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Shale and Tight Gas Prospects Improve Canadian Natural Gas Deliverability Outlook

08/34
For immediate release
23 October 2008

CALGARY - Conventional natural gas production is expected to decline by approximately seven per cent between now and 2010, but further development of shale and tight gas prospects in northeast B.C. may be able to offset this decline, says a National Energy Board (NEB) report released today.

The report, Short-term Natural Gas Deliverability 2008-2010, presents three possible scenarios for deliverability based on the different levels of drilling investment that may occur - a reference case, a low case and a high case. While all three scenarios take into account the development of shale and tight gas prospects in the Horn River and Montney plays of northeast B.C., the high case scenario projects a higher level of investment in this area.

"Canada has a large natural gas resource base and ongoing efforts to further enhance innovation and efficiency will ensure that Canadian natural gas continues to make a key contribution to North American natural gas supply," said National Energy Board Chair Gaétan Caron.

Advances in drilling techniques and technology in recent years are allowing companies to access the shale and tight gas, which was previously difficult to produce. Although this development is still in the early stages, it has the potential to dramatically alter previous projections for a decline in the Western Canadian Sedimentary Basin (WCSB). Ninety-eight per cent of Canada's natural gas production comes from the WCSB.

"In our consultations with producers we heard a great deal of enthusiasm for the resource potential on the western side of the basin," said Gaétan Caron. "The basin on the western side is much deeper and less developed compared to the east."

While Canada's natural gas potential remains high, the development of these energy resources still depends on North American natural gas markets. The current global economic situation could result in declining demand. Meanwhile, natural gas production in the U.S. has increased by eight per cent. Declining production in Canada is also impacted by the high cost of production in Canada, and falling gas prices.

North American natural gas prices were particularly volatile between September 2007 and August 2008, swinging from C$5 to $11 and back to $7 per gigajoule (GJ). The report states that natural gas would need to reach $8 to $9 per GJ in western Canada in order to maintain or accelerate current drilling levels.

The NEB is an independent federal agency that regulates several parts of Canada's energy industry. Its purpose is to promote safety and security, environmental protection, and efficient energy infrastructure and markets in the Canadian public interest, within the mandate set by Parliament in the regulation of pipelines, energy development and trade. As part of its mandate, the NEB monitors the supply of all energy commodities in Canada and reports its findings. The NEB Internet site is regularly updated with new energy information for the Canadian public.

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For further information:

Tara O'Donovan
Communications Officer
National Energy Board
Telephone: 403-299-3371
Telephone (toll free): 1-800-899-1265
Telecopier: 403-292-5503
Telecopier (toll free): 1-877-288-8803
TTY (Teletype): 1-800-632-1663

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