COMMENTARY: Natural Gas ‘Flying Under the Radar,’ But Big Growth is Coming

While boosting oilsands output is in the spotlight, the prospects for natural gas increasingly seem ripe for improvement

By Chris Varcoe

Michael Rose, chief executive of Tourmaline Oil, the country’s largest natural gas producer. Photo by Brent Calver/Postmedia

Here’s an impressive list of projects to consider when evaluating Canada’s energy future: a new $13-billion data centre, two new LNG plants under construction and two more massive gas export terminals on the Pacific Coast waiting in the wings.

While boosting production from the oilsands dominates the spotlight in Canada’s energy industry these days, the prospects for natural gas increasingly seem ripe for improvement.

And it all starts with rising demand.

“There is a wave of demand growth on the horizon. Obviously, for the past few years, that’s been led by LNG,” Ian Archer, an industry expert and associate director at S&P Global Energy, said Thursday.

“We do see the potential for a lot of data centres to possibly be centred in Alberta, and a lot of them will be fuelled, at least through the short term, with natural gas.”

Indeed, exports of liquefied natural gas (LNG) are climbing, but there are other areas of growth.

Two projects on the West Coast — Woodfibre LNG and Cedar LNG — are being built, while increased electrification and the build-out of massive data centres for AI development — including Meta’s $13-billion facility near Edmonton — are set to drive consumption higher.

“Everybody is bullish on oil. I think gas has been, to some degree, flying a little bit under the radar,” said Martin King with RBN Energy.

“Especially on the demand side, especially in Alberta, people have been talking about it . . . Gas is quietly doing its thing. There is still a lot more gas to be found, a lot more supply growth to come and a lot more demand growth to come.”

The theme of higher gas consumption surfaced during this week’s second-quarter oilpatch earnings calls.

Calgary-based TC Energy, which operates gas pipelines across North America, said Thursday it has boosted the company’s natural gas demand forecast by 40 per cent, fuelled by rising LNG exports and power generation.

It expects gas demand in the continent to increase by 51 billion cubic feet (bcf) per day over a decade-long period, ending in 2035.

That’s up 11 bcf a day from previous projections, and it would see total North American use top 181 bcf a day.

“A growing portion of that gas demand is coming from power generation. Lots of that opportunity is certainly in Alberta, but also in the U.S. heartland,” TC Energy CEO Francois Poirier told analysts on Thursday.

In Canada, the company expects domestic demand growth to shoot up by 65 per cent during that period, to about 21 bcf a day. Much of the use is tied to meet the additional call for LNG exports off the West Coast.

Aside from the LNG developments being built, final investment decisions are expected within the next year on Phase 2 of LNG Canada, and the proposed Ksi Lisims project on the Pacific Coast.

Industrial and power consumption is also increasing.

And there are other sources of gas use emerging, including for data centres. Earlier this month, Meta announced plans to build a gigawatt-scale data centre in Sturgeon County.

It will be powered, in part, by a new gas-fired electricity generating plant being built by Pembina Pipeline, Kineticor Asset Management and its partners, at a price tag of $4.6 billion. The power generating plant will consume about 150 million cubic feet per day of gas.

New oilsands production is expected to bolster the need for more natural gas, which is used in thermal projects to help extract bitumen.

If another four large data centres are approved by 2030, it could increase domestic gas consumption in Alberta by half-a-billion cubic feet per day, King estimated.

Growing oilsands production by a million barrels a day would add about 700 million cubic feet per day of additional demand.

“It is not just . . . the oilsands projects that can grow in Canada. We have a significant amount of natural gas,” Whitecap Resources CEO Grant Fagerheim said Thursday.

“Canada is building its own demand for its product, if we’re going to actually grow the oilsands projects.”

However, natural gas prices in Western Canada have remained weak in recent years as production ramped up. Output could keep rising given the potential size of the low-cost resource base.

Spot prices for AECO gas in Alberta closed Wednesday at C$1.52 per thousand cubic feet, while U.S. benchmark prices were US$2.70 per million British thermal units.

Tourmaline Oil, the country’s largest natural gas producer, reported its output dipped slightly to 594,000 barrels of oil equivalent (boe) per day in the April-to-June period. It injected more gas into storage, had some price-related shut-ins, and deferred some activity due to low gas prices until later in the year.

Tourmaline will be watching for new demand announcements in the next 12 months, company officials said Thursday.

“We’re not going to build a data centre . . . but we do see it as another opportunity for our gas market diversification portfolio. So we’d be seeking a gas supply deal,” CEO Mike Rose told analysts.

“We are keen to help get this whole gas demand sleeve from data centres moved along in Alberta.”

Chris Varcoe is a Calgary Herald columnist.

[email protected]

Share This:

---

More News Articles