Running on empty
When Canada�s natural gas reserves hit the crisis point, who will be left
out in the cold?
By Andrew Nikiforuk | July 10/24, 2000 [Canadian Business]
When you start cursing the size of your natural gas bill this winter, you
should think first of Rob Woronuk. He�s a sharp, 59-year-old Calgary
mathematician and independent gas analyst, and he�ll tell you that all the
numbers on natural gas reserves pointed toward troubling shortages and
higher prices more than half a dozen years ago. No alarm bells rang out then
because, well, no one really is responsible for keeping an eye on natural
gas reserves in Canada. "Consumers thought prices were nice and low," he
says, "but nobody told them that they were living on borrowed time."
If you live in Central Canada and narrowly avoid natural gas rationing
during a brutal cold snap this winter, you should thank Jim Gray. He�s the
chairman of Canadian Hunter Exploration Ltd., one of Calgary�s Blue-Eyed
Sheiks, and a whistle blower on the looming natural gas crunch. In a recent
speech, he boldly proclaimed that North America is just about to hit the
wall on supply and demand for natural gas; he decided to come forward
because he thinks consumers ought to know the truth. "The worst thing is for
people to be surprised," says Gray, whose speech put it this way: "Houston,
we have a problem."
And if you�re wondering how a country so dependent on energy for heating and
transportation could abruptly find itself in the midst of a natural gas
shortage (and the pessimists say it could last a couple of years), then
remember Mike Sawyer�s name. As the executive director of the Citizen�s Oil
and Gas Council, this low-paid activist has repeatedly scolded Ottawa�s
National Energy Board (NEB) over the last decade for market-based policies
that have short-changed the public interest. "The US treats energy as
strategic commodity," says Sawyer, a Calgary-based researcher. "But here in
Canada we piss away our resources and have no intelligent government policy
on energy. The NEB didn�t even predict this shortfall."
That�s just a taste of what one pipeline analyst ruefully calls "the
mess"�and what you�ll be reading about this fall in gigajoules. Not only is
Canada�s looming natural gas crisis a sorry affair; it�s a fully predictable
one with widespread implications. Tight gas supplies not only mean higher
heating bills; they also mean pricier electricity, inflationary pressure and
fuming voters. Some industrial sectors such as pulp and paper are already
switching back to fuel oil due to climbing gas prices. "There is no way out
of this in the short term," notes Tom Christie, an investment adviser with
BMO Nesbitt Burns. "If it�s a cold winter, some people in the oil and gas
industry are even afraid Ottawa might re-regulate natural gas." [...]
[for more of this article go to:
http://www.canbus.com/magazine_items/2000/july10_00_nogas.shtml]''
***
>From the Financial Times
Is a Canadian gas blow-down underway?
Published: April 17 2000 17:12GMT | Last Updated: April 17 2000 17:17GMT
Canada supplied more than half of North America's demand growth for natural
gas in the 1990s, in part bolstered by a generous 25-year
reserve-to-production ratio. But with the ratio now down to less than eight
years and with the 1.3-billion-cubic-feet-per-day Alliance Pipeline
scheduled to go into service later this year, opinion is divided over how
robust Canadian production will be in the next few years.
Western Canada "blew down" its reserve inventory and gas production is flat
despite a record number of wells drilled in the final quarter of 1999, says
Brian Frank, vice president BP Amoco Gas & Power Canada.
Production per new well in the western basin has slipped from a 1986 peak,
and decline rates are up. As a result, Canada will have excess pipeline
capacity of about 1.5 to 2 billion cubic feet per day this year and will be
"long" pipe until 2005, Mr. Frank predicts. TransCanada faces "significant"
capacity turnback in 2002 and 2003, he says.
With Canadian gas making up about 13% of U.S. natural gas supply and
projected to grow to 17% in 2005, imported gas will continue to play a
pivotal role in U.S. markets. Canadian imports are expected to rise to 4
trillion cubic feet in 2007 from 3 tcf in 1998, the Gas Research Institute
says.
This "second pillar of U.S. gas supply" can only increase if reserve
additions outpace production, according to the GRI, which released a new
study of the Western Canadian Sedimentary Basin prospects late last week.
The combination of higher production rates with less than 100% reserve
replacement has resulted in a decline in the remaining reserve-to-production
ratio.
These lower remaining reserve-to-production ratios indicate the industry is
producing from lower inventories and "suggests that new wells and reserves
will be required to maintain future deliverability," says Canada's National
Energy Board.
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