N T J O H Guiding Principles for Hydraulic Fracturing 1- We will safeguard the quality and quantity of regiDnal surface and groundwater resources, through Seu nd welll re construct-Jon practice , sourcing fresh water ;3Iterrratives where appropriate, and recycling water for reuse as much -a s prlica l _ 2 . We will Fneasu re and disclose our water use with tie goal of continuing to ned uc e our effect on the er'.4 ronment. 3_ Me will support the development of fracturing fiu id additives with the least environ nienta I risks- 4- We will support the disclosure of fractuf "n g fluid additives. 5_ e will coati ntse to advance, coBa borrite! on and corn niun irate technologies and best practices that reduce the potential e nvironr rental risks cf h y d ra u:'i r- fracturing. 1.at�ii.'iY� "tJ:ri Yil! ,. v. d.. .. 1��.•_ v 1 nv .,�, . ®�,_, ILtIhl3iFf7.:lr1 �•1 cr_�easarr �..rri.:rL�ir��.,..a. d _,...a_:a.ua�r.. .esa�i .a, =yr u.i �.er��n.�a•uu ur aa+sukir .,�. a wc� •..u., �. a�l�r•�i rM �r�r�a ii1R� Sao "��y„' " ,,. f � -� ors �.� -�F� a r a -•.F •r�, d�l�r.� r�Fe y e7aw �• ►Y " - � w h ..I.. Y s 11. i-A .r ui ili a �.,r p�' ei r--1�7 a 7 r ar�i Fa Lal.w MW �� °�� .�. ®: .3 men ..:r�� ■��a® ..�.- I E R I T D F NEW B R U N I C S A I N T J O H N Hydraulic Fracturing (i~racing) - con"t • Flow back water is re- cycied for reuse in other frays or sent to designated, regulated waste disposal ,centers. • Time to build a well pad, drill well, fray: and complete well is generally -8 weeks in ce well is in p rod uc- -tion the well head aid water storage tanks are Ieft on site and the rem aiiider of the well pad is reclaimed Each weJl pad is approximately 3-5 aicres and can acc:ori modate up to 20 wells UNB Srxfnthhn UNIVERSITY DF NEW BRUNSWICK SAINT JOHN McCully Field,, Sussex I E I T D F NEW B R U N I C S A I T J O H N McCully Held., Sussex P-all rw 4w CA 1,I) UNIVERSITY DF NEW BRUNSWICK SAINT JOHN McCully I Field., Sussex UNIVERSITY DF NEW BRUNSWICK SAINT JO 'what does this mean for Canada? • Jobs (Upstrea ni from Westerai Canada Natural Gas) • 317,1)o1) - die nUmber of jobs natural gas sector is expected to provide (direct, indirect and induced) across Canada by 2D35 ■ 9,693,O - nLiniber of person years of employment provided by natural gas industry betv�een now and 2r135 ■ 339 billion - amount natural qas employees vvill earn over next 25 years • Revenue, Royalties, Taxes (To all Canada froni Westerri Caii. N) ■ 15,1 billion - amount natUraI gas provided in export revenue ■ S1.5 trillion - natural q -as expected to contribution to Canadas GDP over the neat 25 }dears ■ S199 billion - natural alas i nddu sb-y will gene rate in royalties ■ S1711 billion - natural gas industry will generate in federal taxes ■ $130 billion - natural gas industry y will generate in provincial taxes UNB Srxfnthhn UNIVERSITY DF NEW BRUNSWICK SAINT JOHN Types of Economic Benefits Di rest Bemefi is the spending by natural gas companies and ether sectors of the economy that are also stimulated by these expenditures Indirect Benefits: supply chain oppoi1tu nities Iindticed Benefits: rOUnds of transactions thr0ugh0LA the =ec0i10r Y set of by workers, Fired directly or indirectly, spending their wades on q eod s and services UNB sajrytPhn UNIVERSITY DF NEW BRUNSWICK SAINT JOHN Canadian Jobs created by Upstream NG Industry in British olumbia (thousands) �_� *It4tir�iaelull9��dg�gl •5•.n�ljt Inht.a�ma7Wt■ �rrtl� ■1�.4�Kwcerl�, I,r,3�lYo3t,Y ���_� ° T% ��1�rlylsagvlrcmenlal '�.p�hly�=- e�idt�lEiacwnluall � _,_ "LUuIJ be muii ta•_ %i hik in pipdhive uld L4G i 1111�'J e�_'Sl L.F 411 C - - 140_0 1011_0 N Indir-ed NUJJ i IndrPra Eon — 0 Direct 40-0 �I 1l11�4 at e. CM: