Energy-intensive bitumen production in the Alberta oilsands, along with rising natural gas-fired power generation, are expected to drive substantial growth in the province’s gas demand over the next nine years, according to the government.
Natural gas demand in the province is forecast to grow 16% by 2033 from the 6.8 Bcf/d averaged in 2023, the Alberta Energy Regulator (AER) said in its newly published annual energy outlook. Demand growth is expected primarily from the oilsands, power generation and commercial sectors.
Natural gas removals, or volumes shipped outside of the province, “are projected to grow in the short term and decline starting in 2026 and to the end of the forecast period,” regulators said. “This decline in removals will occur as demand growth is forecast to outpace production increases.”
In-province demand was equal to about 60% of Alberta’s marketable natural gas production in 2023. That figure is expected to reach 63% by 2023, researchers said.
Alberta’s natural gas demand rose by 2.3% in 2023 versus 2022. This included year/year growth of 7.0% from the oilsands, 8.0% from power generators and 4.4% from the petrochemicals industry, AER said.
Natural gas production, meanwhile, is seen growing at a much slower rate than demand over the coming years, regulators said.
By 2033, AER forecast Alberta’s marketable natural gas production would reach 11.6 Bcf/d versus 11.2 Bcf/d in 2023. “Increasing output from the Petroleum Services Association of Canada areas of Foothills Front (including shale gas) and Northwestern Alberta will more than offset declines in production levels across the rest of the province,” researchers said.
The authors noted that, “In the near term, the central banks in many developed countries are poised to cut interest rates this year, lifting global economic growth and energy demand; however, oil and gas companies in Alberta are expected to maintain disciplined investment strategies. Meanwhile, energy affordability and security remain a top priority for many nations while transitioning to a low-carbon economy.”
Production Powerhouse
The province’s gas production continued to rise last year despite a plunge in North American gas prices.
Alberta’s total marketable natural gas production rose 2% year/year in 2023 “as producers focused on conventional gas, tight gas, and gas from oil wells production,” researchers said. “The higher production was driven by increases in conventional gas (including tight gas) production concentrated in Foothills Front and Northwestern Alberta.”
Alberta accounted for over 60% of Canada’s natural gas production in 2023 and almost 85% of its oil equivalent production including bitumen extracted from the oilsands region.
Capital expenditures for crude oil, natural gas, oilsands and emerging resources grew to a six-year high of C$29.5 billion ($21.7 billion) last year, researchers highlighted. Investment in the oilsands, which accounted for 2.0 Bcf/d of Alberta gas demand for the year, rose 11% to C$13.2 billion ($9.7 billion). Oil and gas investment overall fell 6% to C$15.6 billion ($11.5 billion).
U.S. Henry Hub and Alberta benchmark AECO C prices fell by 59% and 46%, respectively, in 2023, AER highlighted. Weak heating demand amid mild winter temperatures, and rising associated gas production from Lower 48 onshore inventories, caused gas storage inventories to swell and prices to fall. Alberta natural gas storage levels were about 33% above the five-year average in 2023, AER said.
NGI’s Henry Hub Bidweek price for July 2024 was $2.625/MMBtu, versus $2.600 in July 2023. NGI’s NOVA/AECO C Bidweek price was C$0.73/GJ, compared with C$2.010 a year earlier.
In contrast to last year’s steep decline in natural gas prices, U.S. and Canadian oil prices dropped by just 18% and 22%, respectively, in 2023, researchers noted.
‘Often Overlooked’ Oilsands
AER’s bullish oilsands outlook was corroborated in a recent report by Enverus Intelligence Research (EIR).
“The often-overlooked Canadian oilsands represent nearly 40% of North America’s sub-$50 [West Texas Intermediate] breakeven oil resource,” said EIR’s Dane Gregoris, managing director.
“Oilsands businesses are particularly attractive to global investors today because of their long duration oil resource and newfound egress,” Gregoris added. “This is especially relevant at a time where U.S. shale oil growth is slowing, and low-cost drilling inventory is becoming scarcer south of the border.”
Pipelines Facilitating Growth
Prospects for continued production growth are boosted by ongoing expansions of pipeline infrastructure in Alberta, according to AER.
“For natural gas transportation, capacity met the export demand in 2023, and transportation capability improved further after the completion of the Coastal GasLink pipeline in British Columbia, connecting to future LNG Canada facilities,” researchers said.
“With expected pipeline capacity improvements and reasonably elevated oil prices, Alberta’s oil and gas industry continued to grow in 2023,” the AER team added. “In addition, the anticipated rise in oil and gas demand from international markets, facilitated by the Trans Mountain Pipeline Expansion and Coastal GasLink Pipeline, contributed to the production growth.”
On the energy transition front, AER estimated Alberta hydrogen production could rise to 3.9 million metric tons/year (mmty) from 2.5 mmty by 2033, representing 4% average annual growth.
