Gas deliverability in Canada will continue to decline through 2012 as production falls in Alberta and rises in British Columbia, says the National Energy Board.
A drilling slump began to reduce deliverability—which NEB defines as "the estimated amount of gas that can be supplied from a given area based on historical production and declines as well as projected activity and results"—in 2008.
After staying at about 17 bcfd through most of the last decade, Canadian deliverability fell to 15.8 bcfd at the end of 2008 and to an estimated 14.4 bcfd at the end of 2009.
The decline will continue under any of three price scenarios in NEB's analysis: a mid-price range of $5.50/MMbtu (US) at Henry Hub in 2010, $6/MMbtu in 2011, and $6.75/MMbtu in 2012; a high-price range for those years of $6.50, $7.00, and $7.75/MMbtu, and a low-price range of $4.25, $4.75, and $5.25.
With prices in the middle range, NEB projects a deliverability decline to 13 bcfd in 2012 from an average 15.1 bcfd for all of last year, with gas drilling rising by 19% in 2010 and less than 10% in each of the next 2 years.
The high-price range yields deliverability projections of 14.2 bcfd in 2010, 13.9 bcfd in 2011, and 14.3 bcfd in 2012. Gas drilling jumps by a total of 64% over the projection period.
With gas prices in the low range, deliverability drops throughout the period to 11.6 bcfd in 2012. Drilling averages 60% of 2009 levels throughout the projection.
Projected gas drilling expenditure in 2012 is $9.1 billion with prices in the middle range, $12 billion with high prices, and $5 billion with low prices.
Shifting supply
In all three scenarios, activity increases in unconventional resource plays, especially tight gas and shales in British Columbia.
In the middle price range, deliverability from the Horn River unconventional play in British Columbia rises to 462 MMcfd by 2012 from 41 MMcfd at present and from the Montney play to 1.5 bcfd from 387 MMcfd.
With prices in that range, Canadian gas exports to the US would decline, but deliverability would "readily meet Canadian demand, including projected growth for the oil sands and to generate electricity," NEB says.
Even under the low-price scenario, predicated on a "more pessimistic macroeconomic picture," deliverability would be greater than projected Canadian demand in the forecast period.
NEB notes that deliverability's trend of increasing in British Columbia and falling in Alberta might change "should shale gas development accelerate in Alberta, either in the Duvernay or other sources."
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