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CONVENTIONAL NATURAL GAS SUPPLY COSTS IN WESTERN CANADA - AN UPDATE

Conventional Natural Gas Supply Costs in Western Canada - An Update

Study Released December 05, 2013

Study 136

The abundance of shale gas developments in the United States has led to sustained low natural gas prices across North America, making the majority of Canada’s dry gas resources uneconomic to develop. The exception is those resources that contain significant amounts of natural gas liquids (NGLs). The presence of liquids improves the economics of gas extraction. The analysis shows that the dry-gas portion of the supply cost can decline significantly in the presence of liquids. In some cases, the dry-gas costs are almost completely offset by revenues from the liquids. This report updates CERI Study No. 136, Conventional Natural Gas Supply Costs in Western Canada released in June 2013 to include the supply cost of producing gas on a liquids-basis (that is, including the revenues and costs for both dry gas and NGLs) for numerous areas across Western Canada. Previously, the study only looked at supply costs on a dry-gas basis, effectively ignoring the liquids component. The supply cost calculation provides an indicator of the economic viability of producing gas in each of the study areas. With the inclusion of NGLs in the analysis, this update presents a more realistic evaluation of the economic viability of natural gas production in liquids-rich areas across Western Canada.

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