Ft r,, m .of rvrfi'flj 4M a ,vraom of &u VA]k f* MAwff& CdfmdW =a ,►rfAt MfJ UNB Srxfnthhn UNIVERSITY ELF NEW BRUNSWICK SAINT JOHN Natural Gas Workforce Information: (MarceHus Shale EducaUan and Training Cesiber) Each well req Li ires 420 hicl ivid dials workhiq hi 150 d iffere iit occtil)atioiis to complete mid produce gas. from oiie well Each well creates approx 1.3 Direct FTE`s I)er year If you include Direct, I id rest aiid Iiiducecl jobs the estimates ire 3 — 58 FTEs I)er well, varies by jaarisdiction If 200 wells. per year... 2,600 Direct jobs per year and 6,400 to 11,600 total jobs per year, stip[)orrt d by the natural gas industry UNB Srxfnthhn UNIVERSITY DF NEW BRUNSWICK SAINT JOIN Supply Chain Opportunities: • ConstrLlCti011, manufacturing and transportation • Drilling, completion acid production • Geological and geophysical Pipeline wid associated hifrastrUCtUre * Environmental & other C.011S lting services * Legal & lead NatUra I gas distri'bLiti011 • Service i iidustries logistics & di tribUtion • R eta i1, food, health, -e d ucation & fiiiaiicial servi ces UNB SaittfIihn I E R I T D F NEW B R U N S W I C K SAINT J O H N Not Just Traditional NG Businesses: Work boots, uniforms & uniform cleaning * Well pad cleaning * AItemate I10using — RVs, mini—homes * Fencing * Conc.rete * Landscaping irrigation * Security, EMTs * E nq i neers, I wye. rs,, acc:ounta iits,, surveyorsf etc * Home sales, hotels.F restatirantsF entertammeiA., retail, auto sales (especially pickup trucks) * Cateri ig UNB Srxfnthhn I E R I T D F NEW B R U N S W I C K S A I N T J O H N CERI Case Study • Canadian Energy Research Institte • Potential Economic Impacts of Developing Quebec's Shale Gas —March 2013 UNB Srxfnthhn UNI ER ITY OF NEW BRUNSWICK AI NT JOHN Economic Impacts of Developing Shale Gas in Quebec This report does not comment on the possibility of lifting the moratorium that currently exists in Quebec, nor any other regulatory or policy changes; it is strictly a study of the economic impacts of developing the Mica Shale were it to happen. in Quebec, there is not currently any significant oil and gas service industry presence, which can lead to significant drilling cost over -runs, and does not allow for companies to achieve economies of scale. This study makes the assumption that the Utica Shale will be developed in an environment where a moderate level of oil and gas services are in place, allowing a certain degree of cost reduction to be established for drillers in the region. In other words, this study assumes that the costs of wells drilled reflect the cost of field development, rather than exploratory wells. Consequently, this study will not reflect any of the cost of the expensive exploratory phase. A shallow Montney horizontal well from northeast BC was used as an analog to estimate the cost of drilling the Mica Shale in Quebec due to the similar depth of the formation and length of horizontal leg assumed to be used in the Utica Shale (1,850m vertical depth, 3,500m measured depth). 55 Each well is assumed to cost roughly $7 million which includes all costs from construction, drilling and completion. A type curve from a BC Horn River well was used as an analog for the estimated production ,profile for a Utica Shale well due to their similar geologic characteristics. There is insufficient production data from the Utica Shale to apply a production profile from the Utica Shale to this study. UNB 'Sa4(n I E R I T D F NEW B R H N I C S A I N T J H N Two scenarios are investigated in this study. In the first scenario, drilling takes place to build and maintain a production level of approximately 5003 million cubic feet per day (MMCFPD) — Quebec's current consumption of natural gas. In the second scenario, drilling takes place to build and maintain a production level of approximately 1,500 MMCFPD, which would allow for 1,000 MM FPD of export capacity on top of Quebec's own consumption needs. These production levels are exogenous. In order to model this development, the following assumptions were made: 9 The area of development was restricted to the fairway between the Yamaska fault and Logan's Line (area 2) and is assumed to be the only area of development in this study and makes up an area roughly 2,400 sq. miles in size (see Figure 1.14). This has been the area with the greatest level of activity and development to date and carries with it the least uncertainty. 0 60 percent of the area is suitable for drilling. • Utica Shale is developed exclusively with horizontal wells, with 1,500m horizontal legs and 326m inter -well spacing (5 wells per section). This amounts to 7,206 potential well locations. * 104 percent drilling success rate. * Produced gas is drys (i.e., no liquids), and does not require additional processing. UNB I E I T D F NEW B R U N I K S A I N T J O H N Figure 1.15: Production Profiles of Two Production Scenarios — 150 } mmcf/d —500 mmcf/d 2 1800 1600 1400 1200 1000 c °_ soo -30 600 0 400 200 0 5 10 15 20 Years Source: CERI UNIVERSITY DF NEW BRUNSWICK SAINT JOHN Table 1.4: Drilling Intensity for Various Production Profiles Drilling Intensity (wells per month) IP = 10 MMCFPD (yrs 1- 10/11 -25) IP = 5mmcf/d (Base Case) (yrs 1- 10/11 -25) IP = 2 MMCFPD (yrs 1- 10/11 -25) 500 MMCFPD 3/2 5/3 15/10 1,500 MMCFPD 4/0 15/9 45/30 Source: CERI UNB Srxfnthhn UNIVERSITY DF NEW BRUNSWICK SAINT JOHN Figure 1.16: Production Profiles and Cumulative Production- for Type Well IP Variations iii 9 8 7 c E 5 Q 2 1 w 5 10 15 20 TEXT, ODI C 3000 � c� '7 1-111 1tt Years i10 mmcffd —6 mmcffd —Z mmeffd — Curn_ 10 — — Cum_ b - -- Cum_ 2 Source. CERI I E I T D F NEW B R U N S W I C K S A I N T J H N Key Findings • Over the period 2012 -2036 the estimated capital investment in Qu6bec is $7.9 billion and $23.5 billion for the 500 MMCFPD and 1,500 MMCFPD cases, respectively, for base case drilling intensity. • Total Canadian GDP impact as a result of investment is estimated to be $37.3 billion and $112.0 billion for the 500 ilLr'1MCFPD and 1,500 MMCFPD cases, respectively, for base case drilling intensity. Roughly 54 percent is realized in Qubec, 40 percent in Alberta, and the remaining 6 percent is spread over the rest of Canada. • Canadian employee compensation is estimated to total $12.9 billion and $35.7 billion for the 500 MMCFPD and 1,500 MMCFPD cases, respectively, for base case drilling intensity. Approximately 63 percent of the wages will be earned in Quebec, 30 percent in Alberta, and the remaining 7 percent is spread over the rest of Canada. • Employment in Canada (direct, indirect and induced) is expected to grow by 293,000 and 550,000 person -years for the 500 MMCFPD and 1,500 MMCFPD cases, respectively, over the time period for base case drilling intensity. Roughly 69 percent is realized in Quebec, 23 percent in Alberta, and the remaining 5 percent is spread over the rest of Canada. • Tax revenue in Quebec from development of the Utica Shale is estimated to total $7.0 billion and $21.0 billion over the 25 -year period for the 540 MMCFPD and 1,500 MMCFPD cases, respectively, for base case drilling intensity. • Tax revenue in Alberta from development of the Utica Shale is estimated to total $3.0 billion and $9.1 billion over the 25 -year period for the 500 MMCFPD and 1,500 MMCFPD cases, respectively, for base case drilling intensity. • Supply