Post Carbon Toronto

Natural gas supply

 

Canadian Natural Gas Supply Issues

Natural gas distributers and producers frequently state that Canada has enough natural gas reserves to last for more than 70 years at current rates of consumption. It isn't exactly a false statement, but the truth is more complicated and uncertain than the industry would have Canadians know.

For one thing, most of the reserves claimed by the industry and supported by National Energy Board studies, are "undiscovered". For another, most of those undiscovered reserves are located in the high arctic and offshore in the Atlantic east of Newfoundland. Currently that gas, if it were to be discovered, would be considered "stranded", that is there is no economical way to bring it to markets in the south. In fact, producing those reserves will be a extremely difficult engineering challenge and undoubtedly very expensive, if it is ever attempted.

The gas reserves that Canadians rely on for heating and industrial production such as manufacturing cement, glass, plastics, fertiliser and other essential materials comes primarily from fields in the Western Canadian Sedimentary Basin which underlies Alberta and parts of Saskatchewan and British Columbia. This basin has been intesively explored and developed gas producers are now struggling to maintain production.

The Western Canadian Sedimentary Basin

The WCSB is the source of 98% of all Canadian gas production. Production in 2006 was 472.63 million cubic meters per day (16.7 billion cubic feet), or about 6.1 trillion cubic feet per year. Production growth has stalled since about 2000, with declines in conventional gas production offset by modest growth in unconventional gas sources such as coal-bed methane. This relatively stable plateau in production has only been maintained by a massive ramp up in drilling activity.

In the mid 90s, about 4,000 gas wells were drilled per year. Starting in 1998, the number of new wells drilled each year began to climb rapidly reaching over 18,000 in 2005. Yet this massive increase in drilling has only managed to stabilze production, not increase it. The reason for this is that size of the gas pools is declining resulting in lower intial production rate, rapid decline in production and lower total life time production. Initial productivity has declined from about 0.40 MMcf/d in 1997 to about 0.10 MMcf/d in 2006. At the same time production costs have been rising.

This trend will only get worse as geologists have estimated that the remaining recoverable gas in the WCSB, discovered and undiscovered, will be found in increasingly smaller pools. The first 65% of the ultimately recoverable gas was found in 28,770 pools and took about 100,000 exploration wells to locate. The maining undiscovered gas is expected to be contained in about 203,000 pools and will require more than 200,000 exploration wells to discover.

In a joint report by the Alberta Energy and Utility Board and the National Energy Board (2005) analyzing Alberta's ultimate natural gas potential, they said:

Alberta’s initial reserves, as booked by the EUB/NEB, have increased by an average of 105 109 m3 (3.8 Tcf) per year over the past four years. If these increases continue at the same rate, it would take about 16 years to find all of the undiscovered resources of conventional natural gas estimated in this study. The project team anticipates that annual additions will decline in future years and thus it will take longer to find all of the undiscovered resources. Alberta’s annual production is in the order of 136 109 m3 (4.8 Tcf), a volume that exceeds annual additions. Consequently, Alberta’s remaining reserves will continue to decline.

Since 2006, the number of wells drilled has begun to decline as 'low' gas prices made some new prospects uneconomical. While nominal gas prices in US dollars have been relatively stable, the US dollar has declined in value reducing income to gas producers (gas is sold priced in US dollars) while production costs have been rising. This has made many new drilling prospects uneconomical. The decline in production has been offset by lower exports to the US and overall demand for gas has declined somewhat as large industrial users such as fertiliser and plastics manufactures have moved production offshore to plants in the middle east and Russia.

Where Candian gas reserves are located

 

Note that the amounts in red are "resources" or geologists estimates of how much gas may be found in a region without regard to how much can be economically recovered. The amounts in black are discovered resources, that is gas that has been discovered but cannot yet be economically recovered. Higher gas prices, improved technology or in the availabilty of pipelines for transport can change some portion of the "discovered resources" into "reserves" in the future.

The estimates of Canadian gas reserves produced by the National Energy board include "undiscovered reserves", that is estimates of future discoveries adjusted for an estimate of how much might be economically recoverable at some time in the future.

Canadian Gas Production Statistics

	2000	2001	2002	2003	2004	2005	2006
Production	6.45	6.60	6.63	6.45	6.47	6.57	6.60
Consumption	2.29	2.92	3.02	3.25	3.26	3.23	3.41
Exports	3.53	3.67	3.61	3.20	3.20	3.34	3.79
Reserves	59.43	59.82	58.76	56.61	56.29	57.65	58.80
R/P Ratio (Years)	9.21	9.07	8.86	8.77	8.70	8.78	8.90

 

Datasheet on Canada's natural gas production, supply, and reserves: Natural gas in Canada 2007 (PDF)

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