Gas
Drilling Activity Continues to be Strong
At the
halfway point in the 2001/02 gas year, supply and demand in
the Western Canadian Sedimentary Basin (WCSB) are unfolding
as TransCanada predicted in our November 2001 issue of Update.
Gas price volatility has continued, demand has started to rebound
from the lows of last year and production growth, while strong
over the winter, is expected to decline over the remainder of
the gas year.
"Currently,
the gas market is in a delicate balance," stated Al Jamal,
Manager of Gas Supply, at the recent Inside Track Customer Meeting.
"Hence, short term movement in the pace of the economic
recovery, the oil price, gas supply response, weather, the volume
of gas in storage and market psychology will contribute to price
volatility." Although in the short term gas supply is adequate
with expectations of a full storage position going into next
winter, the market is still on edge. "The buyers of gas
have not forgotten the $10.00 price in 2001. The market is looking
at 2003 when the gas demand is expected to continue to increase
as the economy strengthens. With faltering supply, the supply/demand
balance tightens considerably resulting in stronger gas prices
and increased volatility in early 2003."
While total
drilling in the WCSB has declined by 25 per cent compared to
last year from November to April, gas drilling has been virtually
unchanged from last year's record drilling level. However, a
larger proportion of these wells were drilled in southeast Alberta
and Saskatchewan, where wells are shallower, lower cost but
have lower producing rates. Click here for Slide 2. "With
this shift back to the lower producing areas of the basin, even
with a high number of gas wells being connected this year, gas
supply will not grow as much as last year. This is due to the
overall declining initial productivity per new well", says
Craig Yano, Senior Supply Specialist. "We need to have
a reversal back to the higher cost, deeper, more exploratory
areas of the WCSB if we are to see long term growth. For this
to happen there will have to be sustained, higher gas prices."
Due to
the approximately 700 MMcf/d of new production from Ladyfern
in 2001 and early 2002, WCSB production is estimated to be 250
- 400 MMcf/d higher in the first four months of 01/02 compared
to 00/01. However, with the emphasis of connections in the southeast
region of the basin and lower supply for the rest of the year,
the year over year growth is expected to be in the 0 to 200
MMcf/d range. This compares to approximately 400 MMcf/d of supply
growth in 2001. Going forward, TransCanada has lowered its forecast
of supply growth for the 2000 - 2005 timeframe from 2.0 Bcf/d
to 1.4 Bcf/d. "As the basin matures, it is becoming more
difficult to grow production from the WCSB," says Al. "Also,
demand within the WCSB is expected to grow significantly in
the next 10 years, reducing the amount of gas available for
export." Click here for Slide 3.
For more
information on supply, please contact Al Jamal at (403) 920-2265
or email: al_jamal@transcanada.com.
Study
Reinforces Impacts of Mackenzie Valley Pipeline
Findings from a recent economic study, sponsored by
the Government of Northwest Territories and TransCanada, reinforce
the significant, positive benefits of a Mackenzie Valley pipeline.
"This
study showed a Mackenzie Valley pipeline would have substantial
overall benefits across many parts of Canada," says Jeff
Rush, vice-president, Mackenzie Valley initiative. "The pipeline
would advance development of the natural gas industry in the NWT,
which in turn would have an impact throughout the country."
Wright Mansell
Research Ltd. completed the study this month. The study looked
at the impact the pipeline would have on Gross Domestic Product
(GDP), labour income, government revenues and employment opportunities
across Canada. To draw its conclusions, the study evaluated the
impacts from 2002 to 2033 and used estimates of $US 3 and $US
4/million cubic feet at Chicago as the price of natural gas.
A few of the
findings from the study include:
The GDP could
rise from $40.2 billion to $57.1 billion, depending on the price
of natural gas, as a result of the pipeline being built. Government
revenues could rise between $12.1 billion and $23.4 billion. An
additional 157,000 person-years of employment could be generated
from the pipeline.
"TransCanada
co-sponsored this study to show our support for advancing the
Mackenzie Valley pipeline," says Jeff. "We believe the
pipeline will be good for Canada, and the numbers reinforce this."
Take a look
at the report's executive summary.
For further
information on the Mackenzie Valley, please contact Jeff Rush
at (403) 920-5819 or email: jeff_rush@transcanada.com.
Alberta Supply Update
Fort
McMurray
The Alberta Oil Sands area located near the City of Fort McMurray,
represent a new and exciting market opportunity for TransCanada's
Alberta System (Nova Gas Transmission Limited - NGTL) customers.
Three customers, Syncrude, Suncor and Petro-Canada, had requested
delivery service in this area, totaling 412 MMcf/d. The application
to provide the service was submitted to the EUB in March 2001.
In early 2002, TransCanada' Alberta System received approval from
the EUB to provide regulated, Mainline delivery service into the
Fort McMurray area, at the Mildred Lake Meter Stations.
We are excited
about the growth prospects this market presents, and we will continue
to work with customers to meet their growing needs in this area.
Fort
Saskatchewan
The Fort Saskatchewan, Alberta market is one of the fastest growing
markets in North America and represents a large new market opportunity
for TransCanada's Alberta System and our customers. Two customers
in particular, Dow Chemical and Sherritt International, with a
total contract requirement of 121 MMcf/d, requested service that
resulted in the development of the Fort Saskatchewan extension
project. This market will provide additional delivery choices
for all customers and increase the supply on the Alberta System
that will reduce tolls for all customers. A physical alternative
offers customers security of supply.
Agreements
are in place with customers to support the construction of 77
kilometers of Nominal Pipe Size (NPS) 20 from the Mainline to
the industrial area of Fort Saskatchewan. The line is expected
to be in service October 2002.
Our application
was filed with the Alberta Energy and Utilities Board (AEUB) in
October 2001 and the hearing began on May 13, 2002. The overall
theme for TransCanada's Alberta System's final argument was 'the
applied-for facilities best meet our Alberta System customers
requests for service and best manage the risks and uncertainties
to the benefit of all Alberta System customers'. The hearing that
addressed issues regarding this project concluded on May 23, 2002.
