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Shell Canada Energy Response to NEB Information Request No. 1.1 Jurisdiction Over the Coastal Gaslink MH-053-2018 Pipeline Project

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Shell Canada Energy Response to NEB Information Request No. 1.1 Jurisdiction Over the Coastal Gaslink MH-053-2018 Pipeline Project Shell Canada Energy Response to NEB Information Request No. 1.1 Jurisdiction over the Coastal GasLink MH-053-2018 Pipeline Project IR Number: NEB 1.1 Topic: Shell Canada Energy Commercial and functional integration of the Coastal GasLink Pipeline (CGL Pipeline) Reference: i) A97945-2, Shell Canada Energy (Shell) Additional Written Evidence, PDF Page 12 of 33 ii) A97945-2, Shell, Additional Written Evidence, PDF Page 11 of 33 iii) A97945-2, Shell, Additional Written Evidence, PDF Page 12 of 33 iv) A97945-2, PetroChina Kitimat LNG Partnership, Additional Written, Evidence, PDF Page 23 of 33 Preamble: Reference i) states that Shell has significant natural gas production and holdings in the Groundbirch area of British Columbia (BC). Shell’s Groundbirch operations currently produce approximately 500 million cubic feet per day (MMcf/d) of natural gas from the Montney formation, and have an expected field life of more than 35 years. Reference ii) states that Shell is currently developing plans to connect its Groundbirch gas supply directly to the CGL Pipeline. Shell has requested Coastal GasLink Pipeline Ltd. (CGL) to build a meter station at the inlet of CGL Pipeline, through which Shell intends to nominate and deliver its gas supply requirements to the LNG export Terminal. The details are still being finalized. Reference iii) states that Shell’s plan is to source all its gas nomination requirements through a combination of Groundbirch production and other third-party supply sources. One supply option, among others, is expected to be an arrangement whereby Shell procures gas from the NOVA Gas Transmission Ltd. (NGTL) System. At this point in time, no arrangement has been concluded with NGTL. However, Shell’s plans, including those involving NGTL, will allow for ongoing “procure versus produce” decisions that would optimize Shell’s cost of supply over the LNG Canada project life, and would also help to provide for operational flexibility. Possible future connections to NGTL would serve to achieve these two goals, as a supplemental option, among others, to maximize this flexibility. Reference iv) states that PetroChina has significant natural gas production and holdings in the Groundbirch area of BC, including a 20 per cent interest in a non-operated joint venture with Shell Canada Limited. The reference also states that PetroChina has requested CGL to build a meter station at the inlet of the CGL Pipeline, to allow it the option to directly connect its gas supply to the pipeline. 1 Shell Canada Energy Response to NEB Information Request No. 1.1 Jurisdiction over the Coastal GasLink MH-053-2018 Pipeline Project Request: a) Provide a detailed description of Shell’s natural gas supply portfolio in the Western Canadian Sedimentary Basin (WCSB). In your answer, include: a.1) geographic location; a.2) current and forecast production profile; a.3) summary of all current transportation arrangements, including receipt and delivery points, volumes to be transported, and lengths of transportation contracts; and a.4) map(s) illustrating Shell’s production areas. b) Provide a detailed description of what will happen to Shell’s natural gas production in the event the LNG Canada export facility does not require natural gas supply. In your answer, discuss whether in the event of a prolonged non-utilization of the LNG export facility (eg. maintenance, lack of demand), whether Shell would shut-in its natural gas production. c) Provide a detailed description of Shell’s plans for its natural gas supply in the event that the economics are more favourable to deliver gas into another market in Canada or the United States (US) rather than to the LNG Canada’s export terminal in Kitimat. d) Provide a detailed description of Shell’s plans to connect its Groundbirch gas supply directly to the CGL Pipeline, as referenced in ii). In your answer, include: d.1) pipeline capacity (in cubic feet per day); d.2 pipeline length in kilometers; d.3) planned physical connection point with the CGL Pipeline; d.4) summary of regulatory authority(s) necessary for construction and operation of planned pipeline; d.5) clarification on whether supply from producing assets jointly owned with PetroChina (as referenced in iv) will use a shared physical connection to the CGL Pipeline; and d.6) to the extent details are not finalized, provide best information available, including anticipated timelines for when final decisions on necessary connections between Shell’s production and CGL Pipeline are expected to be made. Response: a.1) Shell produces or otherwise sources gas from a number of assets in the WCSB. The primary source of gas supply to meet Shell’s gas nomination requirements for the LNG Canada facility will come from Shell’s Groundbirch asset in northeast British Columbia. In addition to the Groundbirch assets, Shell currently produces gas from assets in the Fox Creek, Gold Creek and