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Report: Natural gas supply to decline as market recovers
The current downturn in drilling activity is expected to put a significant dent in Canadian natural gas supplies over the next two years, says the National Energy Board’s report “Short-term Canadian Natural Gas Deliverability 2009-2011,” released Sept. 23. NEB is an independent federal agency that regulates several parts of Canada’s energy industry.
Abundant supply and reduced demand have slashed North American natural gas prices from a record high of C$13 per million British thermal units in July 2008 to below C$2 per million Btu in September 2009, NEB’s report said.
In response to lower prices, drilling activity in Canada and the United States has slowed to roughly half the levels of previous years. On Sept. 1 there were 199 active rigs in Western Canada, compared to 412 at the same time in 2008.
“Since conventional gas represents a substantial majority of North American supply, the decline in drilling is likely to begin to reduce deliverability (the ability to produce gas from new and existing wells),” NEB said in a Sept. 23 press release about the report.
Tight gas, shale hold firm Meanwhile, the report said, tight gas and shale gas drilling activity in northeast B.C., Quebec and the Maritimes is expected to continue at modest levels into 2010 as the industry seeks to gain knowledge and refine its techniques. Activity levels in northeast B.C. could begin to increase over the 2010 to 2011 winter period if proposed pipeline projects are approved and developed. Overall, deliverability is expected to decline by about 17 percent by 2011.
“Drilling activity is slowing in response to current market conditions, but our projections show that there will still be sufficient natural gas to serve Canadian markets,” said NEB Chair Gaétan Caron. “As the market begins to recover, and demand increases, we will see a return to more normal levels of drilling activity.”
Canadian demand for natural gas is expected to grow by 6 percent between now and 2011, with most of the increase coming from oil sands development in Western Canada, the report said.
The report was an update to the NEB’s 2008 outlook for Canadian gas deliverability.
NEB will release its next annual outlook for short-term Canadian natural gas deliverability in March 2010.
NEB’s purpose is to promote safety and security, environmental protection, efficient energy infrastructure and markets that serve the best interests of Canadians.
—Petroleum News
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