Canada’s Natural Gas Industry
Canada is the third largest producer of natural gas in the world only behind Russia and US with the current annual production of approximately 6.3 trillion cubic feet (Tcf). The most important source of natural gas products is the Western Canada Sedimentary Basin (WCSB) which accounts for almost 98% of the total natural gas produced in Canada. Alberta, British Columbia and Saskatchewan contribute around 80%, 16% and 4%, respectively, to the production of the WCSB. Natural gas from offshore Nova Scotia provides most of the remaining production.
Canada has a network of approximately 80,000 kilometers of extensive high pressure steel transmission, pipelines that carry natural gas from production centers to domestic consuming regions and export markets. The largest transmission system in the country is operated by TransCanada Pipelines Ltd.
Industry experts estimate that there is still approximately 594 Tcf of natural gas resources remaining in Canada which would last more than 90 years at the current rate of production. This includes proved reserves (wells currently producing), an estimate of discovered resources (wells in the far north not yet on production because of a lack of pipelines) and undiscovered resources (amounts geologists estimate will be found in the future).
Canada is the number one supplier of natural gas to the United States. Canada and US are often described as an integrated continental natural gas market because they are so well connected by extensive natural gas pipelines. Thus, a high level of price correlation exits between them.
Canada’s natural gas production grew steadily between 1986 to 2001 (7Bcf/day to 16.6Bcf/day). However, despite the high level of drilling activity, production from Western Canada almost flattened. This is primarily due to the fact that producers have already found and drilled the largest and the highest quality reservoirs. The new wells that are being discovered are smaller and have a lower production rate.
Despite the reduced productivity of new wells that are being drilled, investments in exploration and drilled activity have tripled since 2001. The minimum price of natural gas has also tripled in this same period.