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TransCanada Faces 'Supply Risk' as Canadian Production Drops

TransCanada Faces 'Supply Risk' as Canadian Production Drops

Gas from the far North cannot arrive too soon in southern markets, according to testimony offered in a rate case before the National Energy Board by TransCanada PipeLines Ltd., which said it faces increasing "supply risk."

TransCanada, which is seeking rate increases for a second year in a row, said its latest survey of production capacity across the Western Canada Sedimentary Basin generated bleak results.

"There has been a shift from an era characterized by high inventory, readily-available prospects, low gas prices and quick supply response to one characterized by low inventory, higher supply costs, high gas prices and slower supply response."

Only 10 years ago, fewer than 5,000 wells per year in the basin generated annual production growth exceeding 1 Bcf per year. Since 2000, productivity has declined even though the industry has drilled about 40,000 gas wells, TransCanada pointed out.

The top Canadian gas transporter has begun including Mackenzie Delta gas in its supply forecasts through 2010. But TransCanada predicts that the arctic supply, of 1 to 1.5 Bcf/d, will fall short of making up for the emerging decline in western gas fields. The pipeline expects western Canadian output to drop by as much as 2.7 Bcf/d or about 16% from the 2002 peak of 16.8 Bcf daily.

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