AN EXPLORATION & PRODUCTION PERSPECTIVE ON THE WEST COAST OFFSHORE B.C. NATURAL GAS SYMPOSIUM MAY 7, 2003 Dave Collyer Vice President, Limited
AGENDA INTRODUCTION OPPORTUNITY EVALUATION FRAMEWORK ( TECOP ) Technical Economic Commercial Organizational Political / Societal CURRENT ASSESSMENT OF WEST COAST OFFSHORE NEAR TERM PRIORITIES KEY MESSAGES 05/07/03 SCProj4/Fendlt/David Collyer/Presentations/West Coast Conference_May 2003 2
SHELL CANADA S UPSTREAM BUSINESS Mackenzie Delta West Coast Offshore Foothills - Maintain/generate cash Peace River ( oil sands ) - Grow? - Grow Peace River Foothills N.S. Offshore West Coast Offshore Initial Shell land position 1961 Exploration in 1960 s 14 wells drilled Regional 2D seismic Farmout to Chevron 1971 Moratorium 1972 Environmental Assessment Panel 1986 West Coast not a current exploration priority but a strategic growth option of interest 05/07/03 SCProj4/Fendlt/David Collyer/Presentations/West Coast Conference_May 2003 3
SHELL S OPPORTUNITY EVALUATION FRAMEWORK - TECOP TECOP T ECHNICAL Prospectivity, costs, technology, HSE E CONOMIC Economic attractiveness C OMMERCIAL Market, fiscal, competition O RGANIZATIONAL Competencies, resourcing, partners P OLITICAL / SOCIETAL Governments, First Nations, stakeholders, reputation, regulation 05/07/03 SCProj4/Fendlt/David Collyer/Presentations/West Coast Conference_May 2003 4
TECHNICAL - GEOLOGICAL PROSPECTIVITY PROS Positive indicators source / reservoir / trap / seal GSC / other resource estimates (± 30 TCF) New technologies not applied Exploration cycle immature Large areal extent CONS Early drilling results disappointing Oil vs. gas uncertainty Relative attractiveness versus investment alternatives GSC estimates are not recoverable reserves Resource potential HIGHLY uncertain can only be confirmed through exploration 05/07/03 SCProj4/Fendlt/David Collyer/Presentations/West Coast Conference_May 2003 5
TECHNICAL - SEISMIC DATA QUALITY Early data (circa 1965) More recent GSC data (circa 1988) 05/07/03 Need to apply current seismic technology & geological concepts to more fully assess offshore potential SCProj4/Fendlt/David Collyer/Presentations/West Coast Conference_May 2003 6
A NOTIONAL TECHNICAL TIMELINE YEAR 0 1 2 3 4 5 6 7 8 9 10 11 12 Base regional studies 2-D Seismic 3-D Seismic Series of technical gates Concurrent process in other key areas - regulatory, fiscal, etc.?..would allow timely exploration activity if/when go-ahead provided Exploration Drilling Appraisal Drilling Dvm t Planning & Regulatory Approval REPRESENTATION OF TECHNICAL TIMELINE ONLY...OTHER FACTORS WILL HAVE A SIGNIFICANT IMPACT ON PACE OF ACTIVITY!! Development First Production 05/07/03 SCProj4/Fendlt/David Collyer/Presentations/West Coast Conference_May 2003 7
TECHNICAL - ENVIRONMENT Establish integrated planning framework @ early stage in process Government leadership, broad stakeholder engagement Identify data / information gaps ( real, substantive) Plan / timeline to address information needs Key requirements: Sound science as basis for decision-making Good baseline data Early clarity on sensitive / protected areas (prior to significant expenditures) Provide legitimate foundation for subsequent environmental assessments & regulatory reviews for specific project proposals 05/07/03 SCProj4/Fendlt/David Collyer/Presentations/West Coast Conference_May 2003 8
TECHNICAL - ENVIRONMENT Important to acknowledge results of earlier reviews Oct/ 01 Jacques Whitford Report there are no specific design, geographical or environmental issues that would preclude the development of the offshore reservoirs of British Columbia Jan/ 02 Offshore Oil and Gas Scientific Panel Report There is no inherent or fundamental inadequacy of science or technology, properly applied in an appropriate regulatory framework, to justify a blanket moratorium on activities. 05/07/03 SCProj4/Fendlt/David Collyer/Presentations/West Coast Conference_May 2003 9
