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Home > Energy Reports > Energy Futures > 2008 Energy Futures Workshop Program - Session 3A - Gas Market Dynamics

2008 Energy Futures Workshop - Session 3A - Gas Market Dynamics

2008 Energy Futures Workshop Program - Session 3A - Gas Market Dynamics [PDF 335 KB]

2008 Energy Future Workshop
Session 3A
Gas Market Dynamics
Ottawa, Ontario

Presented by
Paul Mortensen
Technical Leader
Hydrocarbon Resources
National Energy Board

22 January 2008

Good afternoon, everyone. Welcome to our session on Gas Market Dynamics. My name is Paul Mortensen, I'm the Technical Leader of Hydrocarbon Resources at the NEB.

The North American gas market is constantly changing.

In the Energy Futures project, the NEB examined a wide range for Canadian gas supply, demand and prices.

With the scope of that project already wide enough, we were not able to look at how these changes might impact natural gas transmission, pipeline services and operations, gas storage or U.S. markets.

To help with this, we have on the panel two experts in natural gas transmission and distribution.

Speakers

On my immediate left is Dr. Bill Langford. Bill is Vice-President of Pipeline Strategy at TransCanada Pipelines - the company that moves more of North America's gas than any other. TransCanada moves gas throughout Alberta, across Canada, and in key regions of the U.S. TransCanada is also heavily involved in both the Alaska and Mackenzie gas pipeline projects.

On my far left is Malini Giridhar. Malini is Director, Energy Policy and Analysis at Enbridge Gas Distribution, where she is responsible for gas acquisition, gas dispatch, energy planning and strategy.

The insights that Malini and Bill provide regarding gas pipeline flow analysis and on demand trends and operational issues in Ontario will be a key takeaways. The EF projections could not deal with the North American context or with the level of detail required to understand the special circumstances in Ontario.

Our session this afternoon is scheduled for 80 minutes. Our intent is to highlight some of the opportunities and challenges facing the natural gas industry. I'll provide a brief overview of some of the issues arising from our Energy Futures analyses, then each of our speakers will give a presentation. We have allocated about 15 to 20 minutes at the end of the session for questions, and we encourage you to pose questions to our expert panel, but ask that you hold questions until after all speakers have presented.

Resource Utilization

Canada has a large remaining resource base of natural gas (dark columns) under any of our 3 EF scenarios.

The amount of resource that would be produced between 2005 and 2030 is shown adjacent to these columns.

Over the period, production continue to rely heavily on the conventional resource in western Canada and on the unconventional tight gas resource.

CBM has an increasing role, especially at high prices, but other unconventional and frontier resources are challenged by uncertainty and the lengthy time and high costs for the infrastructure needed to connect to their remote locations.

As a result, Canadian gas production declines in 2 of our 3 scenarios.

At the same time, the scenarios call for Canadian gas demand to grow.

One of the key areas of demand growth is to fuel oil sands operations.

Net Flows Out of Western Canada

The combination could have significant implications for the net amount of western Canada gas leaving the region after accounting for local demands.

Typically, close to 60 percent of the production in the region has been delivered to other Canadian and U.S. markets.

Ex-region flows are squeezed to zero in Triple E with no contribution from Mackenzie gas.

Potential Gas Flow Impacts

With less output from western Canada, growing gas-fired power demand, especially in Ontario, may need to be increasingly served from flows through the U.S.

Other changes include growing gas production in the U.S. Rockies and from the shales of east Texas, Louisiana and Arkansas.

The introduction of large volumes of LNG directly into market areas, and potentially with large seasonal swings adds further uncertainty.

Natural Gas Wildcards

The EF analysis exposed a number of key issues and uncertainties in natural gas markets - we are calling these "wildcards".

Subsequent to the analysis in the EF project, industry sentiment regarding gas drilling in western Canada, and Alberta in particular, turned considerably more negative. Industry concerns over cost escalation, softening gas prices, better oil economics, and changes to Alberta's royalties have caused gas investments to be scaled back. How long this might persist and the impact on Canadian production declines is unknown.

Through 2007, global LNG has been in relatively short supply with Asian and European markets readily outbidding North America for spare cargoes during peak demand periods. Based on the new projects entering service between 2008 and 2010, LNG supply could surge by almost 50 percent (to around 30 Bcf/d). A significant increment could come to North America especially during the summer months. A slower pace of LNG additions after 2010 could see the global market return to tight supply conditions.

Pipeline projects to access gas in the Mackenzie Delta and Alaska have been around for decades. Just this month TCPL was selected under Alaska's Gas Inducement Act to proceed to an open season and receive some financial backing for the regulatory process. How this might impact the Mackenzie Gas Pipeline project remains to be seen.

On the demand side, there is considerable uncertainty regarding the key oil sands market. Roughly ¾ of the resource is too deep to surface mine and instead must be heated underground to be able to flow to horizontal wells. Although more energy intensive, there is also the possibility of substituting alternative fuels with a number of different technologies being evaluated.

Finally, gas-fired power. There are few alternatives to the operational flexibility, ease of siting, rapid construction, and low initial capital costs associated with gas-fired facilities. This is particularly the case if the power grid requires you to site a backup source of power close to a remote wind facility. Clean coal may yet supplant future incremental gas additions, but uncertain costs for new technology and future emissions has slowed its application.

 

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Date Modified:

2011-10-28