THE GAS IN CANADA AND ITS FUTURE
RYSTAD ENERGY PRODUCT HIGHLIGHTS
Rystad Energy now offers a wide product range of North American shale products (NASAnalysis) as an advancement and extension to the previous North American Shale Quarterly report published until 2012. Watch out video below for more information.




NASReport: Up-to-date play coverage incorporating prospectivity maps, company-specific data, acreage and reserves, production forecasts of plays up to 2025 as well as infrastructure and economics of plays.

NASCube: Database that provides US and Canada shale gas and tight oil plays data for more than 200 companies and 30 plays. Data derives from Rystad Energy’s global and complete upstream database UCube, in addition to well data.

NASMaps: Geological, company acreage and well location maps. Maps are available as pdf-layers and GIS files with embedded information for import to GIS software.

NASWellData: Listing of official well data for key plays in addition to estimates for average well curves for selected acreages.



CONTACT
NAS@rystadenergy.com



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The winter months of late 2013/early 2014 were colder than usual, which boosted the demand for natural gas in both Canada and United States. The withdrawal of the gas in storage has caused gas prices to increase. In some days of February 2014, Henry Hub natural gas prices reached almost as high as 8 $/million Btu. This resulted in companies reinvesting in some of the key gas plays in NA. The following Newsletter by Rystad Energy provides an overview of the natural gas in Canada and its possible future development.



Figure 1
depicts the natural gas supply as forecasted by Rystad Energy and natural gas demand* in North America. The potential upside on production for shale gas at prices above 6 $/kcf is also indicated. The graph reveals that natural gas production in NA has increased over the last years, mainly due to additions from shale gas plays, which has led to a surplus and lower prices. By 2025, Rystad Energy estimates a gas surplus of ~15 bcf/d from NA, ~5 bcf/d of which is represented by Canada. Going forward, the question remains how many LNG export projects will be decided. [Source: NASReport]
 
The primary destination for NA LNG exports will be East Asian markets, where gas prices are ~4 times higher than in NA as of June 2014. The map above represents an overview of the proposed and potential LNG export terminals in British Columbia, as of June 2014. The combined capacity of all these terminals would be as high as ~25 bcf/d. The map also depicts the largest unconventional projects in the western Canadian provinces, gas production from which will feed the potential LNG terminals. Rystad Energy estimates that it will be more convenient for industry to build pipeline from Montney rather than Horn River, given the proximity of the Montney Play to the proposed LNG terminals. Going forward, Rystad Energy estimates that Petronas, Chevron, Shell, BG and ExxonMobil are most likely to proceed with its operated LNG terminals. [Source: FERC, Rystad Energy analysis]

 
Petronas is the operator closest to an investment decision regarding its estimated $11 billion LNG project. Over the last years, the company has acquired a substantial acreage position in the gassiest part of Montney play (from Progress Energy and Talisman). Figure 2 reveals that Petronas is among the operators in Montney with the highest wellhead breakeven price in its Montney development. This is due to relatively high D&C costs, especially in the development areas of Farell Creek, Cypress A and Greater Cypress, where the Montney depth ranges from 6,000–7,000 ft. The reason for Petronas to maintain a high drilling activity** is to prove its gas resources in British Columbia, prior to its decision to proceed with the LNG investments. [NASAnalysis]

 
Rystad Energy estimates that Petronas holds ~7 tcf of net economically recoverable resources as of January 1, 2014, as depicted in Figure 3. This figure depicts the net remaining gas resources as of 2014 from the shale gas plays in Canada ranked by the Top 20 resource holders. The grey portion represents resources that are uncommercial at current forward prices, reflecting an upside of the companies’ resource potential in the high scenario (gas price at 6 $/kcf). [Source: NASCube]

*Historical numbers are taken from EIA. Future trend is based on IEA’s New Policies Scenario.
**In 2013 alone the company operated over 170 wells in Montney, thus becoming the largest Montney operator in terms of spudded wells


RYSTAD ENERGY INDUSTRY OUTLOOK
 
NEB: short-term gas production forecast. National Energy Board released a short-term Canadian natural gas deliverability forecast, in May 2014, according to which the production of natural gas is expected to rise to 14.6 bcf/d by 2016 from 14 bcf/d in 2013 (an average growth of ~1.5% p.a.). Rystad Energy estimates that the overall natural gas production in Canada will grow on average by 3% from 2013 to 2016, where most of the growth is driven by shale gas (20% yearly growth on average). At the same time, gas production from conventional operations will decline at an average rate of 8% in the same period. [Source: National Energy Board; UCube]
 
Reactions to the proposed LNG legislation. In the last issue of the Newsletter we reported the proposed tax on liquefied natural gas by the government of British Colombia. The tax will be levied on the profits from LNG projects at an initial rate of 1.5%, rising to 7% after companies recover the costs of building the shipping terminals. The proposed legislation has created a discussion, in which the president of Petronas Tan Sri Dato’ Shamsul Azhar Abbas said, “Let’s not slaughter the goose before it even has a chance to hatch the golden egg” and referred to the LNG projects as the once in a lifetime opportunity for British Colombia. Petronas is expected to make the final investment decision regarding its LNG terminal by the year-end; however, in light of the proposed legislation, it commented that it will not proceed with its plans at all costs and advised British Columbia to avoid policy missteps that were undertaken in Australia. [Source: Bloomberg]

Largest Canadian acquisitions in Q2 2014. During the second quarter of 2014, there were two acquisitions which surpassed $1 billion in value in Canada. In April 2014, Crescent Point Energy acquired CanEra Energy Corporation for over $1 billion, with operations located primarily in Southeast Saskatchewan. Through the transaction, Crescent Point acquired ~260 net sections of lands with Torquay potential – extension of the Three Forks play stretching across North Dakota. In the same month, Athabasca Oil Corporation agreed to sell 40% working interest in its Dover oil sands project to a wholly owned subsidiary of PetroChina (Phoenix Energy Holdings Ltd.) for above $1.2 billion. [Source: PLS Derrick]

 
 
Rystad Energy is an independent oil and gas consulting services and business intelligence data firm offering global databases, strategy advisory and research products for E&P and oil service companies, investors and governments. We are headquartered in Oslo, Norway, with additional research teams in India. Further presence has been established in the UK (London), USA (New York & Houston), Russia (Moscow), for Africa as well as South East Asia.