NEB expects a decline in Canadian gas deliverability

By OGJ editors
-- Canada's natural gas deliverability may decrease to 12 bcfd in 2013 from the 13.4 bcfd in 2011, according to the midrange scenario in a recent report by Canada' National Energy Board.

Despite this decline, NEB expects Canada to have ample gas supply to meet its needs.

The report, Short-Term Natural Gas Deliverability 2011-13, attributes the decline to two key market factors, namely oversupply of gas in Canada and the US and the shift in drilling away from gas.

The report expects the decline trend to continue unless prices are pushed up because of a closer balance between demand and available supply.

It notes that as of fall 2010, the US had drilled a record number of horizontal wells in major shale gas formations despite a slower growth in demand since 2009, thus creating an overall surplus of gas in the Canadian and US markets.

If US companies continue to drill at high levels, they will meet more American internal demand, keep prices down, and decrease opportunities for Canada to export, the report said.

The report explains that the glut of gas has led Canadian gas producers to pursue other energy products to secure revenues when gas prices are low such as the production of oil and NGLs, which have a higher market value.

The completion of two gas pipelines in the US also will affect the delivery of gas from Canada. Both pipelines will enable more US produced gas to move to markets traditionally served by Canadian exports, the report said.

The Bison Pipeline, which went into service in January, moves gas from Wyoming to the US Midwest via the Northern Border Pipeline. The Ruby Pipeline, scheduled to enter service in June, will move gas from Wyoming into the Pacific Northwest and California.

Combined, both pipelines can carry about 1.9 bcfd. In 2010, total Canadian exports were about 8.9 bcfd, so that this new amount of US pipeline capacity may have a large effect on Canadian gas exports to these markets, the report said.

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