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The Cow and the Ostrich - Predicting gas prices

The Cow and the Ostrich - Predicting gas prices. Dave Russum Geo-Help Inc. Canadian Institute Conference, June 2003 . Qualifications. Not an expert on price! Geologist – spent 25+ years exploring and developing resources Four years assessing Canada’s gas resources/reserves/production

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The Cow and the Ostrich - Predicting gas prices

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  1. The Cow and the Ostrich- Predicting gas prices Dave Russum Geo-Help Inc. Canadian Institute Conference, June 2003 www.geohelp.ab.ca

  2. 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

  3. 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 www.geohelp.ab.ca

  4. Natural Gas In Canada – Where are we today? 100Tcf FUTURE? Kyoto? Weather? NAFTA? OPEC? LNG? Politics? Terrorism? N.Am Economy? Storage volumes? Greenspan? SUPPLY:Exploration Remaining Reserves 60Tcf Avg Prices (39 Years) (9 Years) 17Bcf/d DEMAND:Production, Exports 7Bcf/d 1986 2002 www.geohelp.ab.ca

  5. 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 www.geohelp.ab.ca

  6. Canada’s Resources and Reserves ? 15000 Tcf Ultimate Resources Total Conventional + Unconventional 592Tcf 1000’s Tcf Rate of Conversion: Accessibility Technology Price Investor commitment Discovered 340Tcf Raw Gas Sales Gas 204Tcf Remaining Unproduced Remaining Reserves 60 Tcf www.geohelp.ab.ca

  7. 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 www.geohelp.ab.ca

  8. Understanding Remaining Resources – Accessible and Economically Available www.geohelp.ab.ca

  9. Predicting future accessible resources www.geohelp.ab.ca

  10. Undiscovered GIP WCSB CGPC vs. GSC Estimate (Excludes Appreciation) CGPC 1998 & GSC 1991 Data CGPC 133 Tcf vs. GSC 258-49=211 Tcf www.geohelp.ab.ca

  11. World Gas Reserves (BP, 2001) Total 5476 Tcf North America: 5% of Reserves 30% of Production 30% of Consumption www.geohelp.ab.ca

  12. Canadian Annual Marketed Gas Production by Area (Bcf – CAPP Data) WCSB (97%) www.geohelp.ab.ca

  13. Future Marketable Gas Excluding Alberta Conventional (Bcf/Yr) www.geohelp.ab.ca

  14. Future Marketable Gas Canada (Bcf/Yr) 3% Decline to 2005 5% Decline after www.geohelp.ab.ca

  15. Future Marketable Gas Prediction (Bcf/Yr) $$$ $ Export to US Rest of Canada Alberta Demand www.geohelp.ab.ca

  16. 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 www.geohelp.ab.ca

  17. 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 www.geohelp.ab.ca

  18. Prediction AECO Gas price $Cdn/mmbtu (Historic Prices, GLJ, 2003) Decade of volatility Actual Prediction www.geohelp.ab.ca

  19. 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 www.geohelp.ab.ca

  20. Thank you For more information contact: Dave Russum Geo-Help Inc dave@geohelp.ab.ca www.geohelp.ab.ca www.geohelp.ab.ca

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