Canadian gas production can't keep up with U.S. demand
The Globe and Mail, Wednesday June 11
By BARRIE McKENNA
Washington — The United States shouldn't look northward to ease its worsening natural gas supply crunch because Canadian production won't be able to keep up with soaring demand south of the border, a U.S. congressional committee has heard.
Canada has filled half of all new U.S. gas demand for a decade now, but the well is running dry, Harold Kvisle, president and chief executive officer of TransCanada Corp. of Calgary, warned the energy and commerce committee yesterday.
"Our industry is now running flat out," Mr. Kvisle explained. "There's not much more production increase available for export."
Expansion of the oil sands projects at Fort McMurray, Alta., will suck up a large chunk of the natural gas production coming on stream in Western Canada, he noted, because the process of producing oil from the sands consumes large quantities of the fuel.
"We see production growth flat-lining and there is a very significant increase in demand — in no small part because of the oil sands development," Mr. Kvisle said.
Canada supplies about one-sixth of U.S. natural gas consumption, currently running at 21.6 trillion cubic feet a year and growing.
"We can't blame Canada, like the kids from South Park did," quipped committee chairman Billy Tauzin. "Canada is trying to get gas to us to the extent they can."
The hearing comes amid growing concern about the United States' dependence on rising and volatile natural gas prices. In the past year, North American prices for natural gas have doubled and inventories have dwindled to the lowest level in nearly 30 years.
U.S. Energy Secretary Spencer Abraham has directed the National Petroleum Council to devise a strategy to deal with the natural gas supply crunch — a game plan that could include strict conservation measures.
A long delayed energy bill now before Congress lavishes hefty subsidies on natural gas producers to help them build a $15-billion (U.S.) pipeline across Alaska and the Yukon. But the pipeline wouldn't start delivering gas to the U.S. market until 2020.
Both Senate and House versions of the bill provide loan guarantees for the pipeline's construction, but require a trans-Alaska route.
Mr. Kvisle and other witnesses at the hearing played down the near-term impact that tapping vast gas reserves in Alaska or Canada's Mackenzie Valley would have on easing the current supply crunch.
The only way to work out the growing imbalance in the United States between tight supplies and soaring demand is to curb consumption — or destroy demand, as Mr. Kvisle put it.
"There is virtually nothing that can be done to increase the supply of natural gas," he told the committee. "This is a multiyear process, and big projects — whether it's LNG [liquefied natural gas] importation or natural gas from the north — take a long time. The mid-term market balancing mechanism will in fact be demand destruction."
Testifying at the same hearing, U.S. Federal Reserve Board chairman Alan Greenspan warned that rising and volatile natural gas prices have put domestic gas-consuming industries "in a weakened competitive position."
Among the largest users of natural gas are fertilizer makers and electric utilities.
Mr. Greenspan noted that some gas users are already turning to alternative sources because of the problem.
He spoke at length about the enormous potential LNG offers.
Mr. Greenspan said North America will forever be condemned to a volatile and inefficient natural gas market unless it can secure "unlimited access to the vast world reserves" just as it has with oil. |
