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Canada expects lower natural gas exports to US

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World Pipelines,

In its recent publication, Canada's Energy Future (CEF), Canada's National Energy Board (NEB) projects that both Canada's natural gas production and its domestic natural gas consumption will increase through the next decade. Exports of natural gas by pipeline to the US are expected to continue to decline. The planned construction of LNG export terminals on Canada's western coast, which would send LNG exports to Asian markets by 2019, plays a key role in maintaining Canada's overall natural gas exports.

Net natural gas exports to the US

The NEB expects that Canadian natural gas net exports to the US will fall to 2.5 billion ft3/d by 2025, shrinking to a negligible volume by 2040. Net exports to the United States have already decreased from a high of 10.6 billion ft3/d in 2007 to 7.4 billion ft3/d in 2014. With the continued development of US shale resources, such as the Marcellus, the United States now relies less on Canadian imports to meet demand. By 2040, CEF projects that US natural gas exports to eastern Canada will largely offset Canadian natural gas exports to the United States.

LNG exports to other destinations

With the decline of natural gas exports to the United States, LNG exports are expected to be the primary driver of Canadian natural gas production growth, with production growing from 15 billion ft3/d in 2015 to nearly 18 billion ft3/d in 2025. The NEB analyses two additional cases in CEF to explore the impact of LNG exports on production. In a low LNG case, where no liquefaction facilities are constructed, production remains at the 2015 level of 15 billion ft3/d through 2040. In a high LNG case, where LNG exports reach 4.0 billion ft3/d by 2023 and 6.0 billion ft3/d by 2030, production increases to 22 billion ft3/d by 2040. Based on these results, CEF anticipates that future Canadian natural gas production growth will rely on the construction of LNG export capacity.

Natural gas production

Recent technological advances in horizontal drilling and hydraulic fracturing have led to increased development of tight gas and shale gas resources in the Western Canadian Sedimentary Basin. CEF expects this development to continue as Canada's domestic natural gas production grows to nearly 18 billion ft3/d by 2025. Tight natural gas accounts for 70% of projected production in 2025, and most of this natural gas is from the Montney formation in British Columbia and Alberta, where production is projected to triple from 3.0 billion ft3/d to 9.6 billion ft3/d between 2014 and 2040. Production growth also occurs in the Alberta Deep Basin (tight) and the Horn River Basin (shale). These increases offset the decline in production from other resources.

Domestic natural gas consumption

Canadian natural gas consumption is also projected to rise, reaching 16.4 billion ft3/d by 2025 and 18.6 billion ft3/d by 2040. The industrial sector, which includes refining and oil exploration, is the primary driver of this growth, as well as the largest consumer of natural gas. Oil sands operations alone currently account for 20% of Canadian natural gas consumption. By 2040, CEF expects oil sands production to more than double to 4.8 million bpd, consuming 3.4 billion ft3/d of natural gas. Another source of natural gas demand growth is electricity generation, whose consumption rises to more than 3.2 billion ft3/d by the end of the projection period.

Adapted from press release by Rosalie Starling

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