Drought poses problem for water-intensive Canadian gas industry
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Gary Park for Petroleum News
Unless there is a sudden change in weather patterns, persistent drought conditions pose a big challenge for the natural gas sector in Western Canada says a report by Deloitte Canada.
The report, made public in early April, says the potential water shortage is a key risk facing gas producers in 2024.
It says some of the most extreme drought conditions are currently in the gas-dependent regions of northeastern British Columbia and northwestern Alberta where water use is critical to the development of gas that underpins the LNG facilities expected to come on stream in the next year.
Andrew Botterill, national oil, gas and chemicals leader at Deloitte Canada, said the upcoming availability of new processing and transmission infrastructure is "the moment the natural gas industry has been waiting for for 10 years," but the prospect of water restrictions means "we've now got another complication."
Poised to come on stream is the C$40 billion LNG Canada project at Kitimat that is scheduled to start exporting LNG and open up Asian markets to Canadian gas for the first time.
Much of the C$5 billion in capital spending projected to take place in gas fields this year is targeted at British Columbia according to the Canadian Association of Petroleum Producers.
Botterill said the threatened drought "is just going to mean some extra costs around water management."
In December the Alberta Energy Regulator warned the oil and gas industry it could face restricted access to water in the event of a severe drought in 2024.
The provincial government has already launched negotiations aimed at trying to get major water users to reach water-sharing agreements.
Meanwhile, the British Columbia Energy Regulator has issued advance warning of potential water restrictions for industrial license holders.
Botterill said that if restrictions are imposed gas developers will need to explore increased use of alternative water sources, such as recycled water previously used as fracking fluid.
In 2022 the Alberta Energy Regulator estimated that just over 1% of water used by hydraulic fracturing operations was recycled water, with the remaining 99% being primarily fresh water.
--GARY PARK
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