Canada’s National Energy Board (NEB) Wednesday delivered a dreary forecast for Canadian conventional natural gas production in the short term, estimating a decline of 7-15% in deliverability between now and 2009.

In the NEB’s “Short-Term Canadian Natural Gas Deliverability 2007-2009,” regulators said gas deliverability will decrease from 483 million cubic meters/day, or 17.1 Bcf/d, at the end of 2006 to a “lower range” of 410-449 million cubic meters/day (14.5-15.8 Bcf/d) in 2009.

“The drilling pace that sustained Canadian natural gas deliverability is gone, for the moment,” said National Energy Board Chair Gaetan Caron.

Most of Canada’s natural gas resource lies in the Western Canada Sedimentary Basin (WCSB), and in recent years the average production from new wells in the maturing basin has gradually declined, the NEB noted.

Despite rising costs for drilling and exploration, the report noted that high levels of new drilling and exploration activity driven by high demand and prices for natural gas helped maintain the overall production levels of natural gas. However, in mid-2006 drilling slowed down in the WCSB for several reasons: continued high service and labor costs, the increasing Canadian dollar value affecting profit margins on exports to the United States and moderate gas prices reducing the return on investment. Another contributing factor is investment in oil and oilsands development, which competes for investment capital with gas drilling.

With less drilling, gas production is beginning to drop at a faster pace, the report noted. The flow of conventional gas from the maturing WCSB is expected to decrease from an annual average of 16.2 Bcf/d in 2006 to 13.7 Bcf/d in 2009.

Ongoing drilling is increasingly focused on the deeper western side of the WCSB, an area that requires more complex, expensive drilling but has a potential for higher returns, the report noted. Here, the NEB said producers will continue to develop and improve their techniques to unlock the more challenging gas resources.

“We see cause for optimism as deeper drilling and improved techniques help producers deliver tighter gas from deeper wells,” said Caron. “In the longer term, Canadians should rest assured that their natural gas needs will be met as other sources, such as unconventional gas, liquefied natural gas or gas from frontier areas, enter Canada’s energy market.”

Coalbed methane (CBM) is another positive story. The 2007 NEB report projects continued growth in CBM, though more moderately than in 2003-2006, to approximately 23 million cubic meters/day (0.81 Bcf/d) by 2009 in the NEB reference case projection, up from 14.5 million cubic meters/day in 2006.

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