Canada's natural gas production will stay flat through 2022 without new export routes as the juggernaut of U.S. shale production undercuts supplies from Alberta and British Columbia.
The forecast by the International Energy Agency, released Thursday, points to mounting pressures faced by producers in Western Canada, where pipeline constraints and delays to proposed liquefied natural gas projects have stymied development and contributed to a longer-term malaise in Canadian gas prices.
For years, western producers accounted for the lion's share of exports to markets in Ontario, Quebec and New England. But those shipments have steadily declined with the rapid growth in U.S. production from deposits such as the Marcellus and Utica regions in the northeast. A growing share is being exported north.
The shale boom is forecast to drive overall U.S. production to 890-billion cubic metres by 2022, accounting for 40 per cent of the world's extra output, the IEA said. More than half of the increase will be exported as LNG, putting the United States in league with top exporters Australia and Qatar.
By contrast, Canadian production is forecast to stay almost flat at around 170 bcm, with exports to the United States dropping by 4 bcm from about 82 bcm in 2016, the agency said.
"The U.S. shale revolution shows no sign of running out of steam and its effects are now amplified by a second revolution of rising LNG supplies," IEA executive director Fatih Birol said in a statement.
The dour outlook for Canadian gas comes despite moves by pipeline operator TransCanada Corp. to lower shipping fees on its cross-country mainline system in an effort to make domestic volumes more competitive.
Earlier this year, Calgary-based TransCanada signed long-term deals with producers to ship at least 1.5-million gigajoules a day of gas on the west-to-east system at a discounted rate.
The move will help Canadian producers defend market share, but the long-haul pipelines such as the mainline are unlikely to deliver volumes at historic levels, said Samir Kayande, analyst at RS Energy Group in Calgary.
For the Canadian industry, just maintaining production at current levels is no small feat, he said. It will require a greater emphasis on marketing and creative transportation solutions, he said.
"Flat's a win in the face of all this cheap gas coming in from the northeast U.S." he said.
The IEA said growth in Canada's domestic production "heavily" depends on the development of LNG export projects. However, it said proponents, including Royal Dutch Shell PLC and Malaysia's Petronas, have put off investment decisions. Meanwhile, a "major wave" of new projects globally means there is little incentive to build new capacity, it said.
Some producers have sought to bypass the gridlock in Canada altogether. In the spring, Seven Generations Energy Ltd. signed a deal with U.S. LNG producer Cheniere Energy Inc., enabling the company to export volumes from wells in British Columbia via the U.S. Gulf Coast.
"It's a long way to go but everything's built," Mr. Kayande said.