Natural gas production in Canada is set to fall over the next five years, according to a Conference Board of Canada report released yesterday. However, in B.C., the forecast is brighter.
Despite a prediction that drilling in Alberta will rise moderately over the next five years, the board noted that would not be enough to offset the declines expected from existing gas connections in that province.
As a result, Alberta's production is forecast to fall by up to 20% between 2010 and 2015.
The conference board’s outlook in B.C. is more optimistic, largely due to its shale gas production. The board indicated that the province’s large increases in production will help slow the overall decline across Canada.
Production Canada-wide has fallen from 25% of the North American total five years ago to less than 20% today.
“The natural gas extraction industry continues to undergo a period of transition,” said economist Todd Crawford.
“Production is projected to fall indefinitely, and barring any unexpected situation that would cause prices to spike, profits are unlikely to return to pre-recession levels until beyond the medium term."
The natural gas industry adapted quickly to the difficult circumstances of the past two years to maintain profitability. Pre-tax profits in the industry totalled $616 million last year—compared with more than $8 billion in 2005.
Even though prices remain weak for the third consecutive year, profits will rise to $744 million this year.
The economic recovery is expected to take firmer hold next year and growth in U.S. gas production is forecast to slow. As a result, prices are expected moderately improve through 2015, which will be the main source of revenue growth.
However, costs are likely to re-emerge as a key issue for the industry - especially in Alberta, where it is in competition with the oil industry.
Jennifer Harrison
Twitter: JHarrisonBIV