Stagnant Canadian natural gas production is poised to rebound in the coming years, according to the latest National Energy Board (NEB) projections.
In a market assessment titled Canada’s Energy Future 2018, the NEB credits the improving outlook to liquefied natural gas (LNG) exports, pipeline additions and rising consumption by thermal oil sands and power plants.
The NEB forecasts a 29% increase in Canadian gas production to 20.9 Bcf/d by 2040, up from the current year-to-date average of 16.2 Bcf/d, according to a reference case rated most likely to happen,
The gains would start after an extended industry lull that is expected to erode Canadian gas production down to a low of 15.9 Bcf/d in 2021, NEB said.
The gas recovery is expected to follow the resumption of drilling to support steady LNG export growth, with overseas tanker shipments starting at 750 MMcf/d in 2025 and rising to 3 Bcf/d in 2031.
In the NEB market assessment, all currently foreseeable Canadian LNG exports sail from the Pacific coast of British Columbia (BC). No deliveries are foreseen from the Atlantic coast, where terminal proposals are still striving to assemble gas supplies and financing.
The NEB projections assume more lean times are ahead — even in Alberta and BC.
“Canadian natural gas price discounts persist in the near term and are slowly alleviated by 2025 as infrastructure is built and markets for excess natural gas are found.”
The Western Canada Sedimentary Basin benchmark, Nova Inventory Transfer, is likely to take until 2040 to recover gradually to $3.26/MMBtu from the current trading range of about $1.00/MMBtu.
When prices and drilling pick up again, the activity hotspot is expected to be the liquids-rich Montney formation that straddles northern Alberta and BC.
The NEB projections anticipate 131% growth in Montney gas output to 12.1 Bcf/d in 2040. Canadian natural gas liquids output is projected to climb by 75% to 1.7 million b/d by 2040.
While oil sands development has slowed down, thermal production of the northern Alberta resource is still expected to be a mainstay of gas consumption.
The NEB projections show total Canadian oil output growing by 50% to 6.9 million b/d in 2040 from 4.6 million b/d this year. The oil sands are expected to lead growth, rising to 4.5 million b/d in 2040 from their current 2.8 million b/d.
The board’s reference case assumes oil prices have already recovered about as well as can be expected from a low that started in 2014. Oil is expected to remain in a range of $68-$75/barrel through 2040.
But the NEB sounds a note of caution. The outlook is bound to change as a result of unpredictable market, technology and policy evolution.
“Consider the projections a baseline to support ongoing discussions of Canada’s energy future, not a prediction of what will take place,” the board said.
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