The biggest catalyst for growth in Canada’s provinces in the coming year will be in the natural resource sector, which in some parts of the country has seen strong growth in unconventional oil and natural gas, according to Royal Bank of Canada (RBC).

In its “Economics Provincial Outlook” published last week RBC economists said abundant energy resources in several of Canada’s provinces would draw increased capital investment in the coming year.

“The biggest differentiating factor for provincial growth next year will continue to be the dynamism of the natural resource sector,” said Chief Economist Craig Wright. “Resources will continue to be a catalyst for increased capital investment and production in resource-heavy provinces like Saskatchewan, Alberta, and Newfoundland and Labrador.”

Alberta has long been the country’s leading oil and gas producer. Saskatchewan of late has been gaining ground because of the massive Bakken Shale, which extends into the Lower 48 states. Newfoundland and Labrador have extensive offshore oil and gas operations. And British Columbia (BC) has massive unconventional gas deposits in the Horn River Basin and Montney Shale.

According to a report issued last week by the BC Oil & Gas Commission, the province’s gas reserves experienced the largest yearly increase in history from 2009 to 2010, with reserves up 42%. At the end of December 2010 there were 98 producing shale gas wells in the Horn River Basin, which accounted for 10% of the province’s total production. The Montney continued to be the most active gas play in the province with 383 wells accounting for 57% of all wells drilled in 2010. And significant increases are expected.

The latest figures are included in the BC Oil and Gas Commission’s “2010 Hydrocarbon and By-Product Reserves Report,”which estimated total remaining gas reserves jumped 42% year/year to 33.1 Tcf from 23.4 Tcf.

“This represents the highest level of establishing remaining raw gas reserves and the largest yearly increase in the province’s history, continuing a 10-year trend of increases,” the commission noted. The bulk of the gains resulted from unconventional gas development in the prolific Horn River Basin and Montney tight gas formation.

“British Columbia continues to be a world leader in exploration and development of unconventional gas reserves, and as our expertise and capacity to regulate natural gas activity for the benefit of British Columbians grows, so are the province’s reserves,” said Commissioner Paul Jeakins. “This is the highest level in the province’s history…largely the result of exploration in the Horn River Basin leading to the discovery of more reserves.”

Canada’s National Energy Board last month said BC would eclipse Alberta as the top gas producing province because of its prolific unconventional deposits (see NGI, Nov. 28). The hike in gas reserves also bodes well for the province’s long-term energy strategy to attract investment and open up new markets for its natural resources through the “Canada Starts Here: The BC Jobs Plan,” which includes developing up to three liquefied natural gas (LNG) export projects by 2020.

Several underlying economic factors are expected to shape 2012 and 2013, said the RBC team. A strengthening in U.S. demand, continued “vigor” in global commodity markets and fiscal restraint are likely to remain in place over the coming two years.

“In our opinion, the continuation of such economic influences will support results in terms of provincial growth relative to 2012. The main exception could be Nova Scotia where stronger capital investment and natural gas production are likely to spur growth much more materially.”

In Nova Scotia next year Encana Corp.’s Deep Panuke project is slated to begin operations (see NGI, Oct. 31). The long-awaited project, which is about 155 kilometers offshore Halifax, is scheduled to ship its first gas by the end of March.

“While we do not expect a major acceleration of activity in the Nova Scotia economy through to the end of next year, there is reason to be optimistic about the future,” RBC’s economists said. “The Deep Panuke offshore natural gas project is scheduled to come online in the second quarter of 2012, providing a significant boost to natural gas production next year, although the largest annual gain will be seen in 2013 as output reaches full capacity, and the field sees its first full year of production.”

RBC is forecasting Canada’s overall growth to be up about 2.5% year/year in 2012, with Alberta to grow at a rate of around 3.9%, and Newfoundland and Labrador up by 2.8%. Manitoba is expected to grow at a rate of around 3.2%, with growth of 2.3% in both Ontario and British Columbia. Trailing are Prince Edwards Island (1.9%), Quebec and New Brunswick (1.8%), and Nova Scotia (1.6%).

“At the provincial level, the latest data indicate that economic growth is back on track across Canada after some weakness was experienced during the spring of this year,” said the report. “Still, the performance looks quite uneven with some provinces (e.g., Saskatchewan, Newfoundland and Labrador, and Alberta) firing on all cylinders, whereas others (e.g., New Brunswick, Nova Scotia and Quebec) are stuck in low gear.”

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