|
Canadian gas going downhill Natural gas production decline since 2006 eats into shipments to United States; shale plays cut into demand Gary Park For Petroleum News
Canadian natural gas production has declined by 12 percent since the end of 2006 and is likely to slide even more in 2009, the National Energy Board has forecast.
This year alone, output has shrunk by almost 1 million cubic feet per day and is expected to exit 2008 at 15.3 billion cubic feet per day, off from the peak of 17 bcf per day at the start of 2007, the regulator said.
The trend is consistent with an Oct. 2 prediction by the U.S. Natural Gas Supply Association that shipments from Canada will drop to 7.5 bcf per day this winter from 8 bcf per day during the last heating season, offset by an 8 percent rise in U.S. domestic production.
The drop in gas prices through 2007 and 2008 has dramatically slashed Canadian drilling levels from 24,000 wells in 2006 to 19,500 wells in 2007 and an expected 13,000-14,000 wells this year, according to Calgary-based AJM Petroleum Consultants.
Unless there is a sharp uptick in gas prices, drilling levels are not expected to change in 2009, leading to further declines in production, said Robin Mann, chief executive officer of AJM.
The Canadian Association of Petroleum Contractors predicted in May that if gas prices continued their first-half trend, remaining above US$10 per million British thermal units, contractors could be expected to complete 18,000 wells in 2008. However, gas futures slumped over the past two months, entering October at US$7.36 on the New York Mercantile Exchange.
AJM has forecast Alberta Reference average prices of C$7.10 per thousand cubic feet for 2008, rising to C$8.60 in 2009 and generally following an upward curve over the next 20 years, passing C$10 in 2015 and reaching C$12.65 by 2027.
The NEB estimated Canada’s total production in January at 16.24 bcf per day, peaking in March at 16.58 bcf per day before starting a continuous decline.
Alberta remains top producer Alberta remained top of the heap among provinces, producing 12.57 bcf per day in January, peaking at 12.91 bcf per day in April and forecast to end the year at 11.95 bcf per day.
British Columbia had marketable production in January of 2.54 bcf per day, hitting 2.65 bcf per day in March, before starting its downward spiral, which is anticipated to average 2.92 bcf per day in December.
The excitement generated by shale gas plays in the United States and Canada carries a downside, with forecasters warning that drilling and spending plans will be axed as the new discoveries create a gas surplus on the market.
“The development has been so rapid that it probably overran the market a little bit,” said Richard Smead, co-author of a Navigant Consulting report for the American Clean Skies Foundation.
“Right now we probably have more supply than we need in the short term,” he said.
Smead said it makes no financial sense to produce gas at some wells when the price is below US$7.50 and if prices cling to that range, the industry will be forced to constrain capital spending.
He said it is important to remember that the certainty of success is “very high” in some shale formations, “so that if a producer holding a number of leases delays development, nothing is lost long-term. The gas will simply be produced when the market says it is needed.”
| 