COMMERCIAL - MARKETS & INFRASTRUCTURE N.A. Demand* Price Outlook Tcf/Yr.. 30 25 20 1990 1992 Three warm winters 1994 1996 Forecast Range 1998 Economic slowdown 2000 * Includes Canada and the U.S. 2002 2004 1.5%/ Yr... 2006 0.5%/ Yr... 2008 2010 U.S.$/MMBtu 6.0 Positive medium term outlook for N.A. gas market Other commercial issues to be addressed by industry: pipeline infrastructure local market development access to export markets 05/07/03 SCProj4/Fendlt/David Collyer/Presentations/West Coast Conference_May 2003 10 5.0 4.0 3.0 2.0 1.0 * As of April 17th, 2003 1995 1996 1997 Y.T.D. Recent NYMEX Market Strip* Forecast Range 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
COMMERCIAL - LANDHOLDINGS & PARTNERSHIPS 1997: Shell and others donate 129,000 ha to set up Gwaii Haanas Marine Reserve Highly concentrated landholdings Responsible operators with global experience Shell, ChevronTexaco, PetroCanada Strong partnerships (Shell / ChevronTexaco) Rights & interests of existing landholders must be respected! 05/07/03 SCProj4/Fendlt/David Collyer/Presentations/West Coast Conference_May 2003 11
POLITICAL / SOCIETAL Governments must jointly take lead in resolution of Jurisdictional issues Regulatory framework Fiscal regime & revenue sharing Rights & tenure Environmental assessment process Need a pragmatic tripartite process involving First Nations peoples Meaningful consultation Focussed process Industry (& other stakeholders) will engage once multi-stakeholder process(es) established Is there sufficient alignment of interests & political will? 05/07/03 SCProj4/Fendlt/David Collyer/Presentations/West Coast Conference_May 2003 12
W.C. OFFSHORE - CURRENT ASSESSMENT TECOP T ECHNICAL Prospectivity highly uncertain, technology exists, environmental must be addressed (appears doable) E CONOMIC Costs & economics uncertain C OMMERCIAL O RGANIZATIONAL Market outlook very favourable Industry capability exists, limited current capacity for West Coast Offshore P OLITICAL / SOCIETAL Jurisdiction, fiscal, regulatory framework are undefined, meaningful First Nations engagement required mixed stakeholder messages Some positive indicators, many unknowns, significant issues to be resolved! 05/07/03 SCProj4/Fendlt/David Collyer/Presentations/West Coast Conference_May 2003 13
NEAR TERM PRIORITIES Establish a coordinated & transparent multi-stakeholder process (joint Federal / Provincial) Establish integrated planning framework focus on substantive gaps in environmental information & plans to address Federal & Provincial governments align to address: fiscal regime regulatory framework jurisdiction rights & tenure Meaningful consultation with First Nations peoples.. tripartite process? Concurrent, flexible process building momentum toward lifting of moratorium 05/07/03 SCProj4/Fendlt/David Collyer/Presentations/West Coast Conference_May 2003 14
KEY MESSAGES Shell largest West Coast landholder offshore on the radar screen, driven by market pull & potential geological prospectivity Issues / challenges are reasonably well-understood but difficult, complex, diverse Industry needs clarity, certainty, transparency on rules of game before undertaking significant investments Industry will engage in multi-stakeholder processes once established by responsible gov ts & regulators Some momentum established, but much work to be done before moratorium lifted Take longer term view & be realistic about timelines / expectations Potential window of opportunity is there sufficient alignment to proceed? 05/07/03 SCProj4/Fendlt/David Collyer/Presentations/West Coast Conference_May 2003 15
SHELL & SUSTAINABLE DEVELOPMENT An overarching commitment to SD - Economic, Social, Environmental - part of our Business Principles Context in which offshore oil & gas activity MUST be evaluated! 05/07/03 SCProj4/Fendlt/David Collyer/Presentations/West Coast Conference_May 2003 16
We re all in this boat together, so let s do it right... THANK YOU 05/07/03 SCProj4/Fendlt/David Collyer/Presentations/West Coast Conference_May 2003 17