Canadian Natural Gas Industry An Overview
Authors: Dielwart John P. 
Published: March 2010

The Canadian natural gas industry has undergone a transition from near total government control to a "Free market" system of direct negotiations between buyers and sellers. Complete deregulation of natural gas prices became effective on November 1, 1986; however, partial regulation of market access remains in place. The transition has occurred during a period of significant oversupply in the North American market coupled with dramatically reduced commodity prices for competing energy sources. As a result, there has been severe competition for the markets causing substantial downward pressure on prices to the consumer as well as on the gas sales by the traditional marketers.

Introduction

This paper provides a brief review of the current Canadian natural gas resource base as well as recent industry activity including the following:Existing supply sourcesDrilling activityHistorical Canadian natural gas salesurrently contracted reservesShut-in reservesSpecific purchaser considerationsTrans Canada Pipelines LimitedAlberta & Southern Gas Co. Ltd.Supply/demand projections.

As Alberta accounts for 85% of Canada's conventional natural gas reserves, the detailed discussion will be limited to Alberta's reserves. However, the conclusions drawn are deemed to be applicable to Canada's total conventional natural gas industry.

A variety of data sources have been accessed to develop the analysis presented herein, each with varying effective dates. In all cases, the most recent data available from each source has been utilized. Where only partial year data was available, full year values have been estimated by the author.

Existing Supply Sources

The National Energy Board(l) (NEB) has estimated Canada's remaining established natural gas reserves at December 31, 1985 to be 95 exajoules (2557 109m3 at 37.4 MJ/m3); Table 1 summarizes the NEB reserve estimates by region. The NEB does not currently book any eastcoast offshore reserves due to concern regarding the economic viability of the area. As the frontier reserves currently account for only 18% of Canada's remaining established reserves and production is not forecast by the NEB to commence until the mid-1990s, this analysis will be restricted to the conventional producing areas.

Figure 1(2) presents an historical summary of NEB's estimates of Canada's remaining conventional reserves, with 1985 marking the third consecutive year in which new discoveries have failed to replace production. Alberta is the dominant source of conventional natural gas in Canada both in terms of reserves (85%) and production (86%). Therefore, the following discussion of currently available supply will be limited to Alberta.

Figure 2 presents Alberta's historical remaining established reserves of marketable natural gas as determined by the Energy Resources Conservation Board (ERCB)(3). As would be expected, the remaining established reserve profile is consistent with the NEB's data for total Canadian reserves. It is worth noting that 1983 was essentially the first year on record in which reserve additions failed to match production with 1986 marking the fourth consecutive year in which the industry has failed to replace production in Alberta. Over-all, Alberta's remaining established reserves have declined over seven percent since 1982.