cost for the Utica Shale base case is estimated to be $5.35/MCF (thousand cubic feet) for base case drilling intensity. UNIVERSITY OF NEW BRUNSWICK SAINT JOHN Figure 1.17: Change in Variable vs. Change in NPV for Base Case, '$2012 (Base Case Scenario — Supply Cost: $5.35/ mcf) 1.5 CE E 1 0.5 �i �L Sc, u ,_ e: ( E P. I IP = cf/d Case A -3 -i Change in variable UNIVERSITY DF NEW BRUNSWICK SAINT JOHN Figure 1.18: Change in Variable vs. Change in NPV for Highly Productive Case, $2012 (Highly Productive Scenario Supply Cost: 4.15 mcf) Source; CERI IP =1 f'11'1 f/ Case 1.5 :apex -*-- Opex Gas Price —SIP E 0 CL z -0,5 -4CFx6 -3Cr -2CF/6 -10% 0% 10yo 0% 0% 40% Change in Variable Source; CERI UNIVERSITY DF NEW BRUNSWICK SAINT JOHN Figure 1.19: Change in Variable ors. Change in NPV for Poorly Productive Case. $2012 (Poorly Productive Scenario — Supply Cost: $11,64) Source: CERI 1 P _ 1'1`11'1 cf/d Case 6_ �Capex err —Opex Gas Price -SIP 4 ,F E 2 - a CL 0 r� z c �o c -4 -6 -40% -3,0% -20% -10% 0% 1094 20% 3a °'o 40% % Change in variable Source: CERI UNIVERSITY DF NEW BRUNSWICK SAINT JOHN Table 1.5: Quebec Royalty Revenues for 500 MMCFPD Scenario at Constant Prices and the EIA Forecast 500 MMCFPD Highly Productive Wells Moderately Productive Wells Poorly Productive Wells Price ($ /mcf) Royalty Revenue (Nominal $MM) Royalty Revenue (Nominal $MM) Royalty Revenue (Nominal $MM) 3.04 2,365 1,805 878 4.00 3,643 2,831 1,388 5.00 5,314 4,236 2,197 6.00 6,771 5,750 3,625 7.00 8,101 7,090 4,941 10.00 12,238 11,564 9,883 EIA Forecast* 5,496 4,103 2,030 *$0.50/mcf prerniuiii added to EIA forecast dL e to Quebec's proximity to prerniurn markets. :Source: CERI UNB. sa,ntphn I E R I T D F NEW B R U N I K S A I N T Table 1.6: Qu6bec Royalty Revenues for 1,500 MMCFPD Scenario at Constant Prices and the EIA Forecast 1,500 MM+CFPD Highly Productive Wells Moderately Productive Wells Poorly Productive Wells Price ($ /MCF) Royalty Revenue (Nominal $MM) Royalty Revenue (Nominal $MM) Royalty Revenue (Nominal $MM) 3.00 6,797 5,246 2,694 4.00 10,928 8,494 4,357 5.00 16,443 12,995 7,003 6.00 21,517 17,939 11,631 7.00 26,060 22,272 15,865 10.00 40,733 36,986 31,790 EIA Forecast* 15,943 11,996 5,980 *$0.50 /macf pre miuIII added to EIAfore cast dLie to Quebec's proximity to pre MiLlm IIIOrket.s. Source: CERI J 0 H N UNB U I E R I T D F NEW B R U N S W I C K S A I N T J O H DP, Employment and Tax The cumulative additional Canadian GDP over the time period 2012 -2030 as a result of developing the Mica Shale in Quebec is $37.3 billion and $112 billion for the 500 MMCFPD and 1,500 MMCFPD cases, respectively (see Tables 1.7 and 1.8). Canadian employment (direct, indirect and induced) from development of the Utica Shale is estimated to be 293,000 and 880,000 person years for the 500 MMCFPD and 1,500 MMCFPD cases, respectively. Figures 1.20 and 1.21 show the distribution of the associated Canadian employment over the time period 2012 -2036. Compensation of employees in Canada is estimated to be $12.9 billion and $35.7 billion for the 500 MMCFPD and 1,500 MMCFPD cases, respectively. Quebec earns the largest share of GDP (54 percent), employment (09 percent), and employee compensation (03 percent) since the drilling activity occurs in Quebec. Alberta earns the second largest share of GDP (40 percent), employment (23 percent), and employee compensation (30 percent). The remaining proportion of each category is spread across the rest of the provinces. UNB Srxfnthhn I E p I T D F NEW B R U ICJ I S A I N T J O H N Table 1.7. Economic Impacts of Utica Shale Development in Quebec 500 I' ' M FPD Scenario, 2012 -2036 *Government abroad Source: CERI I E I T Y D F NEW B R U N S W I C K S A I N T J H N Table 1.8: Economic Impacts of Utica Shale Development in Quebec 1,500 I' IMCFPD Scenario, 2012-2036 *Government abroad Source: SERI UNIVERSITY DF NEW BRUNSWICK SAINT JOHN Figure 1.20: Jobs (x 1,000) Created and Preserved in Canada as a Result of Utica Shale Development in Quebec 500 MMCFPD Scenario,. 