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This is my first post on the oil drum, although I have been reading it for quite some time. Much of Canada's supply growth is attributed to the eventual tie in of the Mackenzie and Arctic gas. From everything I have seen, this is very unlikely to happen any time soon unless mandated by the Federal government.
In the WCSB, the production growth story is very challenging. Most of the gas in the WCSB is currently produced from Alberta, whos production has fallen by over a bcf/d since peaking in 2001. The Alberta government has predicted a 2.5% yearly decline, however this was based on continued high levels of drilling activity. Drilling for gas in Alberta has fallen off dramatically in the last several months due to royalty changes, high service costs, diminishing opportunities, the strong canadian dollar, and changes to income royalty trust laws. Because of this, it is likely that production will fall off at a rate greater than 2.5%/year.
Most of the rest of Canada's production comes from BC's portion of the WCSB. Production here has plateued over the last couple of years, however it may grow due to development the large "shale gas" plays that have recently been announced. Despite the potential, it will be very challenging to build all the infrastructure required to support significant growth in BC. I personally do not believe that it can offset the production declines that will be seen in Alberta.
The NEB (national energy board) forcast has Canadian gas production falling to 15bcf/d by 2009. At this time, it is estimated that canada will require about 9 bcf/d. Interestingly, the NAFTA proportionality clause dictates that Canada export 56% of its gas to the US. You will notice that the remaining 44% of 15bcf/d only amounts to 6.6 bcf remaining for domestic supply (about 2.4 bcf/d short). This problem will be worsened by continued growth of oil sands demand, and continued switching from coal to natural gas for power generation (especially in Ontario). If my understanding of the facts are correct, it seems that Canada might not be currently meeting its NAFTA requirement, and will certainly not have the ability to do so in the future (energy super power indeed!)
Canada badly needs its own strategic energy plan, however public and political awareness of this issue seems to be very small. The public is more focused on environmental issues and "excessive" corporate profits. If attitudes remain similar in the future, I see higher taxes on gas producers and continued eroding of supplies.
I definitely agree that Canada needs a comprehensive energy plan, but I do cling to the (probably naive) belief that Canada will ignore the proportionality clause if things really get tight. The way the US blatantly scoffs at their obligations under trade agreements I think we have earned a smidgen of leeway to keep from 'freezing in the dark' (of course a west-east pipeline network is a necessity). Also, the probability of another Albertan hissy-fit seems remote because energy prices will remain high this time and I think that it's well recognized that the 'Bloc Albertois' experiment didn't pan out particularly well.
For now though it seems the east is pinning it's fortunes to this LNG terminal in Quebec City that is rife with problems.
I quite liked Linda McQuaig's article from The Star from a year or so ago calling Canada an 'energy pussycat.'
http://www.thestar.com/article/238985
Hey! That's "Block Albertexas"! ;) None of that Frenchy crap is allowed out west.
I was still quite young when the NAFTA agreement was signed (1994?) and thus obviously laregly uninterested in it at the time.
I wonder if anyone knows the behind-the-scenes thinking of that proportionality clause... I am assuming it was a US backed part of the agreement so that we could not cut back supplies once we started exporting them and once America had become reliant on them, is this correct?
Anyone have any extra info on this proportionality clause?
I too was quite young at the time but my father was a top aide to John Turner* who vociferously decried the proportionality clause as well as several other not-so-Canada-friendly tidbits in NAFTA. Turner is a family friend so I'm obviously biased, but I think Canada really missed out by hopping on the Thatcher-Reagan bandwagon with Mulroney. Turner really suffered from a surfeit of integrity and the general feeling of malaise towards the Liberals after 15+ years of Trudeau. As a fly on the wall I was always amused when they hit a stumbling block in the speech-writing process, Turner would say: "Oh well, we can always retreat to our last refuge -- in the truth."
*disclaimer: I vote Green, but my family is VERY Liberal, teeming with staffers, campaigners, etc.
Some reading:
http://www.energybulletin.net/40035.html
http://www.embassymag.ca/html/index.php?display=story&full_path=/2007/ju...
*PDF* http://www.canadians.org/energy/documents/Laxer_presentation_Oct07.pdf
The NAFTA agreement was initiated during Mulroneys term and ratified under Chretien. At the time, natural gas production was still rising. I think that most people felt that it would continue to do so for quite some time (maybe these were the same folks who now work at the IEA)
In addition, the large deposits in the Arctic and Mackenzie delta region had been found in the early 80's. I think most people felt that these would be put on stream sometime in the not too distant future. It seems like 10 years ago, people thought it would be 10 more years till they were on prodution. I think that in 10 more years we will still be saying we are 10 years away. In either case, these supplies will be hard pressed to make up for the short fall in Alberta.
It's much like the American situation where the North slope discoveries were touted as a find that would help to mitigate the 1973 peak, however the reality was that the north slope was only a slight blip on the overall decline.
The NAFTA Proportionality clause Article 605 is often misunderstood. It comes into effect only if the Federal Government of Canada (or of the US) undertakes to implement measures to limit exports. As long as the governments refrain from intervening in the North American energy market, there is no proportionality requirement. Decisions to export oil or gas from Canada to the US are entirely made by producers and suppliers, subject to regulatory approval by National Energy Board and the Alberta Energy Resources and Conservation Board, primarily for environmental and safety reasons.
