TransCanada recently posted our Western Canada Summer 2008 Supply and Demand Outlook. The following is a summary and update to that outlook.

Natural gas prices at NIT have risen significantly in recent months from the low levels of last fall. The increased gas prices, however, are not expected to have a material impact on the level of Western Canada Sedimentary Basin (WCSB) gas supply this year. Last year's 27 per cent decline in gas well drilling has resulted in a 19 per cent decline in gas well connections to the end of February 2008.

“The decline in drilling activity is expected to contribute to a WCSB supply decline of between 600 and 700 MMcf/d this summer over last summer,” says Craig Yano, Senior Supply Specialist, TransCanada. “As a result, we expect an average Alberta System summer flow range from 10.4 – 10.7 Bcf/d.”

Gas well drilling in the WCSB continues to decline this year with a 12 per cent drop to the end of March. With the increase in gas prices, there could be some recovery in activity this summer. Gas prices will be dependent on many factors including summer temperatures, the level of liquefied natural gas (LNG) imports into the U.S., hurricane activity, U.S. domestic gas supply growth and the decline in Canadian exports to the U.S.

Western Canada demand is expected to increase by 200 MMcf/d due to several new oil sands projects coming on line. Combined with an increased storage refill requirement of 200 MMcf/d, WCSB exports are forecast to decline by about 1 Bcf/d this summer with the vast majority of the decline expected to be on the Canadian Mainline.

If you have any questions or comments on the Outlook, please contact Craig Yano at 403.920.2255 or your Customer Sales Representative.