Campbell tap-dances over shifting ground
July 25, 2001
... the B.C. Liberals highlighted their throne speech with a promise to get going on offshore oil and gas. The government admitted that "risks" still have to be assessed before the said-to-be-vast North Coast resource can be developed. But the tone of the speech left little doubt where the Liberals are headed. You could almost hear lips smacking amid the speech's references to "those rich reserves" and those "enormous opportunities."
Vaughn Palmer, Vancouver Sun ... column

Supplies Lag Despite New Natural Gas Wells
July 22, 2001
...suppliers are struggling to keep pace, even as they find that the number of wells drilled translates into less and less natural gas than ever before. "It's like a treadmill," said R. Skip Horvath, president of the Natural Gas Supply Association, the industry's lobbying arm in Washington. "You have to race faster and faster just to keep up."
Douglas Jehl, New York Times ... article
More demand, more holes, and less and less gas. Racing faster and faster only to ... run out. The US will go after Canada, Mexico, offshore, the Arctic, national parks - in their panic, nothing we value in nature will be off-limits.

NWT pipe dream rises as gas falls
July 18, 2001
A steep drop-off in natural gas prices could give a pipeline proposed for the Northwest Territories the jump on a competing, but more expensive project slated for Alaska, NWT Premier Stephen Kakfwi says.
Lily Nguyen, The Globe and Mail ... article

Pipeline deal bypasses public-- critics
July 9, 2001
...the energy industry was consulted about the environmental impacts of several proposed multibillion- dollar pipelines to bring arctic natural gas to southern markets. But none of the agencies involved have sought public input into the process... "It's really crafted toward approval of a proposal rather than a rigorous assessment"
Bob Weber, The Edmonton Journal ... article
Special deal would fast-track Mackenzie pipeline
Ed Struzik, The Edmonton Journal ... article

Introduction to Natural Gas Prices
December 5, 2000

In the 1990s, natural gas was cheap and plentiful, and was expected to remain cheap for a long time.  It was an attractive alternative to costly electricity for commercial and residential heating applications.  Used to generate electricity, it was cheaper than other fossil fuels, particularly coal and oil, and it burned cleaner, too.

So demand started to grow.  This growing demand started pushing the price of gas up in the late 1990s.  Limited infrastructure was the culprit, the industry complained. Build pipelines to get this limitless gas to market, and the price of gas will ease off again. So new pipelines are coming onstream right now - the big Alliance Pipeline from northern Alberta to Chicago, and the BC Gas Southern Crossing to the border in the Okanagan are just two close-to-home examples.  The Georgia Strait Crossing (GSX) is another.

But the improved infrastructure coupled to this growing demand hasn't eased prices at all. In fact, prices are hitting record highs. Removing major distribution constraints has not solved the problem.  

The price peaks we are witnessing now have three main causes.  The first is normal winter demand - as North America gets colder, people everywhere crank up the heat.  More homes and offices are heated directly by gas, or by electricity generated from gas - so gas demand increases, and so does the price. 

The second factor contributing to rising natural gas prices is that gas is a deregulated commodity.  The market for gas is like the market for equities, currencies, and pork bellies.  Gas is priced at various storage and delivery points in North America, and the price varies considerably from place to place.  In Canada, the two prices referred to most often are the AECO hub in southern Alberta, and the Sumas border crossing.  In the United States, the NYMEX (New York Mercantile Exchange) and Henry hub prices are often referred to.  Also, spot and contract prices reflect somewhat different but related values.  Spot prices best illustrate the volatility of the market, whereas contract prices level out some of the worst market extremes.  

As you can see from the graphs shown on this page, gas prices are on a steady upward trend, and since deregulation, have also become wildly volatile.  Neither of these bode well for BC Hydro's proposal to power BC with natural gas. 

Many experts are suggesting that the price jumps we are experiencing now, are related to a more fundamental constraint with the supply of natural gas.  Much of North America's natural gas comes from the Western Canada Sedimentary Basin, that underlies much of Alberta, southern Saskatchewan, southwestern Manitoba and northeastern BC.  The gas that has been removed to date is the easiest and cheapest to get at.  What comes next will be more expensive to extract from that field, or it will come from more remote places like the Arctic and offshore BC. 

The price of gas is not going to go down to the $2.00 per mmBTU level that BC Hydro built it's natural gas strategy around.  It is not likely to settle back to a price that is even twice Hydro's strategic price.  

So, nothing fundamental is going to mitigate the price of gas. 

But the market will. When prices of gas get too high, competing alternatives will come into play.  Merchant power promoters will back right off.  Coal will reassert its place in the market.  Progressive, sustainable technologies will get a serious chance at some of the business. Policy makers might even get into serious demand side management.

It may be too late in British Columbia.  If BC Hydro continues on this ill-advised course, Vancouver Island, and other parts of the province will be saddled with billions of dollars of infrastructure that no-one can afford to operate.

Or it may not be too late. Big utilities like Hydro, who are following the dictates of government, don't change direction or respond to market conditions like the unfettered merchant power companies are able to do. So the question in BC is will Hydro back off the GSX pipeline and this dangerous agenda before the province is too committed to this course of action? Will Ujjal Dosanjh make Hydro take a second look at this strategy?

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Opinion and Articles

The next gas crisis
August 10, 2001
North America is still using more gas than it is finding. Concerted conservation drives and a softer economy may temporarily mask ever-dwindling supplies. A prolonged cold snap, though, could remind us of the reality sooner rather than later. You can count on rising prices to definitely affect your home and business heating bills—or your portfolio—early next year as natural gas abandons its image as a cheap staple and becomes, for better or worse, a premium good on the North American market.
Andrew Nikiforuk, Canadian Business ... article
And there's the New BC Hydro, reconfirming its commitment to the natural gas bandwagon, just when the supply is running out and prices are headed in one direction only!

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REPORTS

The Geological Atlas of the Western Canada Sedimentary Basin
More than you could ever want to know about this amazing geological phenomenon.  Approximately 200,000 wells penetrate bedrock in the WCSB - it is possibly the most comprehensively explored and documented oil-bearing basin in the world.

Natural Gas Potential In Canada
Of the existing and potential gas in the Western Canada Sedimentary Basin, approximately 188 Tcf is deemed marketable.

Graphs, Maps
December 5, 2000

Alberta border natural gas price trend Click for larger image

Natural gas price volatility

Natural gas trading prices 1996-2000 Click for larger image TradingCharts.com

Canada's Petroleum Producing Areas

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