Canada’s natural gas industry will see a difficult market over the next several years, marked by lower prices, falling production and a decline in exports to the United States, but unconventionals will turn around the economy once new export terminals are completed in British Columbia (BC), the Conference Board of Canada said Monday.
Net gas exports to the United States will decline to about 1 Tcf/year over the next decade, which is less than one-third of what the industry had exported as recently as 2007, the Board said. The United States is on the road to natural gas self-sufficiency, which has put the squeeze on the once lucrative export market for Canada’s gas.
However, that doesn’t mean investments have dried up, and in fact, are just the opposite as gas operators prepare for the long term. Canada’s gas industry investments overall in the next 24 years are projected to total US$386 billion, most of which would flow to the three westernmost provinces, the Board said in its report, “The Role of Natural Gas in Powering Canada’s Economy,” which was funded by the Canadian Natural Gas Initiative.
BC is expected to gain the most, with about $181 billion in investments (2012 dollars) between 2012 and 2035, more than $5.8 billion a year on average, which puts the province well ahead of the long-time provincial energy powerhouse Alberta.
“British Columbia faces the challenge of developing on two fronts: unconventional shale gas production and infrastructure to support liquefied natural gas [LNG] exports,” said the Board’s Len Coad, who directs environment, energy and technology policy. “The future of Canada’s natural gas industry depends critically on investment in exploration and production.
“Regulatory frameworks for liquefied natural gas projects and for unconventional natural gas will play a key role in whether this investment takes place and the economic benefits are realized.”
Quebec and New Brunswick also have shale gas deposits, but fierce public opposition may hinder gas market growth in those provinces, said the report.
Some of the highlights from the forecast include:
About a half-dozen LNG export projects in BC are on the table, but the analysis “does not assume that all projects will proceed. If that were to happen, Canada would go from no LNG exports to being the second-largest LNG supplier in the world over a very short period.” For this forecast, they assumed that four LNG trains would be constructed in BC, which would total 20 million tons/year of capacity.
Natural gas investments were quantified for the report based on projected gas demand within Canada and for LNG exports primarily to Asian markets, as well as the existing pipeline network to U.S. markets. BC LNG exports are on the radar for several companies that want to build liquefaction plants, pipelines and/or export facilities, said the authors.
More investment is expected to be made in BC, but Alberta “will gain the most in GDP from the investment, an increase of $153.6 billion increase from 2012 to 2035. British Columbia will gain more than $116 billion in GDP as a result of natural gas investment.”
BC investments in natural gas over the next 24 years are expected to create 1.2 million person-years of employment and more than $46 billion total taxes. The tax revenue estimates don’t include natural gas royalty payments, which represent the resource owners’ share of the value of production.
“In addition to the economic impact from investment, overall production growth is expected to contribute a cumulative $576 billion (2012 dollars) to Canada’s economy, supporting another 129,000 jobs per year,” the report said. “Through these activities, the industry is expected generate roughly 6.2 million person-years of employment. In other words, the industry is expected to support employment of nearly 260,000 per year over the 24-year forecast horizon.”
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