The next decade will be a tough one for Canada’s ailing natural gas industry, marked by depressed prices, a continuing plunge in exports to the United States and lower production, the Conference Board of Canada says.
Net exports to United States will fall to just one trillion cubic feet a year over the next 10 years, or less than one-third of what the industry exported as recently as 2007, according to a new forecast released Monday.
The U.S. is on the road toward self-sufficiency in natural gas thanks to new shale deposits and fracturing technology, squeezing what has been a lucrative export market for Canadian gas.
The news isn’t all bad. The Conference Board says Canada will recapture a chunk of those lost exports by converting natural gas to liquid, and shipping it to fast-growing Asian countries via new terminals in British Columbia.
The future of the industry depends on the development of new shale deposits, primarily in B.C. and Alberta, which will pick up the slack as conventional production declines, the report points out.
The report said new shale deposits in B.C. and the prospect of several new liquefied natural gas terminals will open up new markets in Asia. If all of the proposed terminals get built, Canada would become the second largest of LNG supplier in the world, behind Qatar, the Conference Board says.
But the report assumes that four LNG “trains,” or liquification lines, will eventually be built in British Columbia. Total export capacity will reach 20 million tonnes per year.
“British Columbia faces the challenge developing on two fronts: unconventional shale gas production and infrastructure to support LNG exports,” according to the report. “Regulatory and fiscal measures that enable development will be keys to success.”
Quebec and New Brunswick also have shale gas deposits, but there is fierce public opposition towards tapping them.
Even though Canadian natural gas production is forecast to decline – from 5.3 trillion cubic feet a year in 2012 to 4.8 tcf/year in 2019 – the industry will continue to make huge investments. Production is expected to climb back up to 5.5 trillion tcf/year by 2030, still below what Canada produced in 2010.
The report says the industry will make investments of $386-billion between 2012 and 2035, generating 131,460 jobs and $364-billion in gross domestic product.
The main beneficiaries of that spending will be B.C. and Alberta, the Conference Board says.
Natural gas production is expected to contribute another $576-billion to the economy over the same period, for a total GDP boost of nearly a trillion dollars.
Demand, meanwhile, is expected to double between 2012 and 2035 – to 6 billion cubic feet per year from roughly 3 billion now. The main drivers will be oil sands production, LNG and electricity generation, accounting for nearly 80 per cent of increased use.
But the report points out that demand growth, at a compound annual rate of 2.8 per cent, is still likely to lag overall economic growth.