The political effect of Article 605 is to severely limit the power of the Federal Government to intervene in the primarily Albertan energy industry, something Albertans wanted to prevent another National Energy Program. My guess is that the FTA negotiations were based on trading US access to Canadian energy for Ontario and Quebec access to US markets for manufactured goods. In effect, Eastern Canada gave up energy security for (supposedly) free access to US markets.
Interestingly, it appears that the Government of Alberta has recently taken steps to remove what may people believe is a requirement that the ERCB (successor to the EUB) hold in reserve 15 years supply of natural gas for Albertans before permitting exports. The 15 year rules appears to never have been written in law, but to be only an interpretation of the clause in the Gas Resources Preservation act (amended 2008) which requires that
The EUB interpreted the clause to mean that "core consumers" needs should be met for 15 years before gas could be considered surplus and available for export from Alberta (to the rest of Canada or the US). The term "core consumer" was referenced in the Gas Resources Preservation Act and defined in Gas Utilities Core Market Regulation (AB 44/95):
According to EUB, core consumer consumption is less than about 18% of total Alberta Consumption (See Energy Utility Board report EUB ST98-2007, calculation of available for export).
Since the regulations that define core consumers have been repealed, it is no longer clear that there is any restriction on export of natural gas from Alberta, as of 2008.
Thanks a lot for finding this... I was looking for the text yesterday but couldn't get it.
Thanks for posting that. Most people I talk to in the industry have had little input on the subject. I suspect that the complexity of the agreements wording is part of the problem for most people. It certainly was for me, though it seems clear now. It certainly cheapens the credibility of some of the research bodies (ie. parkland institute), who have been publicly decrying the agreement for the (misleaded) reasons i mentioned in my previous post. Other prominent researchers have also apparently misunderstood the agreement (e.g. Richard Heinberg http://www.dogwoodinitiative.org/EB-2008-02-07-prop). As is the case with alot of other work, it makes one aware that you must really question all of the data behind any opinion/analysis.
Did you have a link for where the 56% was specifically mentioned? I could not seem to find it in the site you posted a link for.
There won't be any specific mention of a percentage in the NAFTA agreement as it is determine by a rule.
If Canada were to impose an export restriction on natural gas (or any other defined petroleum product), it could do so only if maintains an export level greater than or equal to "the proportion prevailing in the most recent 36-month period for which data are available prior to the imposition of the measure, or in such other representative period on which the Parties may agree".
The 56% figure given for natural gas would be based on the recent level of exports.
Further, the percentage is based on "total supply", which the agreement defines to be domestic production plus imports. This would be interesting if LNG terminals are established in Canada for gas that is solely destined for export to the US (as has been the case in several proposals).
I believe that the Parkland Institute is quite aware of specifics of the Proportionality article, but the media are not. No doubt Parkland's message has been somewhat distorted by the media's penchant for dramatic sound bites.
Parkland has been trying to raise the awareness of Canadians, especially in Eastern Canada, about Canada's lack of a domestic energy policy and in particular our loss of energy sovereignty. Most Canadians are complacently unaware of our true energy situation and the risks we are running. Their recent paper calling for the establishment of a Canadian SPR got considerable attention in Quebec, the province that is most dependent on foreign imports.
I don't know whether you have the time/resources, but if you could put together a 'keypost' it would be much appreciated... It is disturbingly rare to come across someone who has any worthwhile knowledge of Canada's energy situation.
Anyways, if nothing else, thanks for the input.
Encana happens to be doing both the Weyburn CO2 injection and oil recovery and is major player in the new BC natural gas. I analysed Encana's latest conference call.
http://nextbigfuture.com/2008/05/canadas-natural-gas-and-co2-stimulated....
The Encana portion of the Montney has 500 million cf to 1 billion cf a day long-term potential. [35.3 cubic feet in one cubic metre, so that amount would be 14.16 million to 28.3 million cubic metres/day, 3-6% of Canada's total natural gas production] They currently are getting 120 million cf/day.
New natural gas finds in Canada:
- Ootla, about 60 miles from Fort Nelson in northeastern British Columbia, may hold 9 trillion to 16 trillion cubic feet of gas. Horizontal wells test flowed at rates of 8.8 million cubic feet, 6.1 million cubic feet and 5.3 million cubic feet of gas a day.
- Montney find in BC (50-80 trillion cf)
- the Horn River basin (12+ trillion cf.)
- Quebec Utica Shale based on some of the Canadian-based research on the play to date the size of the resource is being estimated between 24 and 30 trillion cubic feet of natural gas.
- Smaller but significant find of 1.6 tcf in Southern Ontario
The total new reserves are 97 tcf to 140+ tcf. If they were developed with production rates proportional to Encana's efforts then they would provide 8 bcf/day to 22 bcf/day. The current projection if for Canada to produce 15 bcf/day in 2009 [5.5 tcf per year]. So these new finds appear likely to reverse the decline in Canada's natural gas producton.
Weyburn has 10 million tons of CO2 sequestered and Encana projects 30 million tons.
bear in mind that there are severe infrastructure constraints for all of these new resources. In addtion, the numbers quoted by the companies are more commonly the resource size rather than the reserve size. 20 to 50% of these numbers might be more appropriate as ultimate recoverable reserves. Encana has been quietly developing their Montney resource for several years, however this has not had a significant impact on BC's production rate. These plays are promising, but in some ways are similar to the enormous "reserves/resources" attributed to some of the oil shales. (i.e. they may be too energy intensive to develop to their full extent)