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sumisu

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sumisu

Re: None

Thursday, 10/11/2007 10:32:16 AM

Thursday, October 11, 2007 10:32:16 AM

Post# of 8507
Canadian Natural Gas Output May Decline 15% by 2009 (Update1)

By Ian McKinnon

http://tinyurl.com/3cxmrh

Oct. 10 (Bloomberg) -- Natural gas production in Canada, the source of, may fall by 15 percent by 2009, the country's energy regulator says.

Production of gas from conventional fields in western Canada, which accounts for about 98 percent of the country's output, may fall to 13.7 billion cubic feet a day by 2009 from 16.2 billion last year, the National Energy Board said.

Higher labor costs, competition from oil-sands investments and smaller finds from mature fields contribute to the decline. The number of gas wells drilled this year may fall to about 11,900, a 28 percent drop from 2006, Ken Martin, a supply analyst at the regulatory agency, said in a telephone interview.

Exports of Canadian gas to the U.S. may fall in the next three years as supply decreases and domestic demand rises partly on increased consumption by oil-sands projects, he said.

``It makes for a tighter supply situation,' Martin said. Canada supplied about 17 percent of U.S. gas needs last year, according to data from the U.S. Energy Department.

Companies require prices higher than C$7 per gigajoule ($7.51 per million British thermal units) to increase spending on gas prospects, the report said. Canada gas will probably fetch about C$6.50 per gigajoule next year, Calgary brokerage FirstEnergy Capital Corp. predicted earlier this month in a research report.

Spot gas in Alberta has averaged C$6.15 this year, according to data compiled by Bloomberg News.

``With the price doing what it is doing, it makes for negative sentiment for development activity' in western Canada, Martin said.

Deeper Drilling

Production from deeper drilling in Canada's western provinces and extraction from deposits trapped in coal reserves will blunt the decline, the report said. Production of so-called coalbed methane may increase 35 percent to 810 million cubic feet by 2009 from 600 million cubic feet last year, the board said.

Gas supply in Canada in 2009 may drop to about 15 billion cubic feet in 2009, 12 percent lower than the 17.1 billion produced in 2006, the report said.

The analysis did not include the effect of higher Alberta royalties on output, Martin said. Companies including EnCana Corp. and Talisman Energy Inc. warn they will cut spending on gas projects in 2008 if the province adopts a recommendation to increase royalties by about 20 percent.

The low-output scenario in the report, which pegged daily supply at 14.5 billion cubic feet, may be optimistic if higher royalties pares company spending in Alberta, Martin said. The province accounts for 80 percent of Canada's gas production.

Canada sold more than half of its daily output last year to U.S. buyers, according to National Energy Board data.

To contact the reporter on this story: Ian McKinnon in Calgary at imckinnon1@bloomberg.net .







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