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Spectra Energy Corp. is pursuing a long-term strategy to replace Western Canadian natural gas with U.S. shale gas in Ontario and Quebec, creating further pressure on domestic producers to develop export markets to Asia.

Union Gas Ltd., Spectra's Chatham, Ont.-based subsidiary, is seeking expressions of interest among producers and customers to expand its connection to a pipeline network that would carry shale gas from southwestern Ontario to the Greater Toronto Area and as far as Quebec.

The company is already reversing a line previously used to export Canadian gas into New York State in order to import supplies from the prolific Marcellus shale deposit in Pennsylvania.

In an interview Monday, Spectra chief executive officer Greg Ebel said he expects the development of U.S. shale gas to dramatically curtail Canadian exports into the U.S. Northeast, and even threaten the traditional central Canadian market.

"I think you can see it now," the Houston-based executive said during a visit to Ottawa. "With the price of natural gas in New York and Pennsylvania versus the delivered cost of gas, it's just very difficult for the Western Canadian gas to compete in some markets in the United States."

Ontario consumers will also increasingly benefit from lower transportation costs involved in accessing gas from the Marcellus and the rapidly developing Utica play in Ohio.

"As market forces push you to use product that is closer to you, that makes it tougher for Western Canadian gas," he said.

Spectra itself is in the early stages of planning a new pipeline that would carry gas from Pennsylvania and Ohio to Union's massive Dawn storage hub in Southwest Ontario. Union is already accessing growing volumes from western U.S. suppliers who are themselves being squeezed out of the U.S. Northeast market.

The transformation of North America's natural gas market is causing enormous headaches for Western Canadian producers, who have seen prices dip below $2 per thousand cubic feet and their exports to the U.S. decline by 25 per cent in the past few years.

Given the forecast for growing shale gas production south of the border, the U.S. Energy Information Administration now forecasts that imports from Canada will decline by a whopping 62 per cent over the next 25 years.

Spectra is one of North America's largest pipeline and gas processing companies, with assets that include Union Gas, Westcoast Energy in Western Canada, and the Maritimes and Northeast Pipeline in Atlantic Canada.

Mr. Ebel – an Ottawa native who served as a senior political aide in the Mulroney government – said shrinking markets in eastern North America underscore the urgency for companies to proceed with liquefied natural gas exports on Canada's West Coast.

Spectra is investing $1.5-billion on its British Columbia gas transportation and processing system and is eager to see firm commitments, with the expectation that it will need to expand its pipeline to the coast.

Companies such as Royal Dutch Shell PLC and U.S.-based Apache Corp., are leading consortiums to build projects. But only Apache-led Kitimat LNG, among the major groups, has received the necessary permit to export gas.

In a speech to the Economic Club of Canada, Mr. Ebel said Canada needs to move quickly to develop its LNG capacity because other countries, including the United States and Australia, are pursuing the same Asian markets.

He applauded the federal government's announcement that it will speed the permitting process for major resource projects like pipelines and LNG terminals.

But while Ottawa is targeting environmental reviews, the energy executive said both federal and provincial governments need to do a better job co-ordinating consultations with first nations. After the speech, he was scheduled to meet with John Duncan, Minister of Aboriginal and Northern Affairs, where he could deliver that message directly.

"Canada's first nations are important partners in so many of our energy and resource project – and in our national growth and prosperity," he said.

"One single, meaningful federal-provincial Crown consultation as a part of the approvals process would help avoid confusion and unnecessary delay."