2012 -2036 16.0 14.O 12.0 10.0 ..0 6.0 4.0 2.0 0.0 Source: CERI wt.` ' � (0 � m Induced ■ Indirect ■ Direct UNIVERSITY DF NEW BRUNSWICK SAINT JOHN Figure 1.21. Jobs (x 1,000) Created and Preserved in Canada as a Result of Utica Shale Development in Quebec 1,500 MMCFPD Scenario, 2012 -2036 50.0 45.0 40.0 35,0 30.0 25.0 20.0 15.0 10.0 5.0 0.0 Source: CERI ■ Induced ■ Indirect ■ Direct UNIVERSITY DF NEW BRUNSWICK SAINT JOHN Economic Impacts ARKANSAS: • F'Iarket 'value 1,2010) - $13.1 Killion • Employment( t_ 08) — 9,164 ONG industry • Industry average salary $72,579; state average $3.6,800 (2t" 10) S.rm: litme rr .%AAi1%n 2011 UNB Srxfnthhn I E R I T D F NEW B R U N S W I C K S A I N T J H N Table 1.9: Tax Receipts as a result of Utica Shale Development in Quebec, 2012 -2036 600 MMCFPD Indirect Tax Personal • Corporate Alberta 884 1,447 British Columbia 41 35 8 83 Manitoba 10 8 1 20 New Brunswick Newfoundland & Labrador Northwest Territories 0 0 Nova Scotia Nunavut 0 0 0 0 Ontario 181 146 61 388 Prince Edward Island 0 Quebec 31198 2t938 ., 61988 Saskatchewan Yukon Territory 0 r 0 0 Source: CERI I F R S I T D F NEW B R U N S W I C K S A I N T J O H N Table 1.10: Tax Receipts as a Result of Utica Shale Development in Quebec, 2012 -2036 1,5001 I CFPD CAD Million Indirect Tax Personal Income Tax Corporate Tax Sum y , _ 2,652 4,341 2,14.E 9,137 • r 122 105 24 2.50 r . 31 24 4 60 ' 21 18 4 4 i • •. 4 1 i 8 7 3 1 • ' 1 0 6 1 - 12 10 2 24 0 0 0 0 • 543 439 182 1,164 1 1 0 2 - r ' 9,592 8,812 2,559 20,963 24 15 9 4 0 0 6 0 Source: CERI LINIVERSITY D F NEW B R U N S W I C K S A I N T J O H 12131111 HET IMPROVED 111SCOVERIESf 12,/31112 COMPANY RESERVES REVISIONS RECOVERY EXTENSIONS SALES PURCHASES PRODUCTIDN RESERVES RANK ExxonMobil BP Chesapeake Energy ConocoPhillips Devon Energy Anadarko Encana BHP Equitable Resources Range Resources EOG Resources Southwestern Consol Chevron Cabot Oil and Gas PX Energy Apache Ultra Petroleum Occidental GiEP Resources Linn Energy Shell Pioneer Natural Res. Noble Energy Newfield Exploration Seneca Resources Forest Oil Energen PDC energy Fidelity E &P 26,366 (2,839) O 4,045 181 503 1,524 26,370 1 13,552 (1,853) 885 225 1,149 232 661 11,231 2 15,515 (6,080) 0 3,317 704 14 1,129 10,933 3 10,148 (483) 27 451 0 9 685 9,467 4 9,507 (1,118) 0 1,124 1 2 752 8,762 5 8,365 635 0 418 199 26 916 8,329 6 8,432 (1,005) 0 385 429 11 734 6,660 7 2,730 328 3 128 0 3,297 458 6,429 8 5.347 (756) O 1,654 694 0 259 5,986 9 4,010 77 0 996 73 0 217 4,793 10 6,046 (1.736) O 478 386 15 380 4,036 11 5,887 (2,088) O 919 137 O 564 4,017 12 3,480 (285) 0 954 0 0 156 3,994 13 3,646 318 5 166 6 33 440 3,722 14 2,910 207 0 869 37 0 252 3,696 15 3,983 (405) 0 409 217 6 407 3,369 16 2,976 (157) 0 366 1 314 313 3,186 17 4,779 (2,383) 0 820 0 0 249 2,966 18 3,365 (748) 317 19 0 236 300 2,889 19 2,749 (241) 0 331 0 32 249 2,622 20 17675 (559) O 407 0 1,176 128 2,575 21 3 „259 (1,045) 16 393 6 139 404 2,352 22 2,531 (485) 0 320 17 9 161 2,197 23 1,976 (266) 0 601 164 0 160 1,087 24 2,329 (525) O 181 80 1 151 1,755 25 675 (56) 0 436 0 0 66 988 26 1,397 (479) 0 94 17 O 81 913 27 1,397 (144) O 61 0 11 76 809 28 672 (289) 0 173 6 87 32 604 29 380 (123) O 88 2 0 33 239 30 Totals 159,664 (24,583) 1,253 20,758 4,506 6„ 153 11.937 147,476 I E R I T D F NEW B R U N S W I C K S A I N T J O H N Questions ? ,0)) UNB Srxfnthhn