www.geohelp.ab.ca
The Cow and the Ostrich- Predicting gas prices
Dave Russum
Geo-Help Inc.
Canadian Institute Conference, June 2003
www.geohelp.ab.ca
Qualifications
• Not an expert on price! • Geologist – spent 25+ years exploring and
developing resources• Four years assessing Canada’s gas
resources/reserves/production• Developed a detailed, independent and up-to-
date assessment of Canada's gas supply• Geo-Help provides consulting and information
services to the upstream oil and gas industry
www.geohelp.ab.ca
The Irony of Predicting Future Natural Gas Price
• Predictions are destined to be wrong “if you believe them”
• The more recognised the expert the more likely to be wrong
• Focus on short term guarantees price will continue to bounce off an upward sloping floor and ceiling
• Price cannot be viewed in isolation
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Natural Gas In Canada – Where are we today?
SUPPLY: ExplorationRemaining Reserves
DEMAND: Production,
Exports
FUTURE?
Kyoto?Weather?NAFTA?OPEC?LNG?
Politics?Terrorism?
N.Am Economy?
Storage volumes?
Greenspan?
Avg Prices
1986 2002
100Tcf
60Tcf
7Bcf/d
17Bcf/d
(39 Years) (9 Years)
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Present
• I believe Canada’s gas production has peaked
• WCSB produces 97% of all Canada’s Gas• Over 50% of all sales gas is exported to US• The price for WCSB gas is controlled by
supply and demand issues in the United States
• North America’s gas industry mature compared to rest of world
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Canada’s Resources and Reserves
UltimateResources
Total Conventional + Unconventional
Discovered
Raw Gas
Sales Gas
Remaining Unproduced
RemainingReserves
? 15000 Tcf
60 Tcf
Rate of Conversion:
AccessibilityTechnology
PriceInvestor
commitment
592Tcf 1000’s Tcf
340Tcf
204Tcf
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WCSB Conventional Gas
• 25%(?) re-invest in domestic E&P
• Balance to: – oilsands, – acquisitions,– international,– shareholders
• No chance of reversing production trend unless this changes
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Understanding Remaining Resources – Accessible and
Economically Available
Accessible
Accessible with restrictions
Inaccessible
<$6.00Cdn /mcf Present Future Exclude
>$6.00Cdn /mcf Future Future Exclude
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Predicting future accessible resources
Present Post 2010 >2025
Available now and future
Available post 2010
(Post 2025?)
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Undiscovered GIP WCSB CGPC vs. GSC Estimate (Excludes Appreciation) CGPC 1998 & GSC 1991 Data
Present Post 2010 >2025
104 Tcf vs. 77 Tcf
23 Tcf vs. 54 Tcf
7 Tcf vs.
80 Tcf
CGPC 133 Tcf vs. GSC 258-49=211 Tcf
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S. Am
EurN.Am
SE Asia
Afr
Middle EastFormer
Soviet Union
CANADA 1%
World Gas Reserves (BP, 2001)
North America:5% of Reserves
30% of Production30% of Consumption
Total 5476 Tcf
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0
1000
2000
3000
4000
5000
6000
7000
AB BC Sask Terr E. Coast Total
1999
2000
2001
2002
Canadian Annual Marketed Gas Production by Area
(Bcf – CAPP Data)
WCSB (97%)
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Future Marketable Gas Excluding Alberta
Conventional (Bcf/Yr)
0
1000
2000
3000
4000
5000
6000
7000
UnConv
E Coast
Territories
Sask
BC
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Future Marketable Gas Canada (Bcf/Yr)
0
1000
2000
3000
4000
5000
6000
7000
UnConv
E Coast
Territories
Sask
BC
Alberta3% Decline to 2005
5% Decline after
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Future Marketable Gas Prediction (Bcf/Yr)
0
1000
2000
3000
4000
5000
6000
7000
UnConv
E Coast
Territories
Sask
BC
AlbertaAlberta Demand
Rest of Canada
Export to US$
$$$
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Future with no changes
• Canada’s production has peaked• Future gas will be more expensive to
produce and take considerable time to bring to market
• With higher prices LNG transport from offshore becomes economically viable
• LNG may eventually set a price cap for our gas
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How we can change the Future?
• Future predictions that require “hockey stick” reversals to current trends need to be scrutinised with extreme care.
• Currently very little long term planning, investment or R&D by Industry or Government
• Canada needs a realistic natural gas plan
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Prediction AECO Gas price $Cdn/mmbtu (Historic Prices, GLJ, 2003)
0.00
2.00
4.00
6.00
8.00
10.00
12.00
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
$ C
dn
/MM
btu
AE
CO
Actual Prediction
Decade ofvolatility
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The Challenge:More long-term planning,
long-term investment, more real Exploration
and R&D
VS.A significant decline in
gas production
with implications for
the North American
energy picture
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Thank you
For more information contact:Dave Russum Geo-Help Inc
www.geohelp.ab.ca
