Canadian Agency Drops LNG From Gas Outlook

For the first time in a decade, Canada's energy regulator National Energy Board (NEB) has dropped the prospect of LNG exports from its Energy Futures 2017 assessment to 2040, which was published October 26.

“Previous Energy Futures reference case projections have assumed some volumes of LNG exports within the projection period,” the 2017 report says, noting that the global LNG market has become increasingly more competitive in recent years. 

Some LNG projects are still being considered, it admits, but given recent low global LNG prices and the relatively higher cost of commissioning new LNG facilities and the pipelines needed to supply them with gas, “EF2017 makes an assumption that no LNG exports from Canada will take place over the projection period.”

The 2013 Energy Futures report, by contrast, assumed Canadian LNG exports at 1bn ft³/day in 2019, increasing to 3bn ft³/day by 2023. And last year's report assumed that aggressive LNG project development could push LNG exports as high as 6bn ft³/day by 2030.

The NEB sees gas production dipping over the next five years as conventional, non-tight reservoirs are exhausted, before climbing again as prices slowly increase and encourage the development of unconventional shale and tight gas reservoirs.

In the board’s reference case, Canadian natural gas production will decline early in the forecast period, to a low of 14.6bn ft³/day in 2023, before recovering to 16.8bn ft³/d in 2040, about where it was in 2007. Canadian gas production will average 15.2bn ft³/d this year, the NEB’s data tables show.

As the share of conventional gas in total output – which stood at 65% in 2006 – falls to just 23% in 2040, the supply gap will be filled by unconventional shale and tight gas, primarily from the Montney play, which straddles the northern border between the provinces of Alberta and British Columbia. Prior to 2006, the NEB says, there was no production from the Montney; by 2040, it will reach 7.9bn ft³/day, accounting for nearly half of all Canadian gas production.

The other major unconventional gas source will be Alberta’s Deep Basin, a liquids-rich play which runs along the Alberta foothills. Production will increase modestly by 2040, the NEB says, to 3.8bn ft³/day from 3.4bn ft³/day in 2016.

The board’s forecasts for future production, particularly from the Montney, might have been slightly higher were it not for its assumption that none of the 20 or so LNG export projects proposed for Canada will actually be developed by the end of the forecast period.

Dale Lunan