As a result of the sustained period of lower prices, gas supply from the Western Canada Sedimentary Basin (WCSB) is expected to decrease this winter compared to year-ago levels. High levels of gas in storage in most of North America have kept a lid on gas prices this year, driving NIT/AECO gas prices in August and September to the lowest that they have been since 2002. Gas drilling in the WCSB is down 32% this gas year to the end of August and connections are down 26% to the end of June. WCSB supply to the end of June was down about 300 MMcf/d year-over-year.

This year, declining initial well productivity (IP) and increasing decline rates can’t be blamed for the drop in supply. A decrease in drilling usually means that producers will only connect their best prospects as the more marginal locations are shelved or not completed (called hi-grading).  This tends to flatten or even raise the IP. The composite decline rate has also leveled off in the last few years at about 19%, however that still means that about 3 Bcf/d of new gas is needed every year just to keep supply flat. The region of the highest decline in supply is Southeast Alberta. This is one of the few areas where IP continues to decline (Saskatchewan is the other).

It is expected that WCSB supply will decline by about 350 MMcf/d this gas year (2006/07) compared to the previous gas year and that we will see a further decline of 400 MMcf/d or more next year down to a level of about 16 Bcf/d of total supply for the WCSB.

This winter our forecast for Alberta System receipts is in the range of 10.5 to 10.8 Bcf/d compared to 11.1 Bcf/d last winter.  In spite of this decline in receipts, due to record storage levels and expectations of a colder, more normal winter in the eastern U.S. and Canada, exports are expected to increase slightly over last winter.