Canadian Energy Research Institute (CERI)


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North American Natural Gas Market Dynamics

With the national economy showing signs of recovery, and the expectation that the global economy is not far behind, there is a timely opportunity for government and industry in Canada to formulate a plan for ensuring the continued development of the country’s oil and natural gas resources. As recovery proceeds, the oil market is likely to experience a more predictable return to something resembling “business as usual” in that the global oil market is fairly well defined. The supply distribution in terms of quantity is, for the most part, understood. While quantification of global demand may be a bit more of an art, the fundamental driver of demand is population and associated GDP growth. Given that the world’s 6-7 billion people will continue to depend heavily on oil as an energy source it is safe to assume that while demand may be sluggish it will reach and likely exceed pre-recession levels.

What is more uncertain is how the North American natural gas market will recover. The natural gas market is, for the most part, continental and not global, and as such is determined by supply and demand, driven by energy policy conditions in North America. And right now both supply and demand conditions are in a state of flux. Unlike oil, where the question of recovery is one of “when”, natural gas is faced with not just the question of “when” but also “how”. It is this changing face of the North American natural gas market that is the focus of this Study.

Some of the critical issues and questions that will be examined are:

How much gas could Canada produce from its declining conventional reserves?
While western Canada’s shale gas plays (in particular, those in northern British Columbia) have the potential to rival many US shale plays, what is the potential for unconventional gas development in Canada if netback prices available to Horn River and other producers remain below economic thresholds over a prolonged period?
What is the outlook for natural gas prices under different 20-year supply and demand scenarios?
What are the supply and demand forces that will have the greatest impact on prices at the continental and regional levels, and how will the affect netback to Canadian producers?
With declining conventional production and limited shale gas resources coming on stream, what are the prospects for export volumes and how will they affect export pipeline operations and development?
On the demand side, what effect will curtailment of coal-fired generation and increased consumption of gas as the fuel of choice have in bolstering prices?
What are the critical events and signposts to keep a watch on that could fundamentally alter business and policy decisions?
What are the economic benefits and spin-offs of investments and ongoing expenditures in natural gas development that will benefit national and provincial economies?
What are the issues that could impede future Canadian gas developments and the technology breakthroughs required to competitively produce unconventional gas?

Economic Impacts of the Canadian Petroleum Industry on the United States

The Canadian Energy Research Institute proposes to conduct a comprehensive assessment of the role of the oil and gas industry in the Canadian an US economies, currently and 25 years into the future. Utilizing an Interregional Input-Output (I/O) modeling approach, this study will fill a knowledge gap that currently exists with respect to the quantification of the economic contribution of the oil and gas industry as the Canadian and US levels. By addressing this gap, our study will provide stakeholders with vital analysis and the information they need to make informed policy and business decisions.

CERI has already successfully conducted a number of I/O analysis, a prime example of which is the “Economic Impacts of the Petroleum Industry in Canada” which quantified the value derived from petroleum industries including, oil sands development in terms of government revenues and jobs, extending economic growth. The impacts, in terms of gross domestic product, employment and government revenue, were estimated at the provincial and national levels.

CERI will use the Canadian Interprovincial and US I/O tables that comprise ten provinces, three territories and the US economy as a whole along with the interregional trade flows. This table depicts the trade flow pattern among each Canadian province and US in terms of their exports and imports. The I/O tables include the following categories: conventional oil, oil sands, natural gas and LNG, petrochemical, refineries and coal industries along with twenty-six other sectors.