Industrial Gas Users Association 2005 Seminar

1
COALITION OF INDUSTRIAL ENERGY CONSUMERS PAST,
PRESENT AND FUTURE
Presented by David Goffin, Canadian Chemical
Producers Association

• Industrial Gas Users Association 2005 Seminar
• May 12, 2005

2
Contents of this Presentation

• What is the Coalition?
• Why was it formed?
• What are the major energy "policy" opportunities?
  
• What has it done?
• What are its plans for the future?

3
The Coalition of Industrial Energy Consumers
Members Association of Major Power Consumers in
Ontario Canadian Chemical Producers'
Association Canadian Fertilizer
Institute Canadian Manufacturers and
Exporters Canadian Plastics Industry
Association Canadian Steel Producers
Association Cement Association of Canada Chemical
and Allied Industries Group Forest Products
Association of Canada Industrial Gas Consumers
Association of Alberta Industrial Gas Users
Association Mining Association of
Canada Observer Syncrude Canada Ltd.
4
Natural Gas Forward PricesCurrent vs Year-Ago
Source BP Canada Energy Company
5
Canada's 2001 Response

• Cabinet Reference Group on Energy established
• Reported end of 2001
• But 9/11 and declining natural gas prices
  temporarily blunted our energy focus

6
North America's 2001 Response

• North American Energy Working Group (NAEWG)
  announced in April, 2001
• Jointly chaired by NRCan, Mexican Energy
  Secretariat and U.S. Department of Energy
• To foster communications among governments and
  energy sectors
• To enhance North American energy trade and
  interconnections
• Six expert groups covering science and
  technology natural gas energy picture
  electricity energy efficiency critical
  infrastructure protection

7
The 2003 Energy Wake-up Call

• Second price spike stimulated strong interest
  among industrial energy consumers in forming a
  Coalition
• Initial focus natural gas but extends to all
  sources of energy and energy efficiency
• Energy producers and transporters had already
  formed the Energy Dialogue Group
• Both organizations initially focused on the
  September, 2003 Council of Energy Ministers (CEM)
  meeting
• This meeting led to the structuring of the CEM
  energy issues agenda

8
The Coalition's Recommendations

• Continue commitment to energy markets
• Achieve mutually supportive energy and
  environmental policies
• Remove barriers to energy efficiency and resource
  recovery
• Encourage energy diversity (nuclear, coal bed
  methane, renewables, etc.)
• Develop both Mackenzie Delta and Alaska gas
  through Alberta Hub
• Facilitate LNG infrastructure
• Support technological innovation (e.g. cooperate
  in energy RD for cleaner coal technologies,
  etc.)
• Continue positive policy environment for oil
  sands development
• Continue to facilitate First Nations support for
  pipeline routings

9
Natural Gas Costs around the World(US per
million BTUs)
Canada 5.75
UK 6.40
Russia 0.85
Belgium 5.90
South Korea 4.80
USA 6.25
Iran 1.25
Japan 4.80
North Africa 0.80
China 4.55
Kuwait 1.25
Qatar 0.65
Taiwan 5.00
Oman 1.00
India 2.95
Saudi Arabia 0.75
Trinidad 1.60
Singapore 3.20
Indonesia 2.70
Sources Bloomberg, Economic Times, EIA,
Fertecon, Financial Times, Pace, Platts, World
Bank
Bolivia 1.00
Australia 3.75
Argentina 1.10
Updated November 2004
Source ACC
10
Industrial Gas Demand
14 or 2.5 BCF/d reduction since 2000
Source Agrium Inc.
11
Coalition 2003-2004 Activities

• Development of the Coalition paper and
  recommendations
• Preparation of papers on specific energy issues
• Establishing relationships with governments and
  Energy Dialogue Group
• Numerous federal and provincial government
  meetings
• Participation in 2003 and 2004 CEM meetings
• Support for Conference Board and Public Policy
  Forum initiatives
• Development of the energy impacts on
  manufacturers study

12
CEM Energy Issues Framework

• Regulatory efficiency
• Energy efficiency and demand side management
• Technology
• Energy Information
• Investment
• Human Resources

13
Smart Regulation for Energy Projects the
Structure

• Government released Smart Regulation Report on
  Actions and Plans in March
• Smart regulation interdepartmental theme tables
  will strengthen management and coordination of
  regulatory process
• Environment Canada's chemical, energy, mining and
  forestry sector tables feed into theme table on
  Sustainable Development

14
Smart Regulation for Energy Projects the
Specifics

• DFO environmental process modernization plan
  includes improved timelines and consistency in
  major project reviews
• DFO national standards for seismic exploration
• Implementation of East Coast environmental
  assessment MOUs
• Consolidation of federal environmental
  assessments

15
Other Key CEM Issues

• Energy efficiency/DSM ADMs Steering Committee
  supported by Working Group
• Technology identifying technology priorities,
  based on needs of industrial sector, leading to a
  strategy
• Energy Information consultants report
  completed on stakeholders views

16
The Coalition's Future Agenda

• Provide the industrial energy consumer voice at
  all relevant venues
• Participate in Energy Council of Canada "CEM"
  meetings at the end of May
• Provide submission and participate in September
  Council of Energy Ministers' meeting
• Assess results of Coalition energy study and how
  to best use them
• Participate in sustainable development and
  regulatory theme tables
• Assess NAEWG for opportunities

17
LNG And Power Generation Have The Biggest
Potential To Affect Prices Before 2012
Source Global Energy Advisors
18
Electricity Generation Capacity Additions by Fuel
Type, 2001-2025 (gigawatts)
Source U.S. EIA
19
The Future Of Gas Prices Depends Most On LNG

• How will the market supply the next 4 Tcf of
  growth, much of it to fuel power generation?
• Will LNG timing work out for both regas and
  liquefaction?
• Will LNG be a price taker or market maker?
• How to handle perceived security of LNG supply
  and safety issues?
• Can North American gas markets compete for global
  LNG supply?
• If LNG growth does not materialize
• How much unconventional gas can become available
  and at what price?
• Demand destruction how much more power and gas
  demand can be shed?

Source Global Energy Advisors
20
U.S. LNG Imports, 1990-2025(trillion cubic feet)
History
Projections
New terminals
Existing terminals
Source 2005 Annual Energy Outlook, EIA
21
Natural Gas Wellhead Price, 1970-2025(2003
dollars per thousand cubic feet)
Source U.S. EIA
22
The 2005 World Energy Congress Conclusions
The principal conclusion of the 2004 World Energy
Congress is that sustainable energy systems are
achievable, but the challenges are many and need
to be tackled urgently if sustainability is to be
achieved in this century.

• All energy options must be kept open and no
  technology should be idolised or demonised.
• A larger share of global infrastructure
  investment must be devoted to energy.
• A more pragmatic approach to market reform is
  emerging.
• The reliability of electricity supply is an
  important priority.
• Regional integration of energy supply systems can
  boost access and energy supply security.
• Climate change is a serious global concern.
• Technological innovation and development is vital
  to reconciling expanded energy services for more
  equitable economic development with protection of
  the environment.
• Research and development must be more strongly
  and consistently supported than has been the
  case.
• Public trust must be won and retained.
• Public understanding and trust starts with the
  youth.

Source Energy Council of Canada
23
Conclusion A Long Term Issue

• High energy prices, especially for gasoline and
  other transportation fuels, are straining family
  budgets and the profits of many businesses said
  U.S. Energy Secretary Sam Bodman on April 15
• The problem "has been years in the making and it
  is going to be years in solving"