Canada is the world’s 5th largest producer of natural gas
How much natural gas does Canada have?
Canada’s natural gas resource base is very large. We have almost 1,100 trillion cubic feet of marketable natural gas after cumulative production, a 300-year supply based on current technology and consumption levels and well beyond the future needs of Canadians. And, Canada is the world’s 5th largest producer of natural gas.
The North American natural gas market is oversupplied primarily due to large storage inventories and warmer than usual winters.
Natural gas demand
The natural gas demand cycle can vary due to weather, changes to economic growth, market conditions such as lower prices, regulatory uncertainty or changes and infrastructure constraints. Currently, Canadian natural gas supply exceeds domestic consumption or demand.
Demand for natural gas in Canada is still driven by its primary customers – industrial and residential users.
Natural gas markets
Market Shift: The U.S. is Canada’s No. 1 natural gas customer and also our No.1 competitor.
Canada’s natural gas market has changed. Over the last decade, there has been a significant market shift for Canadian natural gas. While Canada is already a net exporter of natural gas, we export to only one customer: the United States. This lack of market diversity presents a significant challenge for Canadian natural gas producers, as our best customer has now become our biggest competitor.
So how did this happen? Over the past ten years, advances in horizontal drilling and multi-stage hydraulic fracturing have enabled the United States to increase its own natural gas production by 48 per cent (Source: EIA). In fact, the United States has been the world’s top natural gas producer since 2011 according to the U.S. Energy Information Administration. The result has been low prices in North America due to regional oversupply, and declining exports of Canadian natural gas, particularly into the eastern regions of the United States. In these areas, shorter transportation distances give American producers a significant cost advantage. And, the United States is increasing its own exports— including into Ontario and Quebec, displacing natural gas from Western Canada.
When it comes to LNG exports, Canada has fallen behind the United States. The U.S. Federal Energy Regulatory Commission has approved eight LNG export plant proposals, with the first cargoes already being shipped from the Sabine Pass LNG project located on the U.S. Gulf Coast. With more than ten additional projects at various stages of review, the U.S. is set to become a major exporter of natural gas by 2017 (Source: Energy Information Agency – EIA). While it is certainly positive to see LNG export capacity developed in the U.S., as any natural gas leaving the continent helps Canadian producers move their own resources, the world market has become more competitive.
Market diversity means expanded market access through LNG
World demand for natural gas is expected to increase 49 per cent by 2040, driven primarily by the rapidly expanding Asian economies, according the International Energy Agency. Canada’s natural gas is uniquely positioned to meet growing energy demand. We can contribute to meeting their demand by developing a West Coast LNG industry.
A West Coast LNG industry would be backed by our robust upstream natural gas industry. This industry has the technical know-how and a proven track record for producing large volumes of natural gas using hydraulic fracturing in a manner that is safe, cost-effective and environmentally responsible. Combined with our reputation as a reliable trading partner that observes rule of law, and that possesses world-leading environmental regulations, we are well positioned to become a trusted and preferred supplier of LNG to customers in Asia.