Resource World Magazine

50 www.resourceworld.com D E C E M B E R / J A N U A R Y 2 0 1 5 OIL & G A s A s 2015 comes to a close, the only thing certain about the oil and gas industry is the uncertainty about the shape of its future. It's not hard to see the areas of concern: oil prices under US $80/bbl; natural gas prices hovering around $4; fracking under attack from all sides; LNG projects that may or may not go forward; pipeline projects running afoul of environmentalists and First Nations…all stress even those experienced in dealing with the roller coaster that typifies the resource industries. The question is, what will the future really look like and how is the industry planning to deal with it? With figures from Bloomberg News showing crude oil prices sitting at just below US $80/bbl and natural gas at US $4.19/ MMBtu, there's considerable forecasting, with much of it suggest- ing oil prices may recover slightly but can be expected to settle around $75 in the near term. That has Bank of Canada governor, Stephen Poloz, estimating that if the low price of oil persists it will knock a quarter-point off the growth of Canada's gross domestic product (GDP) in 2015. He told the Senate banking committee that losing a quarter per- centage point off the country's economic growth would raise concerns. Slowing the economy that much is significant when the bank is predicting moderate growth in the 2-2.5% range and a quarter point matters when Canada needs more than 2% growth to help close the output gap and create jobs. But the Canadian Association of Petroleum Producers (CAPP), in a recent report, indicated it expects Canadian crude oil produc- tion to grow to 6.4 mb/d by 2030 at an average growth rate of 4% annually, driven largely by oil sands production growth of 1.9mb/d to 4.8mb/d in that time frame. Natural gas production is expected to increase 25%, led by higher levels of tight and shale gas development. Many markets are interested in Western Canadian crude, par- ticularly China, India and Europe, and opportunities exist to replace foreign crude oil imports in Canada and the US at refin- eries along the East, Gulf and West coasts. Demand from global markets could be met – if access to tidewater is achieved for proj- ects now in the regulatory process and others being considered. Diversifying markets for Canada's oil and natural gas produc- tion continues to be a key priority for the industry. While the International Energy Agency, a year ago, forecast the US could become the world's largest oil producer by 2015, by 2035 our neighbours to the south still will need 3 million barrels per day of crude oil imports to meet their demand, CAPP predicts, suggest- ing Canada is well positioned to supply this need and beyond to new global markets. The report says pipelines remain the primary mode of transpor- tation for oil but it notes rail is being considered as an alternative, largely due to pipeline opposition by environmentalists and pro- tracted timelines for regulatory approval. Many new pipelines and pipeline expansions have been proposed, and there are plans to convert natural gas pipelines to oil service to meet the demands of central and eastern Canadian refineries, with potential to link Western Canadian oil production to ports in Atlantic Canada. In the US, a burst of drilling in shale and other long-overlooked rock formations has moved them closer to energy independence. Daily oil production is more than 8 million barrels in the US, the highest level in 25 years. Natural gas production is up nearly 25% in just six years and the US is poised to overtake Russia as the world's largest energy producer, creating more than 2 million new jobs by 2020. In Canada, the east and west coasts have different outlooks. While chances of bringing energy sector prosperity to the Maritimes took a nosedive when the Nova Scotia government banned fracking, BC's government, which has no issue with fracking, is staking its future on the development of liquefied natural gas export facilities and the infrastructure, serving them on the province's west coast. "We will…not allow a process that most Nova Scotians are just simply not comfortable with at this time," Nova Scotia Energy Minister, Andrew Weaver, said after a report concluded the province couldn't make fully informed decisions about fracking without more research. Maritimes Energy Association CEO, Barbara Pike, estimated fracking could have boosted the economy by $1 billion annually and warned that banning it means Nova Scotians will have to pay higher energy costs. And Paul Barnes, CAPP's Atlantic Canada manager, said government ignored industry experts and regula- tors in western Canada, where fracking has been done safely for decades. All is not lost for the East, however. TransCanada Pipelines OutlOOk 2015 for Oil & Gas by Bruce Lantz the only thinG ceRtain aBout the oil & Gas industRy is the unceRtainty aBout the shaPe of its futuRe.

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