Despite ranking low on the list of countries by natural gas proven reserves, Canada remains the third largest producer of natural gas behind Russia and the US. In addition, Canada is also the fourth largest exporter of natural gas, which is mainly transported via pipeline to the US.

With recent discoveries of shale gas deposits across Canada, the natural gas industry has undergone some changes on supply, pricing, Liquid Natural Gas (LNG) exportation, and environmental concern. Continuing in our series of blogs on the emergence of global gas markets, I will look at some of the recent shifts and movements to the Canadian gas market.

Gas Prices in Canada

Since the discovery of numerous shale gas formations across Canada, gas prices have been on the decline with the lowest price recorded in April 2012. This drastic drop in prices has helped increase interest in investment towards Canada’s natural gas industry, particularly in the western province of British Columbia.

Figure 1 below, created by ZEMA, shows gas prices for Canada from the end of 2003 to 2012.

Figure 1: Canadian Natural Gas Prices 2003-2012 (Source: ZEMA)

In recent months gas prices have begun to rise, hitting CD$3.42 per Btu, which is still substantially lower than in previous years.

Shale Gas Supply across Canada

In the past decade, Canada has experienced a decline in production and development of conventional natural gas due to reserve depletion. However recent technological developments in hydraulic fracturing, also known as ‘Fracking’ has caused a rise in development, particularly in western Canada. Figure 2 below, shows the areas where shale gas in concentrated in North America, with significant regions under development including the Bakken and Marcellus highlighted.

Figure 2: North American Shale Plays as of May 9, 2011. (Source: EIA, Canada/Mexico Plays from ARI)

According to the US Energy Intelligence Agency (EIA), Canada possesses an estimated 388 Tbc of recoverable shale gas resources located mainly along the Western Canadian Sedimentary Basin, which includes the provinces of British Columbia, Alberta and Saskatchewan. The remaining is located in offshore fields along Newfoundland and Nova Scotia.

Liquefied Natural Gas (LNG) Exports and Future Outlook

Changes to Canada’s natural gas supply have caused a deflection of interest from LNG import terminals to export terminals. Another large deterrent has been Asia’s growing demand for natural gas. Asia’s gas prices are higher than in Canada, so the ability to supply Asia with LNG would mean large profits for British Columbia. So far, there are four LNG terminals proposed to span British Columbia’s coast, with the first to open in Kitimat in 2015. Also included in this proposal is a new pipeline which would extend from just north of Prince George to the Kitimat LNG terminal.

Stayed tuned for the next blog from our series on emerging Global gas markets later this week, which will be looking at Europe.