NEB: Canadian gas prices to stay robust through 2006

By OGJ editors
HOUSTON, Oct. 27 -- Canada's National Energy Board expects natural gas prices in Canada to remain high through 2006 and production to change little. The combination means limited growth in natural gas liquids (NGL) supply.

NGL prices therefore will be relatively high over the outlook period, the NEB said in an energy market assessment entitled Short-term Outlook for Natural Gas and Natural Gas Liquids to 2006.

Gas prices are expected to be strongly influenced by benchmark US West Texas Intermediate crude oil prices and probably will fluctuate in the btu-equivalent price range bounded by residual fuel oil (RFO) and No. 2 heating oil.

"Based on expectations that WTI crude oil could average about $50/bbl throughout the outlook period, the historical ratios for No. 2 heating oil and RFO would yield a range of about $6.90/MMbtu to $10.34/MMbtu for natural gas, depending on natural gas fundamentals," the report said.

The US and Canadian gas market is expected to remain supply-constrained throughout 2005-06, and demand is expected to show continued resilience to higher gas prices because of its merits as a clean-burning fuel.

NEB Chairman Kenneth Vollman said, "Consumers should expect natural gas prices to remain high and volatile." He cited the relationship between crude oil and gas prices as well as a tight supply-demand balance, which can be exacerbated by weather.

Canadian gas production has flattened. NEB expects minimal change in average annual Canadian gas deliverability—to 16.87 bcfd by 2006 from 16.71 bcfd in 2004.

Deliverability of conventional gas from Alberta is expected to decline, although the decline could be offset by gains from British Columbia and Saskatchewan.

Meanwhile, Canadian gas demand continues to grow, driven in part by Alberta oil sands operations, NEB said. Oil sands projects used 72 MMcfd in 2004, and the report projects they could consume 1.01 bcfd by the fourth quarter of 2006.

Power generation also is driving gas demand. Ontario is working to remove 7,500 Mw of coal-fired capacity from its power grid by 2009.

"Although the refurbishment of existing nuclear generation might meet part of the requirement for the displaced coal, there will likely be a significant volume of new natural gas-fired power generation entering the system," the report said.

Infrastructure, NGL
NEB said utilization of gas infrastructure in Canada and the US will shift as the nature and location of North American gas supply change. Marginal gas production growth in the US Lower 48 states and Canada will require new sources of gas supply.

Increasing LNG shipments into North America will alter the volume and patterns of gas flows through existing pipeline infrastructure, NEB said.

Limited growth is expected in NGL supply during the outlook period. The economics of NGL extraction is based upon gas prices relative to NGL component prices. High gas prices relative to oil prices discourage NGL extraction.

The increase in oil sands demand for gas reduces the amount of liquids-rich gas available at straddle plants. In Canada, most propane is exported.

"Domestic use for butane has been increasing due to its use as a heavy crude oil diluent, although some volumes continue to be exported," NEB said.

Pentanes-plus supply is tight, and the outlook is for significantly increasing demand for use as diluent for heavy oil and bitumen.

"Of all the NGLs, a major issue lies with a tight ethane supply, since the Canadian petrochemical industry is primarily ethane-based. There are a few possible options to gain access to incremental ethane supply," NEB said.

These options include upgrading existing straddle plants to take a deeper cut of ethane, NEB said. New infrastructure also could be added to extract more liquids from gas streams currently not flowing past straddle plants and from gas streams going to oil sand projects.

"Alternatively, there could also be benefits in modifying and diversifying the petrochemical industry focus away from ethane to other feedstocks such as propane or synthetic gas liquids from upgrader and refinery processes," NEB said. "The optimal choice will depend on the economics and views on the potential for incremental gas supply and changing gas flows in North America."

Related Articles

Canada Briefs

12/12/2014

Kinder Morgan to deliver natural gas to Corpus Christi Liquefaction

12/11/2014 Kinder Morgan Inc. (KMI) companies Kinder Morgan Texas Pipeline, Kinder Morgan Tejas Pipeline, and Tennessee Gas Pipeline Co. (TGP) have entered in...

