1. CANADIAN NATURAL GAS Security of Supply Graham Flack Associate Assistant Deputy Minister, Energy Policy Natural Resources Canada Forum on Continental Energy Monday, March 21, 2005 Woodrow Wilson Center Washington, D.C.

2. Presentation Outline Canada’s Contribution to North American Security of Natural Gas Supply Ensuring Future Adequacy of Natural Gas Supply –Role of Market –Role of Governments and Regulators Conclusions

3. Undiscovered Resources Adequacy of Natural Gas Resources (Tcf) Other Canadian Frontiers WCSB (includes Ontario) Arctic Islands Onshore Territories MacKenzie Delta/ Beaufort Sea 138 121 170 46 1 6 1 4 36 12 28 9 52 18 3 2 1 57 Newfoundland Offshore Scotian Shelf Remaining Reserves Gas Basin Produced Discovered Resources 9 B.C. Offshore

4. Security of Natural Gas Supply – Canada’s Contribution Canada has a very high level of natural gas supply and is a major contributor to the North American security of supply picture: –Net exporter - nearly 60% of Canadian natural gas production is exported to the U.S. Represents about 17% of total U.S. natural gas consumption About 94% of total U.S. natural gas imports are from Canada –Canada produces nearly 25% of total North American natural gas supplies

5. Midwest: 8% of U.S. Demand West: 4% of U.S. Demand Northeast: 4% of U.S. Demand Adequacy of Pipeline Infrastructure

6. Canada’s Future Natural Gas Supplies While conventional natural gas supplies are increasing only moderately, demand continues to grow at a steady pace. Together, this implies that new sources of natural gas will be required New supply sources of natural gas emerging: –coalbed methane –Mackenzie Delta and Alaska –east coast offshore –west coast offshore? (moratorium) –liquefied natural gas –compressed natural gas (offshore Newfoundland) –methane hydrates

7. Ensuring Future Adequacy of Natural Gas Supply In the long-term, the prospects for ensuring adequate supplies of natural gas will depend on the ability of, and incentives for stakeholders to: Develop resources; and, Develop infrastructure required to connect resources to market Ensuring the adequacy of natural gas supply in North America for the long-term requires an: –Active role by market participants; and, –Active role from government and regulators

8. Role of Government To ensure that a favorable climate for investment in natural gas resources and infrastructure exists requires that government: 1.Continue to endorse a market-based energy policy 2.Promote initiatives to foster long-term security of natural gas supply 3.International collaboration 4.Create a smarter regulatory framework that is clear, predictable and efficient

9. Role of Government 1.Our market-oriented energy policy framework is designed to: Attract investment and stimulate economic growth; Protect the environment; and, Ensure a secure and competitively priced supply of energy for both domestic and export markets Strong success in these areas: Oil and natural gas industry invested about $27 billion in 2003; more investment than any other sector or industry Our energy policy framework will continue to evolve in response to changes in global energy markets and the needs of industry and consumers

10. Role of Government 2.Promote initiatives to foster long-term security of natural gas supply Continue to promote innovation, technology and energy efficiency improvements Continued commitment to R&D initiatives Promote the diversification of natural gas supply, and all energy sources, including renewable energies Together, these initiatives support our continued commitment to the sustainable development of Canada’s energy resources

11. Role of Government 3.International Cooperation North American Energy Working Group The NAEWG, a group of senior officials from Canada, the U.S. and Mexico, has been successful in fostering cooperation among the three nations Last month, the NAEWG released North American Natural Gas Vision, the first report of its kind to amalgamate public information on natural gas in all three countries. Memorandum of Understanding – National Energy Board and Federal Energy Regulatory Commission

12. Role of Government 4.Regulatory Initiatives Our system of regulation serves us well, but our needs are constantly changing Examples of regulatory cooperation or initiatives designed to ensure an efficient regulatory environment Smart Regulation Initiative Atlantic Energy Roundtable Mackenzie Valley Cooperation Plan

13. Conclusions Canada has an abundance of natural gas resources and the necessary infrastructure to deliver natural gas to market Our market-oriented energy policy framework has been successful in providing us with a competitively priced, secure source of natural gas supply Mature conventional North American natural gas basins, ever- increasing demand, and higher prices are attracting investment New sources of natural gas supply – coalbed methane, liquefied natural gas, Mackenzie Delta, Alaska, and methane hydrates – will arrive Governments and regulators have a role to play in creating a favorable climate for investment in resources and infrastructure