NEB: British Columbia's gas market 'working well,' despite price volatility

By OGJ editors

HOUSTON, May 17 -- British Columbia's natural gas market is "working well" despite high price volatility in Canada and the US, according to the Canada's National Energy Board.

In its findings, contained in a recently conducted energy market assessment (EMA) released late last month, NEB said the gas market is benefiting both endusers and producers, who are "making appropriate adjustments to higher gas prices."

The EMA found that gas prices in British Columbia are now "integrated with the North American gas market" and that there has been a "significant upward step" in natural gas prices throughout North America, including British Columbia.

Overall, the EMA said, British Columbia's endusers have reacted to higher gas prices by reducing demand. "After the California gas price spike in the winter of 2000-01, [endusers], especially industrial consumers, became concerned about natural gas price levels and price volatility. Industries such as the forest products industry improved energy efficiency and increased their use of other fuels," NEB said.

Meanwhile, residential consumers also reduced consumption by improving energy conservation, NEB reported. Also, in northeast British Columbia, producers have responded to higher prices by increasing exploration activity.

NEB's report said, ". . .price volatility continues and is being managed by market participants. However, the small size of the British Columbia natural gas market and the lack of a major storage facility near the Lower Mainland limit market flexibility in comparison with other major market centers such as Alberta."

In the medium to long term, there exists the potential to increase gas supplies from northeast British Columbia and to find gas in other provincial supply basins, NEB concluded.