Western Canadian natural gas production is relocating, not dying, the nation's top pipeline company has told the National Energy Board (NEB).

Output from the industry's "near frontier" -- the Upper Peace River region of northeastern British Columbia (BC) and northwestern Alberta -- is poised to triple to about 4 Bcf/d, according to a new supply projection filed with the NEB.

The outlook is presented in a review compiled to support an application for a C$333 million (U.S. dollar at par) package of additions sought for TransCanada Corp.'s NOVA Gas Transmission. The forecast is conservative. The production predictions use a cautious "recovery factor" set at 25% of the northern resource endowment.

Much of the new supply is expected to be shale gas from northern drilling programs that are still too new to establish performance track records. More optimistic forecasts say up to 40% of the deposits could be put on the market. The upper end of the shale projections is well below the performance of dwindling central and southern Alberta conventional gas pools that the new northern supplies will replace.

The TransCanada-NOVA system's estimates also include only gas volumes that it is confident will flow into its own network. Significant, although smaller, production additions are also expected to go through the rival Spectra (formerly Westcoast) network in BC alone.

The TransCanada-NOVA grid has an edge on capturing growth in demand for delivery service because its Alberta-based system transmits gas into long-distance pipelines radiating outward across North America. The smaller Spectra system carries northern BC gas to southern markets in the province and export lines to the northwestern United States.

The new forecast points out that northern BC and Alberta supply development could easily turn out to be bigger and faster because a new source of demand is developing.

Projections of exploration and production activity do not yet take into account proposed export terminals for liquefied natural gas (LNG) on BC's northern Pacific coast at Kitimat (see Shale Daily, Oct. 6). The first project in the lineup -- the KM LNG terminal sponsored by producers Apache Canada, EOG Resources Canada and Encana Corp. -- received a 20-year license for tanker exports of 9.3 Tcf from the NEB in October.

"A future market in the Asia Pacific region represents an incremental demand not shown [by current forecasts] and provides producers with an additional incentive to grow supply," the TransCanada-NOVA forecast said.

The C$333 million of newly proposed Upper Peace River district pipeline additions are only the next step in the long-range growth seen ahead by the TransCanada-NOVA system. Underpinned by transportation service contracts, the package includes a 100-kilometer (62-mile) pipeline extension for C$230 million in BC plus a related C$103 million in new Alberta installations.

The BC addition will serve an emerging shale gas area known as the Cordova Embayment. The dominant source in the region remains the Horn River Basin, a colossal shale gas endowment that producers such as Devon Energy and Encana have rated as richer than the Barnett Shale in Texas.

Counting only the best parts where the gas content is known to exceed 146 Bcf per square mile section, TransCanada-NOVA estimates the 7,223-square kilometer (2,790-square mile) Horn River mother lode at 490 Tcf.

"Growing shale gas volumes from the U.S. and Canada have and will offset decline in other basins," the TransCanada-NOVA supply forecast said. "These volumes will be a significant component of overall gas supply and are required in the long term to meet expected North American demand."

The current TransCanada-NOVA outlook for a tripling of Upper Peace River gas output is spread over the next 20 years. In addition to using conservative production efficiency estimates, the projection incorporates limited expectations of prices. At no time over the next two decades does the North American market recover to its peak New York Mercantile Exchange annual average of US$9.20/MMBtu for 2008 in the TransCanada-NOVA forecast.

The annual average price is expected to take until 2015 to recover to US$6.76/MMBtu from the anticipated 2011 level of US$4.10/MMBtu. After 2015, "real" annual average prices as expressed in 2010 dollars are projected to stay the same with no increases beyond inflation rates.

North American demand for gas is forecast to grow by about 25% over the period as industrial consumption, led by Alberta thermal oilsands projects and population increases. TransCanada-NOVA foresees combined Canadian, U.S. and Mexican consumption increasing to 101 Bcf/d by 2030 from the current 81 Bcf/d.