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From the NEB: Canada’s new gas reality
Gary Park For Petroleum News
Canadian natural gas production will decline 14 percent over the next two years to 13 billion cubic feet per day, down a dramatic 14 percent from this year’s expected volumes and a dramatic slide of about 23 percent from average output over the past decade, the National Energy Board has forecast.
The only cushioning affect will come from British Columbia’s tight and shale gas plays, which will raise that province’s short-term output by 1 billion cubic feet per day to 3.7 bcf per day.
The federal regulator said the trends point to a “new reality” for Canadian gas, driven by new plays, new technology and new gas types.
NEB Chairman Gaeten Caron said in a statement that Canada’s gas focus is “shifting not only in location, but also in type, which can translate into opportunities for many in the industry.”
However, he said Canadians have no cause to worry about insufficient supplies to meet domestic needs.
The study made no allowance for the latest announced changes in the Alberta government’s conventional and unconventional gas in predicting that the traditional mainstay province will see its production slide to 8.5 bcf per day in 2012 from 12.7 bcf per day in 2009.
The NEB said it expects about 210 wells to be drilled this year in the British Columbia Montney play and 70 in the Horn River basin.
The agency said capital spending on gas projects will stabilize then rise over the two-year period, while drilling days will increase about 11 percent to 50,512 days from 45,659 days in 2010, noting that extracting tight gas and unconventional gas takes more time, thus boosting the number of drilling days per well, although Canada’s drilling levels made a rapid descent to 5,100 wells last year from a record 15,300 in 2006.
It said the rise in oil prices, while gas flounders, poses a challenge to gas producers, adding that some of the new technology designed to extract shale gas is being used for oil extraction in Alberta and Saskatchewan.
With oil drilling more profitable than gas, some capital investment is being drawn away from gas, the NEB said.
Mid-price estimate The targets are based on the NEB’s mid-price estimate, which would see the Henry Hub average increase from US$5.50 per million British thermal units in 2010 to US$6.75 in 2012.
Under that case, conventional production would decline to 6.68 bcf per day from 10.14 bcf per day in 2008 and coalbed methane would slip to 587 million cubic feet per day from 762 million.
Shale gas, all of it in British Columbia, would rise to 462 million cubic feet per day from just 10 million and tight gas would ease to 4.82 bcf per day from 4.89 bcf per day.
The NEB said that Western Canada’s producers have been able to raise capital to increase production, mainly in the Montney and Horn River plays, and service costs have dropped as much as 20 percent under 2008 levels.
It does not expect that quickening interest in Quebec and New Brunswick gas development will have any impact on output over the short term.
Under a low-price case, with average prices rising to US$5.25 from US$4.25 over the two years, the NEB projects deliverability would slide to 11.6 bcf per day by 2012.
Bill Gwozd, a gas supply analyst with Calgary-based Ziff Energy Group, does not share the NEB’s Alberta forecast, predicting a decline that would be flat to slight because of the new drilling technology, which results in greater gas volumes from fewer wells. His firm is releasing its own supply predictions later in April.
He said British Columbia benefits from lower gas prices because its initial production rates from new wells are about ten-fold higher than Alberta.
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