Pacific Access:  Overview of Transportation Options
January 2012

While not a recent concept, oil tankers mooring off British Columbia’s west coast have caused quite a stir. In fact, oil tankers have been loading crude off the west coast since the 1,150 kilometre Trans Mountain Pipeline (TMX) opened in 1957. Thus far, Kinder Morgan’s Westridge Terminal remains the only oil terminal on Canada’s west coast.

This, however, may change.

There are currently 3 pipeline proposals and a rail proposal to transport crude oil from Alberta’s oil sands to the west coast. All aforementioned proposals require marine terminals to be built to transport crude oil to energy-hungry Asian markets. As such, these proposals are drawing a lot of attention—from industry, environmental groups, First Nations and various governments.

Overview of Eastern and Atlantic Canada's Petroleum Industry and Economic Impacts of Offshore Atlantic Projects (2010 - 2035)

There has been a recent renewed interest in onshore hydrocarbon development in the provinces of Quebec, Ontario, New Brunswick, Prince Edward Island, Nova Scotia, and Newfoundland and Labrador due to the region's significant potential. However, a host of issues including regulatory initiatives, public opposition, a lack of large scale commercial projects, and the infancy of the petroleum industry in this region, makes it difficult to establish an outlook for potential development over the long term. Meanwhile, offshore projects in Nova Scotia and Newfoundland and Labrador have become the most relevant developments outside the Western Canada Sedimentary Basin (WCSB) over the last couple of decades and are expected to continue to be the focus of the industry over the coming decades.

Emission Abatement Potential for the Alberta Oil Sands Industry and Carbon Capture and Storage (CCS) Applicability to Coal-Fired Electricity Generation and Oil Sands

In an increasingly greenhouse gas (GHG) conscious environment, Alberta has faced criticism for its heavy emissions within the oil sands industry and its utilization of coal-fired generation. Oil sands development is an expanding industry with production expected to approximately triple in the coming decades; consequently, emissions will rise markedly and if left unhindered, the oil sands will be a significant emitter of GHGs in the future. Simultaneously, the higher emissions from coal power generation compared to other forms of electricity generation have incited a largely uncertain future for coal generation. Furthermore, the advent of a carbon tax in Alberta and Canada’s commitment to the Copenhagen Accord, have endorsed the proliferation of lower GHG intensity technologies. Consequently, under the aforementioned pressures, various stakeholders have hastened to devise schemes and promote technologies that reduce emissions in order to avoid significant future costs (both social and financial) that could hinder development. This has resulted in a myriad of technologies which range from improvements in efficiency, to deep-cuts in emissions through sequestration.

 Economic Impacts of Drilling, Completing and Operating Conventional Oil Wells in Western Canada (2010-2035)

Conventional oil production from the Western Canada Sedimentary Basin (WCSB) has been declining since the early 1970s after reaching a peak of approximately 2 million barrels per day.  In 2010 production from the basin had declined to 0.9 million barrels per day and it appeared that the decline would continue unabated. 2010 can now be viewed as a restart year for the conventional oil industry not just based on the resurgence in the number of wells drilled, driven by oil price, but more importantly based on the number of horizontal wells drilled driven by the success stories in shale gas developments. The industry is returning to old, thought to be depleted, reservoirs equipped with horizontal well drilling techniques to recover more of the resource that remains in the ground.  The number of horizontal wells grew from 24 percent of oil wells drilled in 2006 to 62 percent of oil direct wells in 2011 and the future looks like the trend will continue. This report examines the growth potential in drilling activity, the effect of change towards horizontal drilling, and the increased production potential from conventional oil within the WCSB.  In addition, the capital requirements for development and operation coupled with the economic impacts both for Canada and the United States are estimated.

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The exploration and development of natural gas resources within the Western Canada Sedimentary Basin (WCSB) peaked in 2006 with the completion of over 23,000 new wells, a production level of 17,500 mmcf/day and royalties paid to Alberta, British Columbia and Saskatchewan totalling $8.2 billion. This included conventional resources; coalbed methane (CBM) and early developments of shale/tight gas resources (BC Montney area). The worldwide recession of 2008 affected the gas industry in the same fashion as other industries around the world. Demand for gas retracted, gas prices fell and new drilling activity slowed. Between 2007 and 2010, new drilling activity within the WCSB dropped by close to 70 percent. Production started to decline as new wells failed to counter the natural decline from existing wells. In concert with the production decline, prices dropped resulting in provincial royalties of just $2 billion. At the same time, shale gas developments in the US ramped up to the point where gas supply was starting a push back of Canadian imports into the US. The golden age of gas within the WCSB was in trouble and the future is unclear! This report presents a “realistic” development forecast for the WCSB gas industry in the form of drilling activity, both vertical and horizontal wells, production levels and royalty payments.  In addition, the capital requirements for development and operation of existing and future wells are calculated and the economic impacts for Canada and the United States are estimated.

