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Business
End of the line for low-cost gas
Imports from Canada have reached a limit
 
Gordon Jaremko
The Edmonton Journal
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EDMONTON - The United States has officially admitted it can no longer take for granted growth in low-cost supplies of natural gas from Canada, and that prices will continue to rise.

An annual 25-year forecast by the U.S. Department of Energy's Energy Information Administration cuts its previous predictions of gas imports from Canada almost in half. That trade accounts for about 55 per cent of Canadian production and satisfies 15 per cent of U.S. demand.

The new outlook says the U.S. can only count on gas imports from Canada to stay at current levels of about 3.6 trillion cubic feet per year through 2010. After that, a steady decline is forecast to cut the annual Canadian supply to the U.S. to 2.6 trillion cubic feet by 2025.

The Washington agency's forecasts, which are widely used by U.S. government and industry planners, formerly predicted Canada could be relied upon to increase annual gas exports to 4.8 trillion cubic feet by 2005.

U.S. gas demand is projected to rise by an average 1.4 per cent per year. The resulting strain on supplies is expected to drive up average prices by 1.8 per cent per year to $4.40 US per thousand cubic feet in 2025, or 50 per cent more than the $2.95 US of 2002.

Under energy free trade, Canadian gas sold south of the border fetches about the same price as U.S. production. Canadian consumers pay as much for gas as Americans do.

The abrupt about-face in the official supply outlook brings U.S. expectations into line with recent state-of-the-market reviews by Natural Resources Canada, the National Energy Board and a variety of industry agencies on both sides of the international border.

The latest forecast by Natural Resources Canada predicted the total dollar value of Canadian gas production will about double to $51 billion per year by 2015.

"For almost four years, natural gas prices have remained higher than those of the 1990s," say the Washington forecasters. "This has led to a re-evaluation of expectations about future trends in natural gas markets, the economics of exploration and production, and the size of the natural gas resource."

All concerned have concluded there is no natural-gas counterpart to the Alberta oilsands, which are expected to generate growth in Canadian oil production and exports through 2025.

The NEB's latest forecast, released earlier this month, said Canadian gas production has hit a natural ceiling after more than doubling from 7.3 billion cubic feet per day in the mid-1980s to about 16 billion, with about four-fifths of the supplies coming from Alberta. Exports to the U.S. quadrupled during that growth period.

The NEB suggested the limit to Canadian supplies will be felt across the continent. "The Western Canadian Sedimentary Basin is a key source of natural gas supply in North America, serving practically all of Canada's domestic requirements and providing export volumes that amount to approximately 15 per cent of total consumption in the United States."

The new U.S. forecast anticipates "greater dependence on more costly alternative supplies such as imports of liquefied natural gas ... and remote resources from Alaska and from the Mackenzie Delta in Canada."

The U.S. energy department predicts an Alaskan pipeline will be completed in 2018, about 10 years after the Mackenzie Valley project.

The U.S. outlook for oil also echoes Canadian agencies such as the Alberta Chamber of Resources in predicting strong growth in non-conventional production led by the oilsands. The Washington agency forecasts output of 3.3 million barrels per day by 2025, less than the chamber's target of five million but triple the current level.

By 2025, the Washington forecasters predict imports will rise to 70 per cent of U.S. oil supplies, continuing a long-range trend that has driven the figure up to 54 per cent currently from 37 per cent in 1980 and 42 per cent in 1990.

Oilsands developers plan to export the majority of their new production to the United States.

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