Despite recent sharp declines in Canadian production and exports to the United States, a new analysis by the Canadian Energy Research Institute (CERI) concludes that as long as gas supply from unconventional sources, such as coalbed methane and new basins, can be brought on stream in a timely manner, gas production in Canada can be sustained at levels higher than currently exist through at least 2025.

Canada’s annual gas production increased nearly 20% between 1995 and 2001 and over that period exports to the United States grew by almost a third. But in 2002, the record growth came to an end as gas well completions fell by 17% and production began to drop. Production is still declining despite higher gas prices and substantial increases in drilling in 2003.

The situation prompted CERI to undertake a study of Canada’s gas resources using the existing analysis by the Canadian Gas Potential Committee (CGPC) as a starting point. The CGPC estimates that there is 225 Tcf of undiscovered gas in place in Canada. However, the CGPC resource estimates exclude volumes for a number of areas thought to have reasonable prospects for natural gas discoveries, CERI found. An alternative study commissioned by CERI determined that the existing undiscovered conventional gas resource in Canada is much larger. It estimates that there is 527 Tcf of gas in place.

CERI said if the geological calculations are accurate in a new alternative analysis, production could be as high as 8 Tcf/year over much of the projected horizon. Of course such levels are sustainable only at ever-increasing supply costs. But those higher supply costs are still lower than current gas prices through 2020.

Compared to C$2.50 in 2002, supply costs in 2001 dollars are likely to be at least C$4 and possibly C$5 in 2020. “This implies that the North American gas price would have to continue to trend upwards from its annual average in 2002,” CERI said in a statement. “However, it also implies that the prices observed in the early months of 2003 (which have ranged from C$5.42/Mcf to C$13.64/Mcf at AECO are not likely to be sustainable on an annual basis for some years to come.”

For more information on the report, contact Paul Mortensen at (403) 220-2388.

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