Canada gas markets long-term outlook H1 2015 Report

Commodity Market Report 15 July 2015

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Report summary

Canadian market fundamentals have reversed direction in the last six months — AECO prices are down 50% and global oil prices have slumped by nearly 40%, resulting in a declining Western Canadian Sedimentary Basin (WCSB) gas production outlook for 2016. The productivity improvements and lower service costs will reduce the price floor for WCSB supplies, but there is more competition than ever from Lower 48 supplies. WCSB production is expected to decline though 2017 before rebounding.

Executive summary
Supply
- Overview
  - Impacts to our gas supply outlook in a lower oil price world
- Regional production overview
  - Alberta
    - Deep Basin rich-gas
    - Montney shale (Alberta sub-plays)
    - Duvernay shale
  - British Columbia
    - Montney shale (British Columbia sub-plays)
    - Horn River/Liard shales
  - Eastern Canada
  - Canadian gas cost outlook
Demand
- Overview
  - Oil sands
- Power
  - Core industrial
  - Residential and commercial
  - Natural gas vehicles and marine bunkering
Prices
- North America: debottlenecking projects hold down Henry Hub price appreciation
- AECO: limited upside potential until LNG ramps up
- Western Canada: LNG projects dictate pipeline development
- Eastern Canada: hanging onto WCSB a bit longer
Trade
- Overview
- Piped exports to the US
  - Eastern Canada and US Northeast: hanging onto WCSB a bit longer
  - US Midwest: competing for market share
  - West: filling up the pipe
  - Pacific Northwest and Northern California: capitalizing on discounted AECO
- Canada LNG exports
  - Pacific Basin demand softens
  - Canadian projects face headwinds
  - Overview of Canadian LNG export projects
    - Major Western Canada LNG projects
    - Eastern Canada LNG projects