By Katie Davis A ccording to The Conference Board of Canada’s latest Canadian Industrial Outlook on Gas Extraction, prospects for Canada’s natural gas producers continue to deteriorate as continued strength in U.S. production results in weaker demand for Canadian gas and low prices. “North America’s regional natural gas market has changed greatly over the last decade. Rising U.S. shale produc- tion has increasingly squeezed Canadian natural gas out of some U.S. markets,” said Carlos A. Murillo, Economist, The Conference Board of Canada. “And not only is the U.S. market moving toward self-sufficiency, but the U.S. gas industry is also beating
than total Canadian production. With U.S. shale gas pro- duction displacing imports of Canadian gas, Canadian exports are now 25 per cent lower than they were 10 years ago. North American natural gas demand is expected to remain relatively flat over the forecast and Canadian exports to the U.S. could continue to decline over the next five years. Although natural gas use in Canada’s electricity generation and industrial sectors will increase, these gains will not be enough to offset a potential decline in exports. There is a light at the end of the tunnel, not to be confused with a pipeline, the good news for Canada’s industry is that the rapid buildup of US LNG export capacity in the coming years, and the associated contractual obligations, indicate that export increases will outpace production gains south of the border. This will create opportunities for Canadian gas to meet demand in the United States. Canadian producers are seeing this opportunity in the future and are signing con- tracts to export gas as LNG via the United States. Until demand for Canadian gas grows the industry will remain in survival mode. Yes industry revenues are expected to increase over the forecast, but will be the result of higher prices rather than an increase in the production volumes. More good news for the industry is that industry losses are beginning to narrow. The Canadian gas industry has a pre-tax loss in 2016 of $7.6 billion in 2016, this year’s expected losses look to drop over 70 percent down to $2.8 billion.
Canadian competitors in the race to enter global liquefied natural gas (LNG) markets.”
U.S. natural gas production increased by 40 per cent in the last decade, mainly due to rapid increases in U.S. shale gas output, while in Canada, shale production has stagnated. Today’s U.S. shale production is about three times greater
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APRIL 2017 • SPOTLIGHT ON BUSINESS MAGAZINE
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