North American Natural Gas Liquids Supply

There is a perception in industry and government that with diminishing natural gas production in the Western Canada Sedimentary Basin (WCSB), Natural Gas Liquids (NGLs) supply will suffer a permanent decline.  Many point out that a number of the promising new shale plays, such as Horn River and the Barnett are liquids-poor, although, the Eagleford, Fayetteville, and sections of the Marcellus shales are liquids-rich – as is the Montney shale in Canada.  Remote areas accessed by two proposed gas pipelines in the north, Alaska and Mackenzie Valley, hold large quantities of liquids and could eventually offer substantial supply.  The decline in NGLs production in some areas may create opportunities for pentanes plus supply from new sources, such as pipelines returning diluents from the Great Lakes area to Alberta and/or various offshore sources landing pentanes plus and butanes in British Columbia sea ports and piping them to Alberta and other areas where they are required.

In this report, CERI will catalogue an inventory of NGLs to better understand the state of NGLs today and gauge how the market will develop in the future (i.e., over the next 25 years).  We will demonstrate where the NGLs are located, the volumes under development today, and the potential for further growth.  Central to this work will be the application of the CERI I/O model to determine the economic impacts throughout North America of NGL development.  The study will also consider the physical state of existing petrochemical plants to establish an idea of future infrastructure costs, and it will examine potential emissions impacts of the petrochemical industry.

Some of the critical issues and questions to be examined include:

• NGLs production forecast from conventional supplies; to what extent will Canada remain capable of producing NGLs from its declining conventional reserves?
• Options to bring NGLs from other sources, like Ontario, the US and Australia by pipelines and tankers.
• Are there long-term prospects for export volumes, and how will they change export pipeline operations and development?
• The demand outlook for NGLs and what mixes are needed where.
• The role of natural gas as an alternative to coal in power generation and how this might affect the production of NGLs.
• How expected growth in the oil sands will influence the petrochemical business.

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As the global oil demand rises, and as Canadian producers look to diversify their energy markets, alternative means to move bitumen to the west coast merit examination.  Expansion of the existing Trans Mountain Pipeline and increased rail shipment are being proposed as ways to expand transportation – not only of bitumen but of other hydrocarbons such as LNG and intermediate petrochemicals – to British Columbia ports.

Whether the fluid is bitumen, synthetic crude oil (SCO), natural gas, diluents, refined petroleum products or petrochemical products, they all have one element in common: a constraint of accessing the demand markets outside of North America via Pacific coast in BC.  To establish greater transportation access to the BC coast, various options must be weighed.  This research project therefore considers not only the feasibility of the new pipelines, but the practicability of the alternatives, including:

1. Development of a new pipeline access to West Coast tidewater locations. This includes evaluation of Enbridge’s Northern Gateway pipelines, Kinder Morgan’s Trans Mountain expansion and extension, and indirectly TransCanada’s Keystone XL.
2. Rail transport of hydrocarbons to coastal terminals, including Prince Rupert, Kitimat, and Vancouver.
3. Expansion of the existing Trans Mountain pipeline to Vancouver.
4. Liquefaction in Alberta and shipment of LNG by rail to Prince Rupert, Kitimat, or Vancouver.
5. Increased shipment along existing corridors and liquefaction at Prince Rupert, Kitimat, or Vancouver.

Prior to examining the details of the transport medium to tidewater, the study will update the CERI oil sands supply cost database/model and investigate in detail the  development timing of projects that are candidates to support any pipeline option. In addition, the authors will update the CERI conventional oil supply database/model to account for the potential increase or decrease in conventional oil supplies to the various pipelines.

There will be two phases to this project. The first will examine infrastructure development – pipeline and rail construction or expansion, and the erection of terminals on the Pacific Coast.  Stakeholder concerns are addressed, such as the environmental issues associated with infrastructure development:  loss of habitat, damage to watersheds, and GHG emissions. Marine safety and regulation are also investigated in this phase.

Phase two is an economic analysis of the various options, utilizing CERI’s interregional/input-output model to compare impacts by province and census area. Documents including Enbridge’s NEB application for the Gateway project will be used to generate the capital inputs for the pipelines; health and safety issues will be addressed in a generic fashion by comparing the historical performance of rail, pipeline and oil tanker transportation.

In order to address environmental impacts, CERI will employ Environmental Multi-Regional Input-Output LCA (EMIO LCA) to estimate the Life Cycle GHG emissions involved with construction and operation of these different transportation projects.  This provides a frame-work for comparing the projects.  Like the CERI input-output model, the EMIO LCA not only covers economic interrelationships between Canadian provinces, it provides impact analysis at the census area level.

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Periodicals:  

CERI Commodity Report - Natural Gas

Mellisa Mei, Editor-in-Chief

CERI Commodity Report - Natural Gas is a monthly publication that examines near-term North American natural gas market fundamentals. Coverage includes the key drivers of natural gas activity, supply, demand, and storage, as well as weather expectations, and their impacts on natural gas prices. The report comments on a broad range of elements: active rig count, well licensing, completions, production volumes, Canadian system receipts, LNG imports, energy commodity prices, and so on. The basic elements are consistent from issue to issue. Additional topical articles and reports vary with the marketplace annual cycle, gas industry activity, impacts of other energy sectors, and global issues affecting North American natural gas.

CERI Commodity Report - Natural Gas (available to CERI sponsors free of charge; available to non-sponsors for $1,500 per year)

Sample Issue

CERI Commodity Report - Crude Oil
Dinara Millington, Editor-in-Chief

CERI Commodity Report - Crude Oil is an original, thought provoking publication focusing on short-term developments (including geopolitical ones) in the world oil market, as well as issues impacting the oil market in the longer term. The outlook section provides information and analysis pertaining to the oil market eight quarters into the future. This includes forecasted (and historical) supply, demand and inventory information, comparisons with other organizations' forecasts, information pertaining to OPEC behavior and the forward market, as well as CERI's oil price forecast. The Data Appendix provides in-depth information on the world, US and Canadian oil markets. This publication is released monthly.

CERI Commodity Report - Crude Oil (available to CERI sponsors free of charge; available to non-sponsors for $1,500 per year)

Geopolitics of Energy
Jon Rozhon, Editor-in-Chief

Geopolitics of Energy (GOE) is the leading monthly journal on geopolitical developments affecting global energy markets. It provides analysis, information, perspectives and fresh ideas on the political and economic factors affecting energy and their impact on national energy policies, the international environment and prices. Geopolitics of Energy reports on developments in producer and consumer countries and provides critiques and analyses of current events as they affect these countries now and in the future.

Regular features include:

• National energy profiles
• Special reports on the Middle East, FSU, USA, Canada, Asia, and Africa
• Assessments of energy options and security issues
• Regional perspectives on emerging issues

Geopolitics of Energy is published by the Canadian Energy Research Institute through an editorial board, accessing a network of writers and contacts around the world.

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Sample Issue (pdf file ~ 135 KB)

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