1. Canada’s Energy Futures 2011: Shifting Trends Preview of Key Results & Comparison with Past Projections Abha Bhargava Matthew Hansen Bryce VanSluys 30 th USAEE/IAEE North American Conference Washington, DC October 9-12, 2011 1

2. 2 The NEB An independent quasi- judicial regulatory tribunal established in 1959 An independent quasi- judicial regulatory tribunal established in 1959 Two primary functions: Two primary functions: –Regulatory mandate –Energy information mandate

3. 3 Energy Futures - Background Flagship product published since 1967 Flagship product published since 1967 –Approximately every 4 years Last Report in 2007, with reference Case Update in 2009 Last Report in 2007, with reference Case Update in 2009 –Presentation focused on comparing trends between 2007, 2009 and 2011 projections Key Objectives Key Objectives –Provide unbiased, relevant, comprehensive, expert analysis on energy supply, demand and its economic implications and serve as a reference –Provide stimulus for discussion with and amongst stakeholders –Inform policy and business decisions of key risks and uncertainties facing the energy future

4. NEB’s Integrated Energy Modeling Framework 4 Key Inputs: energy prices, oil and gas drilling, supply costs, well productivity and decline rates, electricity unit level characteristics, and other relevant projections Crude Oil Model Refinery Balances Model Natural Gas Model NGL Model Informetrica Macroeconomic Model Energy 2020 (Energy Demand, Electricity)

5. 2011 Energy Futures Methodology: Reference Case and Four Sensitivities Reference Case 2010-2035 Fast and Slow Economic Growth Sensitivities High and Low Price Sensitivities 5

6. 6 Real GDP Oil Price (WTI, 2010 US$/bbl) Gas Price (Henry Hub, 2010 US$/MMbtu) AAG* 2010-2035 20202035 AAG* 2010-2035 20202035 AAG* 2010-2035 Reference Case 2.3%$102$1151.5%$6.00$8.002.4% Fast 3.2%$105$1211.7%$6.50$8.902.8% Slow 1.8%$100$1121.4%$5.60$6.801.7% High Price 2.3%$142$1552.7%$7.40$10.703.6% Low Price 2.3%$72$850.3%$5.40$6.401.5% *AAG=Average annual growth Five sensitivities represent a wide range of possibilities

7. At a glance: Canadian energy demand, supply and trade, 2010-2035 7

8. Energy supply at record levels Unconventional production grows for oil, gas and electricity Unconventional production grows for oil, gas and electricity –Oil Sands becomes the dominant source of production more than tripling by 2035 –Tight and shale gas makes up for declining conventional gas production –Electric fuel mix becomes cleaner with changes to coal capacity 8

9. Canadian energy demand growth slows Energy demand growth slows moderately compared to history Energy demand growth slows moderately compared to history –Residential energy use is nearly flat over the projection –Industrial sector grows the fastest Changes in demand trends are the result of efficiency and conservation programs, and higher energy prices Changes in demand trends are the result of efficiency and conservation programs, and higher energy prices –Slowing economy and lower population growth are additional factors Government programs result in biodiesel and ethanol demand increasing faster than other fuels Government programs result in biodiesel and ethanol demand increasing faster than other fuels 9

10. Supply – Demand trends have implications for trade and infrastructure Supply and demand trends will effect energy trade Supply and demand trends will effect energy trade –Oil – net oil available for export triples –Gas – net gas available for export declines until 2020, and flat for the remainder –Electricity – net electricity available for export nearly doubles Supply side shifts (volume and location) will have implications for infrastructure Supply side shifts (volume and location) will have implications for infrastructure 10

11. 11 Oil Sands Conventional East Coast Crude Oil: 2011 oil projections surpass past projections

12. Natural Gas Production: lower gas prices, lower conventional (non-tight) production, varying tight gas projections, Mackenzie push-backs and varying LNG assumptions 201020202030 AB Production (Bcf/d) 2007 11.978.894.95 2009 10.237.64 2011 10.456.145.78 BC Production (Bcf/d) 2007 2.612.292.23 2009 3.065.92 2011 2.997.049.36 WCSB Conventional (no tight, Bcf/d) 2007 11.037.914.77 2009 6.734.15 2011 6.763.212.51 WCSB Tight (Bcf/d) 2007 1.901.270.76 2009 4.886.48 2011 4.906.868.30 BC Shale (Bcf/d) 2007 0.00 2009 0.151.34 2011 0.291.853.36 NWT (Bcf/d) 2007 0.001.201.90 2009 0.011.20 2011 0.020.951.20 LNG Imports (Bcf/d) 2007 0.502.052.85 2009 0.140.50 2011 0.660.800.98 12

13. 13 Electricity Generation: 2011 projections have similar overall generation, with larger shares of gas and renewables, and less nuclear and coal

14. Demand growth similar to 2009 Reference Case in aggregate, but sectors tell a different story Residential Commercial Industrial Transportation 14

15. Recent EIA AEO Projections: Trends are shifting for the U.S. as well 15

16. Conclusions Significant shifts have occurred in the last 5 years in the field of energy in North America Significant shifts have occurred in the last 5 years in the field of energy in North America While supply of natural gas has seen an upside potential, demand for energy has come down While supply of natural gas has seen an upside potential, demand for energy has come down Tight oil plays is another success story seen across North America, with production increasing at least in the medium term Tight oil plays is another success story seen across North America, with production increasing at least in the medium term Electricity sector is seeing a growing share of renewables Electricity sector is seeing a growing share of renewables For copies of the Energy Futures projections, see www.neb- one.gc.ca (includes detailed data appendices) For copies of the Energy Futures projections, see www.neb- one.gc.ca (includes detailed data appendices)www.neb- one.gc.cawww.neb- one.gc.ca 16