ARCHIVED - Fact Sheet - Challenges for Future Natural Gas Deliverability in Canada
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Fact Sheet - Challenges for Future Natural Gas Deliverability in Canada - Overview
The report, Short-term Canadian Natural Gas Deliverability 2011-2013, provides an outlook for Canadian natural gas deliverability (the ability to produce gas from new and existing wells) to the end of 2013.
Key factors influencing deliverability in Canada over the period of 2011-2013 are:
- an oversupply of North American natural gas due to continuing increases in U.S. shale gas supplies and reduced natural gas demand growth since 2009, and
- a shift in drilling activity in North America away from natural gas and toward crude oil and other liquid hydrocarbons (propane, butanes, and pentanes plus) to capitalize on higher oil prices.
These key influences have diverted investment and drilling activity away from natural gas in Canada. Although Canada has significant natural gas resources, including shale gas resources, these factors could cause Canadian natural gas deliverability to decline over the projection period. Despite the potential decline, projected Canadian natural gas deliverability is anticipated to be more than sufficient to serve Canadian markets.
The decline in Canadian natural gas deliverability could slow or reverse if the North American natural gas market begins to experience a closer balance between demand and available supply that causes natural gas prices to move upward.
The Mid-Range Case expects natural gas deliverability to decrease from 380 106m³/d (13.4 Bcf/d) in 2011 to 364 106m³/d (12.8 Bcf/d) in 2013.
Total Canadian Deliverability Comparison of Cases
WCSB Initial Productivity of Average Conventional Gas Connections by Connection Year
What's Happening to Deliverability in Canada?
While in previous years natural gas targets accounted for almost 80 per cent of new wells drilled in Canada, this percentage has been declining since 2006. In 2010, only 40 per cent of wells that were drilled targeted natural gas, and this is not expected to change until at least 2013. Moreover, new production has not been able to offset the drop in output from existing wells, and a gradual decrease in natural gas deliverability is expected between 2011 and 2013.
Increasing U.S. Shale Gas Production
At the start of 2008, there were about 280 rigs capable of drilling horizontal wells operating in major U.S. shale formations. By the end of 2010, this number ballooned to over 500 rigs. This large increase in the number of horizontal drilling rigs means that U.S. shale gas production will continue to rise and keep ahead of demand growth in both Canada and the U.S. This essentially means the U.S. can meet more of its internal demand, keep prices from rising, and decrease opportunities for Canada to export to the U.S. These factors are reducing the attractiveness to produce Canadian natural gas.
The Move Towards Oil and NGL-rich Natural Gas
Canadian and U.S. natural gas producers are responding to the U.S. oversupply by shifting away from drilling activity that focuses solely on natural gas. Instead, companies are targeting oil and natural gas containing natural gas liquids (NGLs) to capitalize on the rise in oil prices. NGLs, such as propane, butanes and pentanes plus, are priced in relation to oil, so higher oil prices provide higher revenue, and an influence to change production.
New U.S. Pipeline Infrastructure
In 2011, two new pipelines in the U.S. are coming into service that will further reduce the amount of natural gas imports from Canada. This new infrastructure will give the U.S. more capacity to ship locally produced natural gas to markets across the country. The Bison Pipeline, which went into service in January 2011, moves natural gas from Wyoming to the U.S. Midwest via the Northern Border Pipeline. The Ruby Pipeline, scheduled to enter service in June 2011, will move natural gas from Wyoming into the Pacific Northwest and California. Combined, both pipelines can carry approximately 67 106m³/d (1.9 Bcf/d). In 2010, total Canadian exports were about 253 106m³/d (8.9 Bcf/d), so this new amount of U.S. pipeline capacity may have a large effect on the amount of Canadian gas that would typically be exported into these markets.
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