National Energy Board Expects a Decline in  Natural Gas Deliverability for  Canada

For immediate release
12 May 2011

CALGARY – Current market factors are causing a decline in natural gas deliverability in Canada, says a recent energy market assessment (EMA) from the National Energy Board (NEB or Board). Despite this decline, there will be ample natural gas supply to meet Canadian needs.

In the report, Short Term Natural Gas Deliverability 2011-2013, the NEB examines trends for natural gas deliverability in Canada (the ability to produce natural gas from new and existing wells). The two key market factors with the greatest impact are an oversupply of natural gas in Canada and the U.S., and a shift in drilling away from natural gas.

“Natural gas production in Canada has been gradually declining as a result of these two trends,” said Gaétan Caron, Chair and CEO of the National Energy Board. “This is expected to continue unless a closer balance between demand and available supply can be reached, pushing natural gas prices up.”

Both factors have diverted investment and drilling activity away from natural gas in Canada. Although Canada has significant natural gas resources, including shale gas resources, these factors are expected to cause Canadian natural gas deliverability to decline over the projection period. The report projects (in the Mid-Range Case Scenario) natural gas deliverability to decrease from 380 106m3/d (13.4 Bcf/d) in 2011 to 364 106m3/d (12.8 Bcf/d) by the end of 2013.

As of fall 2010, the U.S. had drilled a record number of horizontal wells in major shale gas formations despite a slower growth in demand since 2009. This increase in drilling activity is creating an overall surplus of natural gas in the Canadian and U.S. markets. If U.S. companies continue to drill at high levels, they will meet more American internal demand, keep prices down, and decrease opportunities for Canada to export south of the border.

Canadian natural gas producers are responding by pursuing other energy products to secure revenues at a time when natural gas prices have declined. Products such as oil and natural gas liquids (NGLs) have a higher market value, and Canadian companies are looking towards these more profitable markets to generate more income.

Also impacting deliverability in Canada are two new U.S. pipelines that will come into service in 2011 – the Bison Pipeline and the Ruby Pipeline. This new infrastructure will enable more U.S. domestically produced gas to move to markets traditionally served by Canadian exports.

The NEB is an independent federal regulator of several parts of Canada's energy industry. Its purpose is to regulate pipelines, energy development and trade in the Canadian public interest. As part of its mandate, the NEB monitors the supply of all energy commodities in Canada and reports its findings. The NEB Internet site is regularly updated with new energy information for the Canadian public.

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This news release is available on the NEB’s Internet site at www.neb‑one.gc.ca under What’s New!

For further information:                  Erin Dottor (erin.dottor@neb-one.gc.ca)
Communications Officer
Telephone: 403-299-3712
TTY (teletype): 1-800-632-1663

For further information:               Erin Dottor (erin.dottor@neb-one.gc.ca)
                                                                  Communications Officer
                                                                  Telephone: 403-299-3712
                                                                  TTY (teletype): 1-800-632-1663

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