Rocky Mountain House 2 Shell Canada Energy Response to NEB Information Request No. 1.1 Jurisdiction over the Coastal GasLink MH-053-2018 Pipeline Project areas of northwest and west central Alberta (collectively referred to as the Alberta Light Tight Oil business). Shell also currently produces natural gas liquids, gas and condensate from assets in the Caroline, Jumping Pound and Waterton areas of south west Alberta (collectively referred to as the Foothills business). a.2) Shell’s Groundbirch operations currently produce approximately 500 million scf/day of natural gas from the Montney formation and have an expected field life of approximately 35 years. Future production forecasts for the Groundbirch asset, as well as Shell’s other WCSB gas producing assets referenced herein, depends on a number of operational and economic variables, including individual well performance and declines; production, processing and transportation infrastructure reliability, availability and investment, commodity prices and other related considerations, along with corporate capital allocation considerations and potential acquisition or divestment choices. However, as Shell’s Groundbirch asset will be the primary supply source for Shell’s gas nomination requirements, Shell will continue to examine investments in incremental production, gathering and processing capacity as appropriate. Aside from the Groundbirch asset, in Fox Creek, Shell holds approximately 250,000 net acres in the Duvernay formation, and currently produces approximately 30,000 boe/day of oil, condensate and gas, from approximately 200 wells. In Gold Creek, Shell currently produces approximately 7,000 boe/day of oil, gas and condensate from 40 wells in the Montney formation. In Rocky Mountain House, Shell currently produces approximately 3,000 boe/day of oil, gas and condensate from 20 wells in the Duvernay formation. The Caroline facility processes approximately 90 mmscf/d of Shell and 3rd party gas from approximately 40 wells. The Jumping Pound complex and field processes approximately 74 mmscf/d of Shell and 3rd party gas, from 90 wells. The Waterton Complex and field produces approximately 99 mmscf/d of Shell and 3rd party gas, from approximately 75 wells. Of note, Shell has publicly announced that it is exploring divestment options for the Foothills business, but as of date of filing, the Foothills business remains an active part of Shell’s WCSB portfolio. As stated in Royal Dutch Shell’s most recent annual report, Shell’s total proved developed and undeveloped gas reserves in Canada as at December 31, 2017 are 1,272 thousand million scf. a.3) Regarding Shell’s transportation arrangements for its WCSB gas, Shell currently holds firm transportation contracts on a number of pipelines which includes NGTL, TransCanada Mainline, Enbridge Westcoast Energy Inc.’s BC pipeline system and the Alliance pipeline system. More specifically Shell can access both NGTL and the 3 Shell Canada Energy Response to NEB Information Request No. 1.1 Jurisdiction over the Coastal GasLink MH-053-2018 Pipeline Project Enbridge Westcoast systems in northeast British Columbia to transport the gas produced from its Groundbirch. For its Alberta production, Shell can access both the NGTL and Alliance systems for production from its Alberta Light Tight Oil assets and evacuates the gas produced by its Foothills assets to the NGTL system to other areas in North America. Shell also holds transportation on the TransCanada Mainline to transport gas into eastern Canada and other areas. The exact quantity of production on a given pipeline will fluctuate daily and the areas into which Shell sells gas are also subject to change depending on economic conditions and available transportation. Shell also looks to optimize the costs of its overall transportation portfolio and as such actively manages its contractual commitments on each pipeline to match its production. Further, as indicated in its evidence, Shell currently has a confidential Transportation Services Agreement with CGL, which contemplates Shell transporting its full LNG Canada gas nomination requirements on CGL, as well as a connection with CGL from Shell’s Groundbirch asset. In conjunction with a possible CGL interconnection as referenced at paragraph 9 of Shell’s evidence [A97945-2 at PDF page 12 of 33], it is anticipated that this provides sufficient operational and supply flexibility to allow Shell to meet its LNG Canada gas nomination requirements. a.4) The map below shows the totality of Shell’s WCSB gas production areas. 4 Shell Canada Energy Response to NEB Information Request No. 1.1 Jurisdiction over the Coastal GasLink MH-053-2018 Pipeline Project b) In the event that Shell’s participating interest in LNG Canada does not require Shell’s gas, Shell would have the option of diverting all or a portion of its equity gas production elsewhere. Such a decision, including volumes, would depend on economic considerations involving domestic gas prices, as well as ability to access sufficient transportation service from NGTL or Enbridge. To the extent the foregoing would not be considered by Shell at that time to be 5 Shell Canada Energy Response to NEB Information Request No.
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