Magnolia LNG lets EPC contract to SK E&C USA

12/03/2014 Magnolia LNG LLC parent-company Liquefied Natural Gas Ltd. agreed to an engineering, procurement, and construction contract with SK E&C USA cov...

Pipeline leak dampens Atlantic LNG production

12/01/2014 Atlantic LNG (ALNG) reported a 35% reduction in LNG production because of insufficient natural gas supply from Trinidad and Tobago’s National Gas C...

Real-time monitoring improves LNG inventory measurement

12/01/2014 Kogas has improved the calculation method for determining stocks at its LNG terminals, changing from a sampling method to a real-time monitoring sy...

Watching Government: Greece and energy in Europe

11/24/2014 Amid growing energy supply geopolitics, Greece is a stable anchor within a rapidly destabilizing region, Yannis Maniatis, its Environment, Energy, ...

Freeport LNG nears construction phase

11/19/2014 Freeport LNG Expansion LP expects later this month to close on financing and begin construction on the first two trains of its natural gas liquefac...

Woodside releases draft EIS for Browse LNG project

11/19/2014 Woodside Petroleum Ltd. has released its draft environmental impact statement (EIS) for the proposed Browse LNG project offshore Western Australia.

ANGA president calls for sharper focus on gas transportation issues

11/17/2014 America’s Natural Gas Alliance Pres. Martin J. Durbin called for a stronger focus on transportation as he outlined issues that the US gas industry ...

White Papers

AVEVA NET Accesses and Manages the Digital Asset

Global demand for new process plants, power plants and infrastructure is increasing steadily with the ...
Sponsored by

AVEVA’s Approach for the Digital Asset

To meet the requirements for leaner project execution and more efficient operations while transferring...
Sponsored by

Diversification - the technology aspects

In tough times, businesses seek to diversify into adjacent markets or to apply their skills and resour...
Sponsored by

Engineering & Design for Lean Construction

Modern marketing rhetoric claims that, in order to cut out expensive costs and reduce risks during the...
Sponsored by

Object Lessons - Why control of engineering design at the object level is essential for efficient project execution

Whatever the task, there is usually only one way to do it right and many more to do it wrong. In the c...
Sponsored by

Plant Design for Lean Construction - at your fingertips

One area which can provide improvements to the adoption of Lean principles is the application of mobil...
Sponsored by

How to Keep Your Mud System Vibrator Hose from Getting Hammered to Death

To prevent the vibrating hoses on your oilfield mud circulation systems from failing, you must examine...
Sponsored by

Duty of Care

Good corporate social responsibility means implementing effective workplace health and safety measures...
Sponsored by

Available Webcasts


On Demand

Optimizing your asset management practices to mitigate the effects of a down market

Thu, Dec 11, 2014

The oil and gas market is in constant flux, and as the price of BOE (Barrel of Oil Equivalent) goes down it is increasingly important to optimize your asset management strategy to stay afloat.  Attend this webinar to learn how developing a solid asset management plan can help your company mitigate costs in any market.

register:WEBCAST


Parylene Conformal Coatings for the Oil & Gas Industry

Thu, Nov 20, 2014

In this concise 30-minute webinar, participants have an opportunity to learn more about how Parylene coatings are applied, their features, and the value they add to devices and components.

register:WEBCAST


Utilizing Predictive Analytics to Optimize Productivity in Oil & Gas Operations

Tue, Nov 18, 2014

Join IBM on Tuesday, November 18 @ 1pm CST to explore how Predictive Analytics can help your organization maximize productivity, operational performance & associated processes to drive enterprise wide productivity and profitability.

register:WEBCAST


US HYDROCARBON EXPORTS Part 3 — LNG

Fri, Nov 14, 2014

US LNG Exports, the third in a trilogy of webcasts focusing on the broad topic of US Hydrocarbon Exports.

A discussion of the problems and potential for the export of US-produced liquefied natural gas.

These and other topics will be discussed, with the latest thoughts on U.S. LNG export policy.

register:WEBCAST


Careers at TOTAL

Careers at TOTAL - Videos

More than 600 job openings are now online, watch videos and learn more!

 

Click Here to Watch

Other Oil & Gas Industry Jobs

Search More Job Listings >>
Stay Connected