Canada's federal government and the Canadian Energy Research Institute (CERI) have joined the chorus predicting a long-range, irreversible decline in pipeline exports of natural gas to the United States.

In an annual winter outlook report, Ottawa's Department of Natural Resources forecasts a 28% drop in net exports to 2.3 Tcf in 2020 from the current annual level of 3.2 Tcf. The "net" calculation includes estimates of gas re-imported to Canada by pipelines originating in western provinces and curving north to Ontario after traversing the U.S. below the Great Lakes.

The department, echoing other forecasters such as the National Energy Board (NEB) and Alberta's Energy Resources Conservation Board, blames the projected drop in the trade on "flattening supply in western Canada and rising demand" led by growing thermal oilsands production.

"It is evident that future North American natural gas supply growth hinges on the development of liquefied natural gas (LNG) infrastructure and access to global LNG supplies," the Canadian energy department adds. Its outlook recites a forecaster consensus that LNG will represent 15% of North American gas supply by 2020, a fivefold increase from the current role of tanker imports.

The Canadian government emphasized that the projections of growing reliance on LNG need to be taken seriously by ensuring that authorities play an enabling role for import terminal projects. Action is beginning, the energy department reported.

A "working group" of officials in Ottawa and provinces where LNG terminals are proposed has prepared and circulated a "regulatory requirements document." The paper "lists all the approvals and permits required in Canada for an LNG import terminal project."

The federal energy department, NEB, provincial regulators and industry also collaborated in creation of a new national LNG environment, public health and safety code formally established by the Canadian Standards Association. The rule -- CSA Z-276 Standard, LNG Production, Storage and Handling -- lists detailed requirements for LNG equipment and operating procedures.

CERI, a quasi-official research organization supported by an array of government and industry agencies, built expectations of continuing supply erosion into a two-volume review of long-distance pipeline usage.

New supply sources of coalbed methane, LNG imports to northern British Columbia's Pacific coast at Kitimat and eventual completion of the currently faltering Mackenzie Gas Project will not make up for erosion of conventional supplies, primarily in Alberta's aging gas fields, CERI said. By 2018, CERI forecasts average use of the 15 Bcf/d in takeaway capacity on five long-distance pipelines out of Alberta and British Columbia will drop from 83% today to 74% in 2012 and 58% in 2018. Unused shipping capacity is projected to increase from 2.5 Bcf/d currently to 3.5 Bcf/d in 2012 and 6.9 Bcf/d in 2018.

The two-volume study provides TransCanada PipeLines with ammunition for its long-running campaign to become the southern leg in the 4.5 Bcf/d Alaskan gas project.

Expanding rival Alliance Pipeline to carry Alaskan production would cost about $13.6 billion, CERI estimates. Tolls on the expanded Alliance between northern British Columbia and Chicago for Alaskan gas would average $1.61/Mcf including compressor fuel, CERI predicts.

TransCanada and its affiliated Foothills-Northern Border system could be expanded to carry Alaskan gas for $1.8 billion and tolls including fuel charges would average $1.30/Mcf, CERI calculates. As Canada's newest long-distance pipeline Alliance is full and contracted to stay that way for years to come. Much of the grid's spare capacity will open up on much older TransCanada and its affiliates. The only new facilities would be $1.8 billion-worth of added pipe and compressors on TransCanada's Nova gathering subsidiary in Alberta to enable Alaskan gas to cross the province, CERI predicted.

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