Canadian natural gas supplies will remain nearly flat for six years as aging conventional flowing wells run down and unconventional production picks up speed to replace the depleting old reserves, according to new projections by the National Energy Board (NEB).
Total output is forecast to dip by 4% to 14.6 Bcf/d from the current 15.2 Bcf/d, before growth resumes after 2023, said the NEB “reference case” rated as most likely to occur in the board’s latest long-range market assessment.
As of the forecast end point in 2040, the NEB rated Canadian gas supply as likely to struggle back up almost to its early 21st century peak by rising to 16.8 Bcf/d.
The limited outlook reflects an expectation that annual average prices will take two decades to recover to US$4.30/MMBtu, still well below the US$6-9/MMBtu heights reached in 2006-2008 before the unconventional “shale gale” blew in surpluses across North America.
The modest expectations acknowledged cancellations of liquefied natural gas (LNG) terminal projects.
For the first time since as yet unsuccessful global marketing efforts began nearly 10 years ago, the NEB cuts Canadian LNG exports to zero in its long-range outlook.
Loss of Canada’s foray into Atlantic offshore gas is also anticipated. The market assessment accepted evidence in a Maritimes & Northeast Pipeline toll case, currently before the board, that the Sable Offshore Energy Project will shut down by 2021.
No replacement of subsea gas with production on land in Canada’s eastern Maritimes is foreseen, thanks to provincial government moratoriums against shale extraction with environmentally unpopular horizontal drilling and hydraulic fracturing.
In the NEB assessment, the Canadian supply engine of growth has gone from traditional mainstay Alberta west to northern British Columbia, where unconventional production is accelerating in the liquids-rich Montney geological formation.
The board said Montney gas jumped from zero before 2006 to nearly 4.5 Bcf/d, or 30% of total Canadian production in 2016.
“The majority of growth over the projection period comes from the Montney, with production reaching 7.9 Bcf/d in 2040, a 74% increase,” the NEB said.
The top growth prospect for Canadian gas consumption continues to be Alberta oilsands production, despite evolving federal and provincial greenhouse gas emission controls and taxes as well as trials of new low-temperature production methods.
Data tables in the NEB long-range outlook showed total oilsands plant gas use rising by 55% to 4.8 Bcf/d in 2040 from the current 3.1 Bcf/d, as bitumen output climbs to 4.5 million b/d from 2.5 million b/d.
The force driving oilsands consumption is expected to be increasing use of low-cost underground or in-situ production with gas-fired steam injections. The specialty’s fuel use is forecast to grow by 68% to 2.7 Bcf/d from 1.6 Bcf/d.
In keeping with the Liberal federal government’s official stand that Canada has embarked on energy transition, “decarbonization” and electrification, the NEB for the first time raised possibilities of long range declines in national use of fossil fuels.
Depending on multiple assumptions about government policy, technology and consumer choice, the NEB said Canadian use of gas, oil and coal could peak and plateau in its most likely reference case or drop by 8-13% in energy conversion scenarios.
The green transition projections remain speculative, said the NEB.
“Over the projection period, it is likely that developments beyond the realm of normal expectations, such as geopolitical events or technological breakthroughs, will occur. Likewise, new information will become available and trends, policies, and technologies will evolve,” said the NEB market assessment.
“Consider the projections a baseline for discussing Canada’s energy future today, not a prediction of what will take place in the future.”