You may think of Alberta as an oil-driven province, but for decades natural gas has been its economic bedrock.
So with gas prices in the sewer, production plummeting and a terrible outlook for the industry, the province is contemplating a strategy to boost its use of gas. One such idea is to increase the number of vehicles that run on it, as suggested by Premier Alison Redford Tuesday.
Finding ways to burn more gas is not only an imperative for the province, but also one for Canada’s energy industry, which is still firmly wedded to the prospects of the clean-burning fuel. It’s not just Encana Corp. and Talisman Inc. – everyone from Suncor Energy Inc. to Cenovus Energy Inc. and Imperial Oil Ltd. produce substantial volumes of gas.
But propping up gas demand in Alberta is going to be far harder than simply convincing people to buy a few more natural gas-fired Civics and semis, or transport trucks. In the U.S., where such plans are far more advanced, and have high-profile boosters like T. Boone Pickens, forecasters have essentially written off transportation as a source of increased gas use.
“We did a deep dive on this and looked at five models of U.S. demand. We couldn’t find anybody who had transportation increasing its share over time,” said Daniel Goldwyn, president of Goldwyn Global Strategies LLC.
And two other important sources of gas growth appear to be passing Alberta by: the switch from coal to gas-fired power, and growth in manufacturing of petrochemicals.
In the United States, some seven billion cubic feet a day of gas is now being burned by what were once coal plants – that’s a tremendous amount, equivalent to half of Canada’s entire gas output. Alberta, however, is moving in the other direction. The province has worked to clear the way for not one, but two new coal plants, and just saw another start operations.
Then there are the agricultural and petrochemical industries, which use tremendous amounts of gas to produce fertilizer, plastic and other products. But some of the most important players in those sectors don’t want to build more in Alberta. Bill Doyle, chief executive officer of Potash Corp., told The Globe and Mail in May that “to build a nitrogen plant in Alberta doesn’t really fit our geographic setup.” Building them requires installing a lot of logistics support – which means it’s not simple to just set up a new plant in Alberta. (Potash’s current plants are located in the U.S. Gulf area and eastern North America.)
And Royal Dutch Shell PLC, which is embarking on a major push to build new petrochemical plants in the U.S., doesn’t see a role for any of those in Canada.
“It’s about finding the right place to do it which has infrastructure access, etc.,” CEO Peter Voser said on a recent visit to Calgary. “As per today, I would see it more as a U.S. development rather than a Canadian development.”