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Economic Impacts of Staged Development of Oil Sands Projects in Alberta (2010-2035)

The Alberta oil sands industry is once again expanding with a number of major projects under development and still more proposed for the future, reflecting a considerable growth that was deferred during 2008-2009 recession. New pipelines will be needed to ship bitumen crude to destinations in the United States and/or Canada’s west coast to reach Pacific Rim markets. This report looks at export pipeline proposals, namely TransCanada’s Keystone XL, Enbridge’s Northern Gateway and Kinder Morgan’s Trans Mountain expansion and evaluates the economic impacts of staged development of Alberta’s oil sands projects according to the proposed in-service dates of these pipelines. The report shows that without additional pipeline capacity, the benefits that will be lost in Alberta, Canada and the US are substantial.

 A Decade of Staged Oil Sands Growth (2010 - 2020)

Canadian Oil production, which includes conventional oil, diluents, bitumen and synthetic crude oil (SCO), from the Western Canada Sedimentary Basin (WCSB), is estimated to exceed 2.9 million barrels per day (bpd) by the end of 2011. In addition after accounting for a resurgence of conventional oil developments and the completion of construction for 3 new oil sands projects, the production capacity out of the WCSB will approach 3.1 million bpd by the middle of 2012 and is forecasted to continue to grow crossing the 3.5 million bpd by 2013. At that point in time production will have exceeded the operational capacity of the export pipeline system leaving the WCSB either west to the port of Vancouver or east/ southeast to the Ontario and US PADD 2 markets? The next tranche of oil sands projects requires additional export capacity either in the form of new pipelines (Keystone XL , Gateway or Kinder Morgan Trans Mountain Northern Leg) or increased rail transport (CN Pipeline on Rail). This study examines the economic impacts of developing these oil sands projects which have been approved by the regulator and are awaiting increased export capacity to access the market. These impacts include the construction and operation of oil sands projects alone and does not include the impacts associated with the construction or operation of the pipelines or rail systems.

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Economic Impacts of New Oil Sands Projects in Alberta (2010-2035)

This study focuses directly on the economic impacts of the Alberta oil sands between 2010 and 2035.  Using Input-Output (I/O) economic modeling, the report quantifies the economic impacts of the oil sands on GDP, employment, employee compensation, and government revenues.  The model incorporates the economic interrelationships between the Canadian federal, US federal, Canadian provincial, and US state economies.  Therefore, it is able to capture the direct, indirect, and induced effects of oil sands infrastructure investments and ongoing operational expenditures on all of the above-mentioned economies.

North American Natural Gas Dynamics:    Shale Gas Plays in North America – A Review

If the recent boom is any indication, the future potential of shale gas is nothing short of dramatic.

Given the sheer magnitude of the resource potential of shale gas, it is essential to understand shale gas and its potential role in an environment of declines in conventional gas production in both Canada and the US. For the investor, it is important to understand the various players and the various shale gas plays. And for anyone involved in the energy industry—or interested about energy—it is prudent to be aware of this unconventional source of natural gas that is representing an increasingly large and growing share of the recoverable resource base.

North American Natural Gas Market Dynamics:  Global LNG – A Review

The global liquefied natural gas (LNG) market has grown significantly over the past decade, with new emerging LNG markets and a growing number of LNG producers.  A plethora of new LNG re-gasification and liquefaction projects that are currently under construction will commence operations over the next few years, and construction will begin on many of the proposed LNG projects that are now in the planning phase.  According to International Energy Agency (IEA) estimates, annual LNG trade will more than double from 2008 levels to approximately 17.7 TCF, or 48.4 BCFPD, by 2035.

North American Natural Gas Dynamics:  Coal-fired Generation in North America

Coal power plants conjure up strong images for individuals and groups on both sides of a raging debate about the future of electricity generation and the environment.

Whether they are changes in national legislation and regulation, or state/provincial programs and initiatives promoting reductions in GHGs or increasing the use of various renewables, many jurisdictions are trying to discover the balance between minimizing environmental impacts and maintaining a modern, reliable electricity system.  While the province of Ontario is moving steadily to permanently shut down all coal-fired generation by 2014 – as part of the Open Ontario Plan – other jurisdictions suggest that advances in coal technology, such as supercritical coal-fired generation, CO₂/O₂ combustion, CO₂ capture and sequestration and Integrated Gasification Combined Cycle (IGCC) offer cleaner coal options.

North American Natural Gas Market Dynamics:  Natural Gas Vehicles – A Review

This paper explores the possibilities of introducing natural gas vehicles (NGVs) to the North American Transportation sector.  Noting that NGV’s have much to offer in terms of reduced greenhouse emissions, increased efficiencies and, in many cases, lower operating costs, the paper nevertheless argues that the place for NGVs in the overall transportation mix will be a small one for years to come.  Grandiose visions of an NGV revolution, such as the Pickens Plan, are found to be infeasible over the next decade.  Instead, the idea of introducing NGV’s into certain transportation corridors, as recommended by NRCan in their report “Natural Gas Use in the Transportation Sector”, is considered both possible and desireable.   However, it will require time, effort, education, incentives, and infrastructure development to establish natural gas as a true alternative to crude-based fuels.

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