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NEB: Canada's Gas Production Fell 2% in 2007

Canada's natural gas production last year averaged 16.8 Bcf/d -- roughly 2% lower than in 2006 -- but crude production jumped 7% on record high oil prices, the National Energy Board (NEB) reported last week.

The 2007 results were detailed in the NEB's latest Canadian Energy Overview, which reviewed the country's oil, natural gas and electricity production.

"While Canadian natural gas production fell slightly...exports rose 4.4% to 258 million cubic meters (9.1 Bcf) per day in 2007," the NEB noted. "However, the average export price was about 5% lower in 2007, and therefore the C$24.3 billion generated from net natural gas exports was nearly identical to 2006 revenues."

Canadian natural gas prices, measured at the AECO Hub in Alberta, began 2007 at C$6.04/gigajoule and reached a low of C$4.11 in late August before closing the year at C$6.12. Prices in eastern Canadian markets, cited at the Dawn Hub, began the year at US$5.94/MMBtu and reached a low of US$5.46/MMBtu in early September. The Dawn prices rose gradually through autumn and early winter to close the year at US$7.62/MMBtu, according to the NEB.

Western Canadian gas output "remained relatively stable through the first half of 2007" as wells drilled in the first half of 2006 were connected into the pipeline system and brought on stream, the NEB said. However, the impact of reduced drilling impacted the last half of last year, when gas production slipped on average about 0.4 Bcf/d.

In Canada's offshore, East Coast gas production from the Sable Offshore Energy Project was initiated in early 2007, and output increased through the rest of the year. Production stabilized around 0.41 Bcf/d by the end of last year, which was about 33% higher than in January 2007. Additional output from the onshore McCully field in New Brunswick also ramped up midway through the year and eventually represented almost 7% of the region's production, the NEB noted. Also approved last year and now taking steps to begin operations is EnCana Corp.'s Deep Panuke gas project offshore Nova Scotia. However, NEB noted that Deep Panuke's gas production is not expected to begin before 2010.

The NEB's estimate of remaining marketable gas reserves in Canada at the end of 2006 -- the last year for which data was available -- was 58.1 Tcf. However, Canada's gas reserves in place may be substantially higher, and analysts are more optimistic about this year's prospects (see related story). For instance, since the beginning of 2008 several producers have reported strong results from British Columbia's Horn River Basin, which could hold 37 Tcf or more (see related story).

According to the NEB report, Canada's reserve additions were 7 Tcf in 2006, which replaced 116% of annual production. The increase in remaining reserves "reflected exploration and improved recovery in known gas fields," said the NEB. Initial reserves were up in Alberta, British Columbia, Saskatchewan and Ontario in 2006, but Canada's frontier regions remained unchanged.

Canada pumped an average of 2.8 million b/d of crude oil in 2007, with nearly half from Alberta's oilsands, the NEB stated. Oilsands investment last year jumped 17% from 2006 to C$18 billion. Canada, said the agency, remains self-sufficient in terms of meeting its own energy needs, and in 2007 the industry accounted for nearly 20%, or C$90 billion, of the total value of Canadian exports. Canada exported an average of 1.85 million b/d of crude in 2007 worth more than C$41 billion, compared with C$39.3 billion in 2006. More than half of Canada's crude oil exports flowed to the U.S. Midwest. According to the U.S. Energy Information Administration, Canada supplies nearly 20% of U.S. daily crude oil imports, more than any other nation.

Canadian net electricity exports in 2007 were nearly double the five-year average of 15.7 terawatt-hours, which generated around C$3.1 billion in revenue. Domestic electricity demand was met in 2007, but the report pointed to the need for new or upgraded electricity transmission facilities as a result of Canada's growing population and economy.

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