NGI The Weekly Gas Market Report / NGI All News Access

Shale, Tight Gas Improve Canada's Outlook -- Depending on Markets

Canada's conventional natural gas production is forecast to decline by 7% between now and 2010, but developing shale and tight gas prospects in northeast British Columbia (BC) may offset the decline, the National Energy Board (NEB) reported.

In its Short-term Natural Gas Deliverability 2008-2010 report, the NEB presented three possible scenarios for deliverability based on the different levels of drilling investment that may occur in a reference case, a low case and a high case. All three scenarios take into account the development of shale and tight gas prospects in the Horn River and Montney plays of northeast BC, with the high case scenario projecting a higher level of investment in this area.

"Canada has a large natural gas resource base and ongoing efforts to further enhance innovation and efficiency will ensure that Canadian natural gas continues to make a key contribution to North American natural gas supply," said NEB Chair Gaetan Caron.

Advances in drilling techniques and technology in recent years have allowed producers to access the shale and tight gas, which were previously difficult to produce. Although still in the early stages, these emerging plays have "the potential to dramatically alter previous projections for a decline in the Western Canadian Sedimentary Basin (WCSB)," the report noted. Ninety-eight percent of Canada's current gas output comes from the WCSB.

"In our consultations with producers we heard a great deal of enthusiasm for the resource potential on the western side of the basin," said Caron. "The basin on the western side is much deeper and less developed compared to the east."

Canada's natural gas potential remains high, but developing unconventional resources "still depends on North American natural gas markets," noted the report. "The current global economic situation could result in declining demand. Meanwhile, natural gas production in the U.S. has increased by 8%. Declining production in Canada is also impacted by the high cost of production in Canada, and falling gas prices."

At last month's LDC Forum Canada, Nexen Marketing USA Inc. Managing Director David J. Slater said transforming the WCSB from conventional to unconventional would be "painful. It will take time as producers are learning new techniques to be effective" (see NGI, Oct. 27).

North American natural gas prices were "particularly volatile" between September 2007 and August, swinging from C$5 to $11 and back to $7/gigajoule (GJ)," the NEB report noted. However, "natural gas would need to reach $8 to $9/GJ in Western Canada in order to maintain or accelerate current drilling levels."

The report is available at www.neb.gc.ca.

©Copyright 2008 Intelligence Press Inc. All rights reserved. The preceding news report may not be republished or redistributed, in whole or in part, in any form, without prior written consent of Intelligence Press, Inc.

Comments powered by Disqus