With the North American natural gas market seeing growing supply, increased competition and falling prices, the National Energy Board believes natural gas delivery and exports will remain oversupplied, according to a June 19 press release from the organization.
With Canadian producers disregarding the oversupplied market, many natural gas companies will continue to drill on proven reserves for liquid natural gas export terminals, the agency said.
Connor McDonald, lead author of the National Energy Board's Mid-Range Forecast, explained western Canadian gas producers will continue to work through the oversupply period, but some companies have seen benefits to the decline in oil prices in the last year, the Calgary Herald reported.
"We still have a lot of competition from the U.S. - that's something that really can't be understated - and we are still in an oversupplied market," said McDonald. "In those respects, there are definitely some difficulties for Canadian producers."
Natural gas delivery still rampant
The National Energy Board report added even with the falling prices of natural gas and LNG, the market is still witnessing a high amount of deliverability. Peter Argiris, a forecast analyst for oil and gas advisory firm Woods Mackenzie, said Canadian production is only expected to grow within the next decade, the Calgary Herald stated.
"On the natural gas side, we see volumes increasing … from 12 Bcf (billion cubic feet) to over 19 Bcf per day," said Argiris. "The lion's share of that growth is coming from Montney and Duvernay, effectively as associated gas production. They're drilling for liquids but the gas is coming."
In the Montney shale basin, production is expected to increase by 94,000 barrels of oil equivalent per day from 2015 to 2025. Additionally, the Duvernay shale is estimated to grow from 27,000 boe/d to 320,000 boe/d in the same time frame.
Even though oil production is still remarkably high, much of the western Canadian producers still need to supply plenty of natural gas and LNG supplies for the gas export industry. However, there are still no sanctioned LNG projects. According to the source, roughly 98 percent of the nation's gas production comes from the western region.
At the same time, wells continue to search for oil and other liquids while producing natural gas as a byproduct.