A new study by TransCanada PipeLines Limited forecasts western Canadian natural gas production will grow to between 16.6 bcf/d and 17.5 bcf/d by 2027 due to increased unconventional supply.

The Mainline throughput study, included in the company’s Mainline tolls application filed with the National Energy Board (NEB), expects production to remain stable through 2020 at an average of between 15 bcf/d and 16 bcf/d before the continued use of horizontal drilling and multi-stage completions translates into production growth.

In addition to growing the overall basin production, this increase in unconventional production will offset declines in conventional production within the basin, according to the study.

TransCanada estimates remaining technically recoverable resources of 1,018 tcf within the WCSB, which based on the current production rate represents some 180 years of supply. “Given this ample resource, WCSB production will grow to satisfy incremental market opportunities, both within the basin and via export, as they arise and become commercially viable,” says the study.

Growth in western Canadian demand of approximately 2.3 bcf/d by 2027 is expected to absorb the growth in production from the WCSB, resulting in net gas available for export from the basin holding steady at approximately nine bcf/d in the forecast period. The study attributes the majority of the forecast growth in demand to gas use in the oilsands industrial sector, concentrated more in the in-situ recovery operations of producers than in the mineable oilsands segment.

The study also anticipates growth in the non-oilsands industrial and electric generation sectors. Demand growth in the gas-fired electric generation sector is mainly driven by oilsands related power generation growth, retirement of coal generation, and Alberta’s expected transition to a capacity market, it says.

U.S. imports to grow

In addition to the gas volumes from the WCSB, the Mainline is increasingly supplied by gas produced from source basins in the United States, most notably the Appalachian Marcellus and Utica plays, says the study. Total Appalachian production is expected to nearly double to 43.5 bcf/d in 2027 from 22.5 bcf/d in 2016 and these volumes are increasingly able to deliver into Ontario markets, it says.

The net balance of imports into Canada is expected to grow through the forecast. The study attributes this growth to incremental imports at Niagara Falls and Chippawa and reduced export activity at Iroquois due to competition with Marcellus volumes in U.S. northeast markets. The incremental imports at Niagara/Chippawa and reduced exports at Iroquois are expected to be partially offset by increased exports at East Hereford, Quebec.

The Rover pipeline currently under construction, is expected to be able to deliver Appalachian volumes into the Vector Pipeline and access the Dawn Hub in 2018, says the study. The NEXUS pipeline also is expected to connect to Vector in 2018 and deliver volumes into Ontario, with volumes from both pipelines accessing the TransCanada Mainline Eastern Market Area via Parkway, it points out.  

Appalachian volumes have already displaced Canadian exports to United States northeast markets, and are expected to maintain their share of those markets, according to the study.

Mainline markets

The markets served by the Mainline are located in three domestic regions: the Prairies, along the Northern Ontario Line, near or within the Eastern Triangle and exports to the U.S. Midwest and U.S. Northeast via interconnecting export points to pipelines in the region.

Prairies demands are defined as including deliveries to domestic markets in the South Saskatchewan Delivery Area (SSDA), the Manitoba Delivery Area (MDA), and exports at Emerson and Spruce. Growth in Prairies demand is predominantly focused in the SSDA, and is largely related to the replacement of coal-fired electric generation facilities with gas-fired generation, says the study.

Northern Ontario Line volumes are expected to see modest loss of throughput as long-haul contracts are supplanted by short-haul contracts from Dawn and other eastern receipt points. The NOL volumes, though, are expected to flow above contracted demand on that segment due to the inclusion of volumes on the Dawn Long Term Fixed Price service which is served in part through the NOL, it says.

Modest growth in the Eastern Triangle area, the study says, is almost entirely attributable to the electric generation sector within Ontario. This includes the placement in service of the Napanee power plant, and some expected use of gas-fired generation to backfill electricity demand normally supplied by nuclear units as they are taken offline for maintenance and refurbishment. Quebec demand sectors are expected to remain relatively stable.

Northeast U.S.  export markets are expected to show only modest growth, with the New England region expected to see approximately 100 mmcf/d of demand growth between 2015 and 2027,  almost entirely for gas-fired electric generation.

The contracts for delivery in the Prairies segment are forecast to remain flat at just over 500 terajoules/d, down from recent years when Emerson, Manitoba contracts were used to access both markets accessible via Emerson and those further east on the Mainline via diversions. However, Rover and NEXUS pipelines are expected to displace those market opportunities and largely displace Mainline contracting to Emerson, the study suggests.

In the event existing firm contracts were not renewed, Prairies contracts would fall to 58 terajoules/d in 2022.