Role of Arctic gas uncertain

Regardless of how Canada’s energy consumption evolves, the National Energy Board has no doubt that demand for natural gas will rise, led by home and business heating uses, with oil sands extraction and gas-fired power plants playing a secondary role.

What is less clear, based on the federal regulator’s projections for 2005-30, is what sources will be tapped to offset the shrinkage of conventional gas output from the Western Canada Sedimentary basin as older fields become less productive.

The NEB’s broad conclusion is that gradual declines in basin output could lead to development of additional northern, offshore and unconventional gas sources and to imports of LNG.

But relatively flat to declining overall production and growing demand for gas in oil sands extraction and electricity generation “could eventually diminish Canada’s role as a natural gas exporter.”

The study says the North American market is evolving from one of self-sufficiency to an increasing requirement for offshore liquefied natural gas.

“The scope of imports into North America will depend to some extent on the success of gas projects in Alaska, Mackenzie Delta, the East Coast and non-conventional developments, such as coalbed methane in Western Canada and the U.S. Rockies …” the NEB says.

But it warns that recent cost-escalation for northern projects adds to the uncertainty about in-service dates and raises concerns about whether these projects will proceed.”

The study says that under one of its three scenarios — the so-called Triple E model that balances economic, environmental and energy objectives within well-functioning energy markets, cooperative international agreements and a rigorous energy demand management policy — Western Canada Sedimentary basin production could fall by 80 percent by 2030 from current levels.

That decline would be due to lower gas prices which can’t absorb the “higher costs of producing other gas resources such as unconventional gas or developments in the North.”

The decline emerging from the other two scenarios would be partially offset by the development of unconventional gas in the WCSB, combined with the expectation of more gas production from the North by 2014.

Those two scenarios are labeled Continuing Trends (trends that are apparent in 2005 and are maintained throughout the entire forecast period) and Fortified Islands (dominated by security concerns, with geopolitical unrest, a lack of international cooperation and trust and protectionist government policies).

Under Triple E, the NEB says LNG imports would account for more than half the gas available in Canada by 2030, which would cost less than developing and bringing northern and unconventional gas to market.

In both Continuing Trends and Triple E, imports would gradually exceed exports, making Canada a net gas importer before 2030.

In Fortified Islands, security concerns would curb worldwide LNG supply and high prices would generate development of unconventional and northern gas, allowing Canadian gas exports to rise.

—Gary Park