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CANADIAN NATURAL GAS MARKET SUPPLY AND DEMAND PATHWAYS OF CHANGE

Canadian Natural Gas Market Supply and Demand Pathways of Change

Published On: May 20, 2021

Study No. 195

This study focuses on different strategies that can potentially enlarge Canada's natural gas market. In this regard, CERI identifies four areas that can contribute to the additional natural gas demand, including the retirement of coal-fired power plants, new petrochemical facilities, new liquefied natural gas (LNG) plants, and decarbonization of energy systems with hydrogen that is made from natural gas with carbon capture and storage (CCS). The additional natural gas demand in these areas are quantified for the short-term (2030), mid-term (2040), and long-term (2050) future.

Canada has committed to reaching net-zero emissions by 2050 and has already started several activities to achieve this goal. The retirement of coal-fired power plants is one of those activities that can significantly contribute to greenhouse gas (GHG) emission reduction. Natural gas can be an appropriate substitute for coal in the retirement period, as it possesses the lowest global warming potential at the combustion points among different types of fossil fuels. CERI's analysis has shown that replacing coal with natural gas will create about 1 bcfpd additional natural gas demand by 2050. Among Canadian provinces, the coal retirement strategy is expected to considerably increase the natural gas demand in AB, SK, and NS. These provinces are the top coal consumers for electricity generation purposes. New petrochemical plants are another area to generate additional demand for natural gas. CERI anticipates that two new plants (Dow Chemical Canada and Inter pipeline) will be constructed in AB by 2030, which require 0.4 bcfpd natural gas in total as the feedstock. LNG plants are the third area in Canada that require additional natural gas. CERI anticipates that new LNG plants need about 2.5 bcfpd additional gas by 2030, which will grow up to 4.9 bcfpd by 2050.

The decarbonization of energy systems with hydrogen is the fourth area that generates additional natural gas demand. CERI assumes that the conventional fossil fuels used in four sectors: domestic natural gas network (residential, commercial, and industrial), natural gas export network, gas-fired power plants, and transportation (diesel and gasoline), will be partially displaced by hydrogen. It is also assumed that hydrogen is produced using the steam methane reforming (SMR) process coupled with a CO2 capture unit with 90% efficiency. Besides, the replacement percentage gradually increases over time. For example, the replacement percentage of the domestic natural gas network will be about 5%, 10% and 20% in 2030, 2040 and 2050, respectively. Since natural gas is the main feedstock for hydrogen production in SMR, this displacement contributes to the additional natural gas consumption of about 2.9 bcfpd by 2050. As a result, the displacement of conventional fuels with hydrogen reduces Canada’s GHG emissions by more than 116 Mt CO2e/yr in 2050, equal to an emissions reduction of 21% compared to 2018 combustion emissions (541 Mt CO2e/yr).

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