In a low cost environment for both oil and natural gas, the future of Canada’s conventional oil and gas development is being questioned. The last two years have seen significant declines in drilling and production as Canadian supply costs are high relative to the commodity prices.
CERI’s “Canadian Crude Oil and Natural Gas Production and Supply Costs Outlook (2016 – 2036)” breaks down drilling and production forecasts as well as supply costs across the various producing regions in Canada. Total natural gas production is expected to start to rise by 2019 as the price of gas increases and drilling rates overcome well decline rates. The rise in the gas production is totally dependent on whether LNG projects will be constructed. While oil prices are expected to rise as well, conventional crude production is expected to drop slightly and remain stable throughout the study period, as growth is concentrated in the oil sands. The Western Canadian Sedimentary Basin will see the vast majority of both natural gas production and conventional crude oil production, however, offshore Newfoundland will contribute approximately one-tenth of the crude oil over the study period.
The Canadian natural gas market has been heavily impacted by the shale boom out of the United States, leaving many in the industry to wonder what is ahead for producers. With current depressed natural gas prices, many drilling areas that were previously profitable are no longer economically attractive. Canadian drilling and production, particularly in the Western Canadian Sedimentary Basin, has dropped off significantly since 2012.
CERI’s “Canadian Natural Gas Market Review” shows that despite the current reduction in Canadian activity, the Canadian industry will see growth from its current levels due to the advances in horizontal drilling that enabled the shale boom, rebounding prices and growing demand for natural gas in both Canada and the United States. While the market for natural gas from Western Canada will remain impacted by the high levels of growth out of American shale plays, Canada will remain a net exporter of natural gas throughout the duration of the 20-year study period.