The board cites declining production in Alberta’s conventional gas fields – production in that province is projected to decline to eight billion cubic feet per day by 2015 from 12 billion in 2006 – as the reason for the projected decline in Canadian supply. Though production in British Columbia is expected to rise to four billion cubic feet by 2015 – or 30 per cent of total Canadian production – those gains are not expected to make up for the drop in supply in other regions of the country.
The board attributes an oversupply of natural gas in North America and competition from oil production in Alberta as reasons why natural gas production is expected to slow down.
“Their (the board’s) analysis reflects what we have been talking about for quite some time, which is, the tremendous abundance of natural gas in North America and how new supplies of gas in new places – specifically in the eastern part of the United States – that are changing the dynamics of the industry,” said Alan Boras, spokesperson for EnCana Corp., one of the largest producer companies operating in northeastern British Columbia and elsewhere in North America. “This presents competitive challenges for all basins that are producing natural gas, and certainly Alberta and B.C. among them.”
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He said market circumstances are dynamic and continue to change, but the core of ensuring the continued growth of the industry in the Northeast is to continue to keep the cost of supply low.
“The Montney and Horn River Basins are among the most cost-effective in the continent, but the challenge is they are a long ways from the major population centres,” said Boras. “Over time, we have to continue to try to be competitive for consumers that are farther away, namely in the United States.”
EnCana and other producer companies are looking towards the future and the development of overseas export opportunities from British Columbia, particularly to Asia. However, Boras said there are promising developments on the domestic side that could help change the supply-demand equation in North America.
He said the conversion of coal-fired power plants to natural gas-fired ones in many jurisdiction shows promise, though it will be largely dependent on regulations pushing those jurisdictions towards lower carbon emission standards for power generation. He said the conversion of vehicles – namely fleet vehicles, buses and taxis – to natural gas from gasoline or diesel fuel also holds great promise for the industry, though that market is largely undeveloped and so is the infrastructure such as the fuelling stations required to support that conversion.
Boras said his company is certainly encouraged by the provincial government’s recently-announced strategy for accelerating the growth of British Columbia’s export capacity for natural gas, specifically the move to streamline the permitting process to bring the necessary liquefied natural gas (LNG) facilities online.
“We always want to see efficient, thorough regulation that takes into consideration the reality of bringing on projects in a very efficient manner,” he said. “It is in the province’s interest to efficiently manage regulations around that, and we are encouraged by that.”
EnCana owns a 30 per cent stake in the proposed Kitimat LNG project, along with equal partner EOG Resources Canada Inc., and the majority owner, Apache Canada Ltd., which owns 40 per cent of the project. That project proposes to export 1.3 billion cubic feet per day of liquefied natural gas to Asian markets.
“We see this is as a very important way for Canada to be able to supply the world energy demand, namely Asia’s demand for liquefied natural gas,” said Boras.
The project is awaiting a decision from the National Energy Board for an export license, and if approved, is expected to be operational by 2015. There are several other LNG projects proposed for British Columbia, and the provincial government’s strategy calls for up to three LNG plants to be operational by 2020.